Lords Sitting of 20 October 1988

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Guildford): The LORD CHANCELLOR on the Woolsack.
Viscount Rothermere—Took the Oath.

Postal Charges
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
Whether they will direct the Post Office to withdraw the recent increase in postal charges.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, I do not consider that the exercise of this power of direction is, in the circumstances, either necessary in the national interest or appropriate given that this is the first price increase in almost two years.
Lord Boyd-Carpenter: My Lords, does not my noble friend consider that it might be a good idea to tell the Post Office that it cannot increase its charges until it at least arrests the decline in the standard of services?
Lord Young of Graffham: My Lords, I am well aware of the opinion which has been expressed on all sides of your Lordships's House and the concern which exists about the quality of the services of the Post Office. The Post Office Users National Council was consulted earlier this year about the tariff proposals. It had no objection to the scale of increases provided that the quality of service was improved. I believe that we all earnestly wish to see that.
Lord Mellish: My Lords, is it not extraordinary that the Post Office introduced new charges during a strike?
Lord Young of Graffham: My Lords, I know that that coincidence was not in the interests of the Post Office and I suspect that it was not because of the conduct of the management. The increase in the prices was set some time before.
Baroness Strange: My Lords, does the Minister agree that it might be a prettier way to compensate the discomfort and dissatisfaction of the general public about the Post Office strike by returning the postage charges to their old rates over the Christmas or festive period?
Lord Young of Graffham: My Lords, I suspect that there is more concern about the quality of service than about the cost. I believe that we all wish to see the quality of service rapidly restored, if not improved upon.
Lord Grimond: My Lords, I wholly agree with the Question. If the Minister will not take up the issue, will he represent to the Post Office that, because it is unable to give any guarantee that first-class mail will be delivered within 24 hours—a good deal is not so delivered—it is unreasonable to add an extra penny to the charge? I believe that in any event the differential charge is totally unjustified.
Lord Young of Graffham: My Lords, I appreciate that there is a considerable difference, but surely the important point is to try to regain the quality of service. The increases remain below the level of inflation and second-class post is only 1½ pence more than it was six years ago.
Lord Nugent of Guildford: My Lords, is my noble friend aware that we are not impressed by the rate of progress of the mechanisation of postal handling and the universal introduction of the postal code? Is he also aware that if that were achieved there would be a massive saving in manpower and that it would speed up the handling of letters? What is the prospect for the universal postal code being in position and that mechanisation being introduced?
Lord Young of Graffham: My Lords, I am grateful to my noble friend, but that is another Question. I believe that we all wish to see the quality of service improved. How the Post Office management and the Post Office accomplishes that is secondary because, above all else, we are concerned that our letters arrive on time.
Lord Orr-Ewing: My Lords, does my noble friend recall that his important Ministry has a responsibility for competition policy and for the Post Office? Is it not time that we had a radical restructuring of the Post Office so that we can match other communications? Every other form of communication is becoming faster, quicker and more accurate, but the Post Office is becoming steadily worse. When letters are posted early on a Saturday they are sometimes not cleared until the first post on Monday and at best do not arrive until Tuesday. In this age we cannot have a postal service which is so desperately slow for the efficiency of industry and everything else in this country.
Lord Young of Graffham: My Lords, I am not sure how the Post Office compares with the international standards of performance of other post offices. We are living in a world where it is steadily becoming more and more difficult for such a labour-intensive service to be carried out. I have heard my noble friend's question clearly and I shall take it away and consider it.
Lord Ferrier: My Lords, is my noble friend aware that the service is becoming worse and that I now receive on a Saturday important correspondence which I used to receive on a Friday?
Lord Young of Graffham: My Lords, I am aware that my bills are arriving later and later. It is not an unmitigated disaster.
Lord Peston: My Lords, if the objective of govern-ment policy is to ensure that the quality of service is improved, why do they not show a more sympathetic response to the noble Lord's Question, because it is not obvious that allowing the Post Office to raise charges will act as an encouragement to improving the services? It will encourage it to stay with its unsatisfactory ways.
Lord Young of Graffham: My Lords, nor is it equally obvious that denying it an increase will improve the quality. We wish to see quality increased. The price increases remain below the level of inflation. The second-class post is only 1½ pence more than it was six years ago.
All those matters are beside the point. We wish to see the quality improved and we have expressed that wish most strongly to the management of the Post Office.
Lord Boyd-Carpenter: My Lords, arising out of that answer and my noble friend's earlier reference to the views of the users council which he quoted with approval—to the effect that it would not object to the increase provided that efficiency was improved—is the collorary that if efficiency is not improved, and it shows no signs of being so, the increase will be withdrawn?
Lord Young of Graffham: My Lords, if that would have the effect of improving quality there might be something to commend it. I believe we should ensure that quality is improved, and after today I shall make that message doubly plain to the chairman of the Post Office.

Care in the Community
3.9 p.m.
The Countess of Mar The Countess of Mar asked Her Majesty's Government:
When they intend to publish their response to the Griffiths Report entitled Care in the Community.
The Earl of Arran: My Lords, we are conscious of the public feeling that our response should not be long delayed and I can assure the House that the Government have not been idle on this issue. They are giving careful consideration to the way forward and taking careful account of the numerous representations they have received. However we cannot yet say when we shall be able to put forward our own proposals.
The Countess of Mar: My Lords, perhaps I may thank the noble Earl for that slightly encouraging reply. We have now been waiting nearly 10 years for a comprehensive community care policy from this Government. Will the noble Earl say whether or not they accept all that is in the Griffiths Report, how much communication there will be between the Department of Health, the Department of Social Security and the Department of the Environment, all of which are involved in producing a new policy?
The Earl of Arran: My Lords, we recognise the concern that the uncertainty should be ended. We certainly acknowledge the need for vigorous action after this period of scrutiny and review has concluded.
Baroness Cox: My Lords. is my noble friend aware that many health care professionals are deeply worried about some of the recommendations in the Griffiths Report and rather hope that they will not be implemented? They are especially concerned about the lack of clinical expertise in the social services and their appropriateness for providing for the growing number of patients coming into the community with very complex clinical problems.
The Earl of Arran: My Lords, I take very careful note of what my noble friend has said.
Lord Ennals: My Lords, apart from the point made by the noble Baroness, will the Minister broadly accept that across the political spectrum and within the statutory and voluntary organisations there is a consensus that the proposals of Sir Roy Griffiths are about right? Does he further accept that the main organisations involved with community care recognise that there is a growing crisis in providing the services needed by some of the most vulnerable people in our society? Finally, will he accept that some of the concerns are now turning into anger that for so long the Government have refused to give a lead?
The Earl of Arran: My Lords, in response to the points made by the noble Lord, Lord Ennals, as I say, we recognise that the state of uncertainty is worrying but there is no reason why health authorities should not press ahead with existing plans and seek to continue their progress.
Lord Renton: My Lords, is my noble friend aware that since 1980 it has been the Government's policy—and they have done something about it—to get mentally handicapped people out of long-stay hospitals? Is he further aware that the most satisfactory means of achieving that is to enable the voluntary associations, such as MENCAP, to set up small establishments where those people can be looked after as part of the community? Can he say to what extent the Government are helping in the pursuit of that policy?
The Earl of Arran: My Lords, in response to my noble friend's point, I am aware of those matters but I stress that it would be wrong and inappropriate to pre-empt our decisions on Sir Roy's report by debating individual proposals now.
Baroness Turner of Camden: My Lords, does the Minister agree that nowadays community care mostly falls very heavily on the shoulders of women often in late or middle age and that without adequate support services, as recommended, the position of such people can rapidly become quite intolerable, as much of the recent publicity has shown? Would the Minister care to comment on that?
The Earl of Arran: My Lords, once again, all I can say in response to the point made by the noble Baroness is that I take careful note of it and it is one of the points under consideration in Sir Roy's report.
Lord Cledwyn of Penrhos: My Lords, the noble Earl has said that the reason for the Government's delay in responding to the Griffiths Report is that they are working very hard indeed on this, taking advice, listening to people and so on. Can he say, therefore, that at the appropriate moment when the studies are over, the Government will produce a White Paper on Government policy on community care?
The Earl of Arran: My Lords, I do not believe that I can exactly answer the question put by the noble Lord the Leader of the Opposition. However, I should like to make one point because there has been a certain amount of criticism in your Lordships' House this afternoon. In dealing with the community care situation we are dealing with government expenditure of some £6 billion. To act too hastily would be improper and unwise.
Baroness Masham of Ilton: My Lords, referring to the mentally ill, will the Government look very carefully at the very worrying increase in arsonists and will they work very closely with the Home Office to see where those people should be treated, whether in health or penal institutions?
The Earl of Arran: My Lords, I pay attention to the point raised by my noble friend.
Lord Dean of Beswick: My Lords, will the Government give very deep consideration to those parts of the report which suggest that some of the community services which were taken away from local authorities during the last reorganisation of the National Health Service could be returned to those local authorities, which in the main carried them out exceedingly well and were closer to the needs of people than the National Health Service could ever he, no matter how good it is?
The Earl of Arran: My Lords, that again is among the points that the Government are currently considering as a result of Sir Roy's proposals.
Baroness Macleod of Borve: My Lords, there is a recommendation in the report that a great number of managers should be put in place. If the report is implemented will the noble Earl ensure that those managers are trained and qualified, unlike the ones now serving in the NHS?
The Earl of Arran: My Lords, once again I believe that it would be wrong for me to give any decision upon that until we are aware of the Government's response to Sir Roy's proposals.
Lady Kinloss: My Lords, can the Minister say whether the Government are satisfied that local authorities will have sufficient funds and expertise for care in the community in view of the report of the
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Office of Population, Censuses and Surveys, Social Services Division, which finds that there are more adult disabled in Great Britain than it was thought?
The Earl of Arran: My Lords, that is a particularly close point and I believe it to be somewhat wide of the Question on the Order Paper. However, it is a point on which I shall undertake to write to the noble Lady.
The Countess of Mar: My Lords, in answer to a previous question the noble Earl said that there was no reason why the health authorities should not press ahead with plans to put people into the community. If that is the case, will he please tell the Department of Social Security and the Department of the Environment that they must co-ordinate their policies, because people are being discharged into the community and the Department of Social Security is refusing to pay for them?
The Earl of Arran: My Lords, that is something of which we shall certainly take note.

Schoolchildren: Assessment Tasks
3.17 p.m.
Lord Peston Lord Peston asked Her Majesty's Government:
When the standard assessment tasks for pupils at or near the end of the first key stage in mathematics, science and English will be publicly available.
Viscount Davidson: My Lords, specification for development of standard assessment tasks (SATs) for key stage 1 pupils were issued on 10th October, and contracts will be let in December. The SATs should be available by Easter 1991 in preparation for the first full assessment the following summer.
Lord Peston: My Lords, in thanking the noble Viscount for his Answer, perhaps I may remind him how controversial this subject is—
Noble Lords: Question, question!
Lord Peston: My Lords, does the noble Viscount agree—well, he will not agree. Perhaps I may ask him whether the tasks will be made known publicly and in particular how they will be interpreted. Will they be placed in the public domain?
Viscount Davidson: My Lords, in answering the noble Lord, the best I can do is to advise him that the department has sent a draft circular to a wide range of organisations. The circular sets out the provisions on curriculum and assessment in Sections 1 to 25 of the Education Reform Act 1988. He will find the answers to both those questions in that particular document which has been placed in the Library.
Lord Ritchie of Dundee: My Lords, is the Minister aware that there is widespread bewilderment among teachers of children with special educational needs as to how testing and assessment of their progress can at the same time be standardised and adapted to their

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special needs? Can the Minister make any reassuring statement on that point?
Viscount Davidson: My Lords, I can make a reassuring statement by saying that I have read the draft circular and the answer to the noble Lord's question lies therein.
Baroness David: My Lords, is the Minister aware that that draft circular dropped onto my desk yesterday, as it has no doubt dropped on many other desks around the country, and another draft circular dropped on my desk today? I should like to ask the Minister, because it is not clear, whether the general public are being made aware of what is going on, because there is a great deal of anxiety among parents who are not governors and other members of the general community. Can he give any assurance that that information, which is causing a great deal of work in education authorities, is also being spread to members of the public generally?
Viscount Davidson: My Lords, I will certainly draw the remarks of the noble Baroness to the attention of my right honourable friend. However, this draft circular has been sent to all local education authorities and other interested bodies for their comments. They are free to make all the comments that they wish. The final circular, based on those comments, will be published in the new year.
Lord Peston: My Lords, may I press another matter? One worry of parents, as the noble Viscount is well aware, is privacy of the assessment. Can he reassure the House that the assessment of young people at the age of seven will be entirely a private matter between teachers and the parents and that it will not become public knowledge?
Viscount Davidson: My Lords, that is an assurance I can give.

Housing Bill: Ballots
3.20 p.m.
Lord Stallard Lord Stallard asked Her Majesty's Government:
Further to exchanges on 10th October (HL deb. col. 604), whether other organisations besides the Electoral Reform Society have been approached concerning Housing Bill ballots, and if so which organisations and in what manner.
The Minister of State, Department of the Environment (The Earl of Caithness): My Lords, so far only one other expression of interest has been received from a specialist ballot services company, with which the Housing Corporation is in contact. Other organisations which may be interested in the duties of the independent teller are invited to contact the Department of the Environment or the corporation.
Lord Stallard: My Lords, I thank the Minister for that reply. However, it does not take us much further. I had hoped to hear the noble Earl say that there would be some kind of approval of the organizations
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asked to take on this task. Approval or acceptance would mean that the organisations themselves accept a voting system stipulating that all abstentions, for whatever reason, shall be counted as "yes" votes in favour of a landlord's proposals to acquire existing tenancies. This means that the proposals contain an in-built incentive for landlords to encourage abstentions, the more so when, as I understand, the landlords will be financing the operation and administration of the balloting schemes. Is that not therefore pointing to a further danger that these societies mentioned by the Minister—
Noble Lords: Question!
Lord Stallard: My Lords, "Is there not a danger?" appears to me to be a question. Is there not a danger that the societies will be seen to be less than impartial, thus encouraging that incentive?
Noble Lords: Reading!
Lord Stallard: My Lords, I made notes while the Minister was speaking; I have merely glanced at them. It is a sad fact that whenever—
Noble Lords: Question!
Lord Stallard: My Lords, is it not a sad fact that Ministers and noble Lords opposite jeer whenever the problems of tenants of housing associations are mentioned? Would it not be better if they listened and became involved in some of these serious problems?
The Earl of Caithness: My Lords, the noble Lord, Lord Stallard, asked some questions which I hope I answered during the debate on 10th October when we were in Committee on the Housing Bill. It is Parliament's duty to lay down the rules, and it will be for the independent teller to see that those rules are interpreted properly and fairly.
Lord Elton: My Lords, is my noble friend aware that the greeting given to the last intervention of the noble Lord who tabled this Question was not directed at the content of his intervention but at its manner and length?
The Earl of Caithness: My Lords, I think that was clear to the whole House.
Lord Denham: My Lords, it may be for the convenience of the House—
Noble Lords: Order!
Lord Stoddart of Swindon: My Lords, I am most obliged to the Government Chief Whip for giving way. Does not the Minister agree that it is an outrageous electoral principle that the votes of those not voting should be added to one side of the argument? Indeed, is it not a dangerous precedent to set? Will the Minister take this supposition into account? Let us say that on a strike ballot all the abstaining voters were added to the "yes" vote, as is proposed in the Bill. Is that not a principle that the Government themselves would not adhere to?
The Earl of Caithness: My Lords, the noble Lord, Lord Stoddart of Swindon, will know that I disagree with him for the reasons that I set out in Committee. Of course, he has failed to point out to the House that those who wish to remain with their existing landlords can opt to do so.
Lord McIntosh of Haringey: My Lords, will the Minister make a better attempt to answer the supplementary question put by my noble friend Lord Stoddart? He asked whether, in the circumstances where an applicant, a private landlord, has an interest in a high number of extensions, there is not a contradiction in having the applicant pay the costs of the independent monitoring body?
The Earl of Caithness: My Lords, no. I disagree with the basis on which the noble Lord formulates that question.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that Her Majesty the Queen will open the new Session of Parliament on Tuesday, 22nd November.
The date of Prorogation of the present Session will he subject to the progress of business but it is expected that the House will sit into the week beginning Monday. 14th November.

Barlow Clowes Group
3.25 p.m.
Lord Young of Graffham: My Lords, I wish to make a statement on Barlow Clowes.
Many people have been badly affected by the collapse of the Barlow Clowes operations. The extent of the suffering and distress has been fully set out in the letters I and my colleagues have received from Members of both Houses and direct from those concerned. We share the deep concern expressed on all sides and sympathise with those who have suffered loss.
The story is very complex: it stretches over many years and involves many different participants.
The House will recall that, following my Statement on 13th June, I appointed Sir Godfray Le Quesne, QC, to prepare an independent report to me on the facts of my department's handling of this matter. I am today publishing Sir Godfray's account, subject to minor deletions made on legal advice in order to avoid possible prejudice to criminal proceedings. His report is one of the most open and exhaustive ever volunteered by a department of state into its handling of a matter of this kind. It contains a full account of my department's role.
I should make it clear to the House that, while the Government attaches importance to maintaining the normal rule that officials' confidential advice to Ministers should not be made public, I have decided that, in the quite exceptional circumstances of this case, it is in the public interest to include the submissions to Ministers and other material which
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would not normally be published. In accordance with normal practice the names of officials involved have been excluded.
I am extremely grateful to Sir Godfray Le Quesne for the thoroughness and speed with which he produced his report. In accordance with his terms of reference, the report is purely factual. The Government have studied it with great care and have taken legal advice including that of leading counsel; and I should now like to set out to the House the key events and our conclusions.
It is only possible to judge the events that occurred in the light of the regulatory system in place at the time. The legislative framework within which all but the final events of this case took place was based on an Act of 1939 which was consolidated in the Prevention of Fraud (Investments) Act 1958. There was very little change in the way it operated until 1983. Then, against the background of Professor Gower's much broader review of investor protection, commissioned in 1981, the Government introduced new regulations. These regulations required, among other things, first, much more information about prospective licence holders; secondly, a certificate from a qualified auditor as to the firm's ability to operate as a going concern during the lifetime of the licence; and thirdly, regular financial monitoring returns, verified by a qualified auditor. covering the proper holding of client money and investments. The regulations were designed to enable the department to rely on the verification of prescribed information by qualified auditors and solicitors.
Sir Godfray's report shows that Barlow Clowes first came to the department's attention in 1975–76. It received advice which due to a misunderstanding within the department did not adequately cover the point at issue and it did not then apply for a licence to deal in securities. The consequences of this have been carefully examined. Had it applied in 1975–76 it is almost certain that a licence would have been granted, given the practice at that time. If Barlow Clowes had received a licence in 1975–76, the first monitoring return of the sort I have described would have been required by the end of December 1984. In the event, Spicer and Pegler certified in July 1985 that it had obtained verification of the clients' investments and cash, and that the statement of clients' funds gave a true and fair view of their composition as at 28th December 1984. There is no reason to think that the fact that Barlow Clowes was not licensed in 1975 had any material effect on the course of subsequent events.
The partnership again came to the department's attention in late 1983. The review and tightening up of the system in 1983 had brought large numbers of unlicensed dealers to light. Wholesale prosecutions would have been unjustified, and as Sir Godfray's report explains, it was the policy to bring unlicensed firms into the regulatory net and to take other action only where there was evidence of wrongdoing or that investors' funds were at risk. The department originally believed that the partnership was applying for membership of NASDIM, which would have meant that it did not need to be licensed directly by the department. When it became apparent that the

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partnership was not doing so, the effective choice open to the department lay between prosecution of Barlow Clowes for not holding a licence (the only sanction provided by the legislation) and licensing the firm if it could meet the regulatory requirements. As Barlow Clowes was a partnership, the department—even where grounds existed—had no powers to investigate it nor to apply for a winding-up order. Nor was there any provision for intervening to protect investors' funds if a licence were refused.
The department therefore decided to seek to bring the partnership within the regulatory framework. In doing so it had four main aims: the first was to subject the partnership to the conduct of business rules (strengthened in 1983); the second to secure examination of its affairs by qualified auditors; and the third to persuade the firm to incorporate a limited company so that the powers available under the Companies Acts would be available. Fourthly, it was also necessary for Barlow Clowes to make arrangements which satisfied the Bank of England that the partnership was not in breach of the Banking Act 1979. When all these objectives had been met, licences were issued in October 1985 to the partnership and the company. In issuing the licences the department made clear to the Barlow Clowes's solicitors that it had been heavily influenced by the assurances received from or through them. The department also took full account of the report from Spicer and Pegler on clients' funds as at December 1984.
In 1986 new licences were issued to Barlow Clowes after it had submitted applications accompanied by the verifications and auditors' certificates required by the legislation. Although the majority of the powers under the Financial Services Act 1986 did not come into force until 29th April 1988, stronger and wider powers of investigation contained in that Act became available on 18th December 1986. By the time of Barlow Clowes's licence applications in 1987, the department had received material from the Stock Exchange and others that caused concern about Barlow Clowes's UK business. The department did not at that time have the power to apply for a winding-up without first conducting a statutory investigation. Even if there had been such a power, there was not at that stage sufficient evidence to be confident that an application to wind up the company would he successful.
The department had three courses open to it. It could refuse the licence. This would have stopped the company from lawfully taking on new business. But because the department could not apply for a winding-up, there would have been no way of securing existing investors' assets. This action could therefore have precipitated a disorderly collapse of the businsss which would have damaged existing investors' interests. The second course was to grant a licence but immediately to issue notice of intention to revoke it. The company could have referred this to the Licensed Dealers Tribunal, which would have meant that it could carry on trading until the tribunal and decided the case.
The department therefore adopted the third possible course. This was to institute an investigation
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under the powers newly available under the Financial Services Act and to issue a new licence, subject to review, pending the outcome of that investigation. The investigation proceeded but even six months later, in April 1988, with all the information the investigators had by then uncovered, there were legal doubts whether sufficient grounds existed for a winding-up petition to succeed. By May 1988, the combination of the investigation and new information on the company's solvency had yielded enough information to secure a winding-up order.
I am informed by the liquidators of Barlow Clowes Gilt Managers that on current information investors are likely to receive in excess of 75p in the pound and they are hoping to make a substantial distribution before Christmas.
I now turn to Barlow Clowes International. This company was based in Gibraltar and was not licensed. Any offshore company dealing with expatriates and not holding itself out as dealing in securities in the United Kingdom would not need a licence. The question therefore is whether the department had reason to believe that BCI required a licence. As Sir Godfray's report shows, no firm evidence came to the department indicating that this was so, and the information provided by the United Kingdom company from 1984 to 1987 indicated that BCI serviced expatriates and non-residents. During this entire period there were no complaints from investors, no question about whether BCI was licensed, no approaches from intermediaries that would have revealed that BCI was dealing with United Kingdom residents.
From 1984 the department decided that as part of its licensing function it would adopt a policy of sample monitoring of advertising in the national and financial press. No advertisements from BCI came to light as a result of this monitoring. Subsequently it has emerged that a single advertisement was placed by BCI in one general supplement of The Times devoted to Gibraltar. This was not picked up by the sampling system. It has since transpired that BCI received business as a result of advertisements placed by authorised intermediaries, not in the general or financial press. These advertisements did not mention BCI, which was only named in subsequent private correspondence. No example of such correspondence was referred to the department before the Barlow Clowes collapse.
The liquidators of Barlow Clowes International predict that there will be sufficient funds realised to make a distribution in excess of 30p in the pound. The complications in BCI will take some considerable time to resolve but the liquidators arc hoping to make a small interim distribution early in 1989.
Perhaps I may now turn to the main conclusion the Government draw from Sir Godfray Le Quesne's report. Within the constraints of the old legislation and the information available to the department at the time, the department's general handling of the licensing of Barlow Clowes and Partners and Barlow Clowes Gilt Managers Ltd. was careful and considered and its actions reasonable. Barlow Clowes International had no licence: only since the company

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collapsed has it emerged that its activities were such that it probably should not have operated without one. Sir Godfray's report shows that my department did not have reason to know this.
I also inform the House that the legal advice the Government have received on the question of liability to investors with all these businesses is clear. The Government have no legal liability. In view of the hardship that has been caused, the Government have considered very carefully whether there is a case for ex gratia compensation. The facts set out in Sir Godfray's report in the Government's view provide no grounds for concluding that my department's handling of the matter was unreasonable or caused the losses experienced by investors, and therefore provide no justification for using taxpayers' money to fund compensation.
I am aware that the Parliamentary Commissioner for Administration has said he is considering whether to investigate complaints of maladministration in my department's handling of the matter. I have today sent him a copy of Sir Godfray Le Quesne's report. If he decides in the light of that to carry out an investigation the Government will of course co-operate fully with him and will consider carefully any report he may make. I am also sending copies of Sir Godfray's report to the Institute of Chartered Accountants in England and Wales, the Securities and Investments Board and FIMBRA for them to see whether there are matters for them to consider.
It is all too clear from the account of events in Sir Godfray Le Quesne's report and from the points I have made so far that there were a number of significant weaknesses in the legislative framework of the Prevention of Fraud (Investments) Act 1958 even after the regulations were greatly tightened in 1983. There were no provisions for injunctions to stop unauthorised businesses or breaches of the rules, nor powers to restrict business, safeguard assets or appoint trustees. Nor was it possible to investigate unincorporated investment businesses. The Government have acted to correct these weaknesses in the Financial Services Act 1986, whose main provisions came into effect in April this year. These improvements do not mean that the present system of investor protection is completely risk-free. No regulatory system can eliminate fraud or guarantee investors against loss. But the legislative framework has been radically revised and strengthened since the chain of events covered by Sir Godfray's report took place.
Lord Williams of Elvel: My Lords, the House will be grateful to the Secretary of State for making that Statement but I am afraid that we on this side find it wholly unsatisfactory. It will come as no comfort at all to those thousands of investors, many of them elderly, who have put their life savings into Barlow Clowes funds.
The Secretary of State said that the report of Sir Godfray Le Quesne is purely factual; but were not the facts largely known? Did we all not know that it was a complex matter stretching back over years? Did we all not know that officials in the licensing section of
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the DTI were stretched, overworked and undersupervised, and had to rely on outside information for granting licences? Did we all not know that after the grant of the licence in October 1985 the DTI failed to insist on more regular reports than the annual monitoring returns, relying again on outside representations? Did we all not know that this situation persisted right through to the collapse, even during the noble Lord's tenure of office, right up to May of this year during an investigation by the Department of Trade and Industry? Did we all not know that the auditors of the company had acted with a certain degree of incompetence in their failure to conduct a proper examination of the returns made by Barlow Clowes to the department? Finally, did we all not know that there was a distinction between the offshore and the onshore business but that it was a distinction which could not be appreciated by those United Kingdom residents who, as the noble Lord said in his Statement, were dealing through intermediaries with BCI?
The noble Lord's Statement was purely factual. The report of Sir Godfray Le Quesne is purely factual. The noble Lord gave the Government's view of what was the Government's responsibility in the light of the facts revealed by Sir Godfray in his report. However, when the noble Lord made his Statement on 13th June of this year he said in response to my probing, and I quote from col. 11 of the Official Report of that day:
"This is an inquiry to determine the facts of what actually happened within the department and to determine whether or not the department is to blame in any way Jr whether procedures could be improved in the future".
In other words, this independent inquiry was to determine whether the department was to blame in any way. It was not to establish the facts, and then for the Government to take a view. It was an independent inquiry which would take that view. That is perfectly clear from what the noble Lord said on that day.
We are entitled to rely on ministerial assurances about the content of an inquiry, assurances given to this House, and those who have invested their funds in Barlow Clowes are also entitled to rely on those assurances. Therefore I ask the noble Lord directly: what was the opinion of Sir Godfray Le Quesne, the independent inquirer, on whether the department was in any way to blame? Until that question is answered fully and fairly in this House we on this side will continue to return to the matter and will continue to insist that the Government have not done their job properly.
3.45 p.m.
Baroness Seear: My Lords, we on these Benches are grateful to the Secretary of State for making this Statement, but we are handicapped by the fact that we have not seen the actual report and have only the Statement—no doubt a correct Statement but we do not know how full a Statement—from the Secretary of State. We understand that the report will be fully published although there is a reference to certain omissions for legal reasons. We should like to know how extensive those omissions will be when the

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report is made public and therefore can be more fully discussed if necessary in your Lordships' House.
The gravamen of the case that the noble Lord puts forward is that the Department of Trade and Industry was in no way incompetent in that it did not have the powers to do the kind of investigation that was needed. That may or may not be the case, but in the report he has given us there are at least two references which lead one to have doubts at least about the efficiency with which the matters were handled. We are told at one point that there was a misunderstanding within the department. Paragraph 7 of the Statement says:
"They received advice which due to a misunderstanding within the department, did not adequately cover the point".
We are told in paragraph 8 that the department,
"originally believed that the partnership was applying for membership of NASDIM",
and then found that there was another misunderstanding. These references in the report to misunderstandings lead us to wonder how many other misunderstandings there were.
It may indeed be the case that the powers for protecting investors were at that time totally inadequate in that we had to rely on the Department of Trade and Industry, which we are told did not have the legal powers to do the job that was necessary. It can be argued that this is borne out by the fact that subsequently a very much more extensive and thorough system has been introduced under the Financial Services Act. However, the very fact that the Department of Trade and Industry was handling these matters must have led to a false sense of security among investors. A government department was seen to be investigating matters of the greatest possible concern. Although it was inadequately equipped to do it in terms of its legal powers, people must have been led to believe that they were better protected than in fact they were.
It is very much to be hoped that if this is indeed the case, the Government in considering compensation will not hide behind narrow legalities and make the case that they have no responsibility but will accept the argument— and we on these Benches hope that the Parliamentary Ombudsman will pursue his inquiries to establish these facts—that the public were under a misunderstanding about the security that was being offered at the time and that that fact in itself gives some moral claim to compensation which we very much hope the Government will be prepared to honour.
The report raises the question of whether the Department of Trade and Industry is staffed in such a way that it is capable of dealing with the highly professional people in the financial world, both those of a high level of integrity and those who are not of a high level of integrity, who are in the professional game of investment. All through the report the message comes out that they had to refer to professionals outside in the hope presumably that from that advice, which they were not themselves professionally competent to assess, they would be able to make an adequate decision as to what ought to be done. It raises the question of the staffing of the department when undertaking these extremely intricate and professionally demanding jobs.
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Williams of Elvel, for what he said, but I can only assume—I expect all in your Lordships' House are in the same position— that he has not had the opportunity to read this most detailed report. I must apologise to all Members of your Lordships' House for that, but it is because of the parliamentary procedure under which the report is published, which is by notice of Motion for an unopposed return in the other place. Moreover, because it is not a government White Paper but an outside report, it would only formally become available to anyone from half-past three this afternoon. Nonetheless I hope that all Members of your Lordships' House will take advantage of looking at and reading the report, and will then see that it is unparallelled in terms of openness.
There is everything in the report to show exactly what my department did all the way through. It is a full disclosure of the facts. Indeed, it is what I promised your Lordships' House when I came here last June.
It is not for anyone, no matter how distinguished, to act as judge in this case; there are legal procedures. What Sir Godfray Le Quesne has done is to go through all the papers in my department. He had access to all the civil servants involved so that he could see exactly what my department has done over the period of many years. I am sure that when any noble Lord, or any investor, has the opportunity to read the report, he will see that my department has not been negligent in carrying out its duties and that it has gone to a great deal of trouble in order to do so.
The noble Lord, Lord Williams of Elvel, would have me extend this matter so that we should leave it to the opinion of Sir Godfray Le Quesne and then be bound by his opinion. However, we have many other ways of determining whether the department is liable. We have taken advice from leading counsel. Indeed, leading counsel have informed me that the Government are not liable in this instance. However there are methods in that connection which are being tested. No doubt those who wish to dispute that decision can put it to the test.
I turn now to the remarks made by the noble Baroness, Lady Seear. The misunderstanding of the department was back in 1975, even before I arrived in the department. It was one, as we went to great pains to point out in the Statement, which was possibly due to incorrect advice given to Barlow Clowes at the time, and the company should perhaps have been licensed then. As the Statement points out, it was the practice of the department to license almost anyone who asked. Therefore it is quite likely that the company would have been licensed. If it had been licensed, it would have been liable to send a return as at the end of 1984, which as events subsequently transpired it did.
The noble Baroness queried the quality of the staff in my department over the period of years when they were supervising the matter. I must inform her that the whole of government works in almost every instance upon the basis of accepting the audit reports, the audit certificates and the undertakings of reputable, professional people. If we did not accept

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the auditors' certificate on accounts, on income tax returns and on many other matters, indeed it would be impossible for our society to operate.
However, I am sure that if the noble Baroness, or any other Member of your Lordships' House, has an opportunity of studying the report it will be seen that time and time again the staff in my department had assurances from very reputable bodies; namely, from accountants, solicitors, banks and many others. That is the only basis upon which the system of licensing operated at that time.
The noble Lord, Lord Williams of Elvel, wishes us to say that we will pay out of sympathy. I have considerable sympathy for those who have suffered. My boxes at night have been accompanied for week after week with perhaps a hundred letters a night from individuals who have suffered. The tales those letters contain are indeed harrowing. Many people who have retired are actually put into great financial stress in the last stages of their lives. I have every possible sympathy with them.
However, I have another responsibility: I must judge the matter from the point of view of taxpayers generally and particular sections of our society. I must then say that if it is the responsibility of the Government, the Government should pay. But the report discloses that my department carried out its duties and proceeded correctly. Moreover, even until the company actually collapsed we did not have the kind of complaints which, if it was as widely known as the noble Lord, Lord Williams of Elvel, surmises, we would have been entitled to have.
I commend all Members of your Lordships' House to read the report with great diligence. If then any noble Lords think that my department has been found wanting I shall be happy to return to the House to answer that charge.
Lord Marsh: My Lords, does the Minister accept that no one in the House will be at all surprised to find that no legal liability rests with the Government in this respect? The report—which we have not had the opportunity to read—is purely factual. I ask the noble Lord whether he agrees with this. What is at issue here is the moral responsibility of the Government, who introduced and administered a licensing system which small investors, quite understandably, saw as a good housekeeping seal of approval. However, it failed to protect the investor, and indeed virtually encouraged people to invest on a basis upon which they should never have done. Does the noble Lord agree that it is not a question of sympathy, nor of the law? Many people believe that the Government—and the taxpayer generally who is behind the Government—have a moral responsibility for this failure.
Lord Young of Graffham: My Lord, I am most grateful to the noble Lord, but I think we must be careful as to how far we take that principle. After all, just because the Department of Transport issues driving licences that does not mean to say that it has any moral responsibility in a road accident. I am being most careful in what I say here. It is not the principle of licensing itself; it is what is carried out.
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We have two separate cases in issue here. We have Barlow Clowes UK where licences were issued, and my department received auditors certificates each year certifying that the funds were correct and properly handled. No complaints were received until the very end when we were looking for legal ways by which we could wind up the company. As regards the other instance, we had no knowledge, and nor does Sir Godfray Le Quesne think we should have had, that the company was actually trading and raising money in this country. That is a different matter.
It is true that in the first instance the company was licensed. It is true, whether or not it is because of the licence, that the loss happily appears to be far less in this country. However, we can do not more than rely upon the system which we have and upon the auditors' certificates which we receive and then see how we can act in order to save the position within the law.
I am happy to say that the position is far better under the law today because, if an intermediary wishes to solicit funds for an offshore investment, investors will be warned of the dangers involved, the fact that it will not be covered by the compensation fund and that they must be aware of the risks which are often run in those circumstances.
Lord Hailsham of Saint Marylebone: My Lords, at the outset of the Statement my noble friend said, obviously rightly, that there were matters in the report which referred to the possibility of criminal proceedings. Can we know with whom the responsibility for bringing such proceedings or not bringing them will ultimately rest? Will it be the Director of Public Prosecutions, the Attorney—General or some other statutory body? Further, within what sort of time frame shall we know whether such proceedings are to be brought?
Lord Young of Graffham: My Lords, that is a matter for the Serious Fraud Office and for those authorities which look at such matters; it is not a matter for me.
Lord Diamond: My Lords, while all of us on these Benches are most grateful to the Secretary of State for having made the Statement, I think that I must preface my comments by saying that the main conclusion to be drawn from this sad affair is that it underlines what we already fully know. Anyone who invests has to invest with caution, and any investment which attracts above normal returns generally carries above normal risks. Further, anyone who invests should never put the whole of his eggs in one basket in any circumstances.
Having said that, is it not clear to all of us that as a result of the Government having given in general terms a stamp of respectability to the name of this partnership, they bear a measure of responsibility in looking after—I go no further than that—those who have suffered grievous losses?
Can the Secretary of State therefore tell us who—either the Government or an appropriate department—will ask the necessary questions of those intermediaries who, knowing the

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circumstances, or who should have known them if they were not negligent and liable therefore by being so negligent, advised clients to invest? They advised them not merely to invest but to invest the whole of their savings and to take such savings from a safe investment such as a building society and put them into this highly speculative venture. I cannot imagine any respectable intermediary doing that. What is happening about the further questioning of those individuals? As to the future, under the present so-called protective system of the investor, is the Secretary of State satisfied that, were those circumstances to repeat themselves, the losses would not occur, or would not occur to anything like the same extent?
4 p.m.
Lord Young of Graffham: My Lords, I listened with great interest and understanding to the noble Lord, Lord Diamond. It is not for me to comment this afternoon upon the behaviour of the intermediaries, but I agree with much that the noble Lord said. Since the coming into full effect of the Financial Services Act the conduct of intermediaries has been under the care of their own self-regulatory body (FIMBRA). The chairman of that body is a Member of your Lordships' House, and he may be able to throw some light upon the matter.
Many things have changed since the passing of the Financial Services Act and so the same circumstances would not repeat themselves. In the case of doubts, it is now much easier to administer the funds for the general protection of the body of investors. We were in a difficult position. Under the then state of the law we were unable to take steps to protect those funds if the licences were withdrawn. Since August a compensation fund has been in operation and so people who invest in such funds know that to an extent they are obtaining cover. There is now a health warning in respect of those funds which are not covered by the compensation fund. The general principle remains the same. Investment for safety is something that should surely be spread above all that.
Lord Elton: My Lords, the noble Lord, Lord Diamond, referred to the organisation formerly known as NASDIM, of which in its present form I am now chairman. He asked who was to ask questions of those who had had dealings with the affair under the old provisions. The current responsibility lies with my association. I can assure your Lordships that the rules of the association and the provisions of the statute will be enforced on any member without fear or favour. However, I remind the noble Lord that we are talking about a system which no longer exists. The old PFI Act has been repealed and replaced by the Financial Services Act. Your Lordships will agree that recent events have shown that the need for that Act was paramount and urgent. There can be no doubt that it should have been passed. Under it, my association has much greater control over the behaviour of its members. It has nothing to do with the investment companies, which fall to another association, but it is responsible
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for intermediaries and has made a scale of categories corresponding to the scale of risks in the business dealt with.
We regard dealing with offshore funds as a very high category. There are much closer controls now than there were. May I in conclusion say—
Noble Lords: No!
Lord Elton: My Lords, may I in conclusion ask—in fact, the Procedure Committee recommended that Statements be dealt with only in the interrogative and your Lordships rejected that recommendation, but I shall however observe it—whether the noble Lord is aware that I share his and everyone else's concern for the victims of that collapse, and welcome the fact that there may be an early pay out for the onshore operation. Where individuals have substantial amounts invested in the offshore operation, and the liquidators can give a firm statement of what will eventually become due, I hope that the Government will recognise that the effects of having one's money frozen are exactly the same for the time being as having lost it all. If an arrangement could be made for an early payment on that side also, perhaps there could be a letter from the liquidators to the investor stating his expectation which could he presented to a clearing bank as evidence of money to come to hand. I hope that the liquidators recognise that many of the people involved have no financial experience and that they should be told that the letter should go to a clearing hank and not to a loan shark.
Lord Young of Graffham: My Lords, we are all concerned about the status of those who invested all their funds in either of the funds. I know that those who are now responsible for putting in order the affairs of both funds and for repaying the investors are equally aware of that. I am informed that there will be a substantial payout of the United Kingdom fund before Christmas. Alas, there cannot he a payout of the Barlow Clowes International fund until the New Year. I shall certainly pass that message on to the liquidators.
Lord Peston: My Lords, I am bound to say that the Secretary of State's Statement sounded as if he were much more concerned to protect the great department of state of which he is in charge than to protect investors. The investors in this case could at least ask the question: if the Department of Trade and Industry was not there to protect us, and if no one else was there to protect us, who was there to protect us? After all we are not dealing here—the Secretary of State should not make the point—with normal risks. The investors involved are not fools. They were perfectly aware of the fact that these things were risky. They are concerned about the misuse of funds and misinformation.
To be told either that we did the best we could or we did all that we could although it was not the best we could do, and it still ended this way, does not sound satisfactory to me and it will not sound satisfactory to the investors. It is all very well to express sympathy, but without 50p all the sympathy in the world will not buy one a cup of coffee.
Lord Young of Graffham: My Lords, I did not say that we did the best we could. I pointed out that we followed the law at that time. The basis of the system was that we relied upon annual returns supported by auditors' and other statements. We received those statements. When it started to come to light that the position was more serious, as I outlined in considerable detail in my Statement, we took such steps as were open to us at that time to try to resolve the position.
It was not until May 1988, when sufficient evidence was available, that we could go in to wind up the company. Those were difficult situations. The law is easier today than it was at that time. The liquidation of the company is being carried out under the present law. However, the law is not arbitrary. Before any department of state can move it must have the necessary evidence. The way this affair was conducted, especially the way the funds were raised for the Gibraltar company, raises considerable questions as to whether that was by accident or otherwise.
Lord Cledwyn of Penrhos: My Lords, I am sure that the noble Lord the Leader of the House will agree that there is a strong case for a debate. The exchanges thus far have underlined that need. I am sure that he will further agree that it would be best to have a debate after the matter has been considered by the ombudsman, if indeed it goes as far as the ombudsman. I am not pressing at this stage for a debate, which would in any event be a matter for the usual channels.
The Secretary of State urged us to read the full report. We shall of course do that now that it is available to us. At the moment, our exchange is based upon the Statement which the noble Lord made to the House. On the basis of that Statement, does the noble Lord at least agree that a very grave error of judgment was committed last November when Barlow Clowes was relicensed at a time when his department was investigating the firm's affairs against a long background, expecially since 1983 of dubiety about the firm?
The noble Lord's Statement refers to a possible collapse if the licence had not been granted in November. Does he not agree that even a collapse, had it occurred, would not have been as serious as the debacle which has now taken place with all the consequences for the small investors, to which the noble Lord, Lord Marsh, has referred?
Finally, one agrees that the law has changed and that the law today is better than it was before. However, will the noble Lord confirm that he, as Secretary of State, and his honourable friends the other Ministers were responsible for the licensed dealer system under the 1958 Act which was valid until the end of April this year?
Lord Young of Graffham: My Lords, I am very grateful to the noble Lord the Leader of the Opposition. I think that all Members of your Lordships' House will be able to assess the position of my department and will be all the better for reading the report. It is not an easy report to read. The noble Lord the Leader of the Opposition
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criticised my department for renewing the licence last November. My Statement made clear that we had two other alternatives. One was not to renew the licence. I said that that would have precipitated the disorderly collapse of the business. It is true that that is no less than the position that occurred a few months later. Once it was known that the business was no longer licensed, it would have collapsed. However, there is the great difference that we would not have been able to administer the funds, as we were able to in May of this year when we applied for the winding-up order. That was the time when we were able or the liquidators were able, to seize the funds and to ensure that they would then be liquidated and returned to investors. The report shows that at the time we could not have done that because we did not have the powers.
The other course was to grant the licence but immediately to issue a notice of intention to revoke it, which would have given us slightly stronger powers. However, under the state of the law at that time the company could have applied to the licensed dealers' tribunal and could have carried on trading until the tribunal had decided its case. That is something which often takes many months to determine.
The noble Lord has referred to the old legislation. We have been aware for a long time of the defects of that legislation. Professor Gower was asked by the Government to prepare a report in 1981. In the early 1980s that report came before your Lordships' House. In 1983 we made the regulations stronger. They were the first regulations that required the return of auditors' certificates and other verification in this field, and that was finally brought into the Financial Services Act 1986, where the law stands today. That is why I say that these precise circumstances will not recur. There are different remedies and different steps. That does not by any means suggest that fraud will never occur again.
Lord Merrivale: My Lords, perhaps I may ask Her Majesty's Government or the Secretary of State a question relating to Barlow Clowes International. Bearing in mind the Government of Gibraltar's keen interest in attracting investors to Gibraltar and the greater tax advantages in Gibraltar compared with those granted by the Channel Islands, damage could have been done to the image of Gibraltar as an offshore base. Therefore will the Secretary of State carefully consider compensation to those who invested in Barlow Clowes International, bearing in mind the final remarks of my noble friend Lord Elton? I feel that those elderly investors who invested in the Gibraltar area should be looked after.
Lord Young of Graffham: My Lords, I am grateful to my noble friend but I am not the Secretary of State for Gibraltar, which is outside our jurisdiction. The Government have been impressing upon the Government of Gibraltar that they should introduce legislation in order to ensure that the funds there are properly managed. Under an impending directive to come through from the European Community, if Gibraltar does not do so, I suspect that it will not be able to operate as freely within the Community. I do not believe that it is for me to take any measure of

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responsibility for those who go to Gibraltar for reasons which only they can give.
Lord Stoddart of Swindon: My Lords, can the noble Lord tell me whether Mr. Clowes is suffering the same financial hardship as the investors in his company? Is it true—as has been alleged—that Mr. Clowes is receiving from the liquidators in excess of £1,000 per week for his living expenses?
Lord Young of Graffham: My Lords, I can answer for much of your Lordships' House but not for Mr. Clowes. I am not in a position to answer for him. The arrangement to which the noble Lord refers is a matter between the liquidator and Mr. Clowes.
Lord Morris: My Lords, is my noble friend the Secretary of State satisfied that the United Kingdom and European regulations deal adequately with the problems of disclosure caused by the exploitation of countries such as Gibraltar and Luxembourg for the registration of companies? We have seen this, for instance, in the case of Barlow Clowes and Minorco S.A.
Lord Young of Graffham: My Lords, these are two entirely different matters. Nobody was in any doubt about the ownership of the Barlow Clowes International shares. The issue with Minorco, which is a Luxembourg company, is disclosure of interests in shares. The European Community has recently adopted a common position which is just short of agreeing on a directive which, while it will not bring the rest of the Community up to our standards, is a very substantial improvement. Gibraltar will have to bring itself at least up to the standards of the European Community.
If we are looking at investment in Gibraltar in the future under the sort of circumstances we have been describing, investors, who only receive details of this investment, as I understand it, not by looking at advertisements but after responding to advertisements about nameless funds received in communications in writing from intermediaries, will have to be warned that if they invest in such funds they will not be eligible for the compensation fund. I should have thought that that should be a clear enough warning.
Lord Diamond: My Lords, perhaps I may—
The Lord Privy Seal (Lord Belstead): My Lords, perhaps we can make this the last question. I think we have had a good run round the course and if the noble Lord, Lord Diamond, will put his point, we can move on to the next business.
Lord Diamond: My Lords, I was merely going to ask the Secretary of State whether he is aware that I am most grateful to him for the hint that he gave to the noble Lord sitting behind him. I am particularly grateful to the noble Lord. Lord Elton, for the very useful series of non-question information he gave us.

Housing Bill
4.17 p.m.
The Earl of Arran: My Lords, I beg to move the Motion standing on the Order Paper in the name of my noble friend Lord Caithness.
Moved, That the amendments for the Report stage be marshalled and considered in the following order—

Clause 1

Schedule 1

Clauses 2 to 7

Schedule 2

Clauses 8 to 24

Schedule 3

Clauses 25 to 39

Schedule 4

Clauses 40 to 46

Schedule 5

Clauses 47 to 59

Schedule 6

Clauses 60 to 62

Schedules 7 and 8

Clauses 63 to 76

Schedule 9

Clauses 77 and 78

Schedule 10

Clause 79

Schedule 11

Clauses 89 to 107

Schedule 12

Clauses 108 to 117

Schedule 13

Clauses 118 to 126

Schedule 14

Clauses 127 to 129

Schedule 15

Clauses 130 to 134

Schedules 16 and 17

Clause 135

The title—(The Earl of Arran.)
On Question, Motion agreed to.

School Boards (Scotland) Bill
4.18 p.m.
The Earl of Dundee: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(The Earl of Dundee.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 18 [Financial powers of Boards]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 55:
Page 11, line 31, at end insert ("Accounting procedures for the recording of the said funds and gifts should he agreed with the education authority and should he subject to internal or external audit.").
The noble Lord said: This amendment deals with the accounting procedures for moneys raised by the school boards. We believe that it is essential that any moneys generated by the school boards which are not forwarded to the education authority but retained for distribution by the boards should be accounted for in a proper manner. Accounting records and procedures should be standard throughout the education authority. Therefore it would be appropriate for the education authority to issue standard guidelines to ensure that these procedures are adhered to and that the books of accounts, documentation, etc. should be the subject of an annual audit. I think that would be a helpful measure for school boards. I am sure that most of them would appreciate having something to help them keep their own finances in order and to make it quite clear to everyone else that the moneys collected, donated or accrued to them were properly spent. I beg to move.
The Earl of Dundee: I am grateful to the noble Lord for his concern in this matter. However, I think we should be quite clear about exactly what it is that is under discussion. School boards could have two sources of funds. First, there are the sums provided to boards by their authorities for running their affairs and discharging their delegated functions. Those sums are governed by Clause 17. Any such moneys will remain within authorities' financial control mechanisms and will be subject to authority audit procedures in the normal way.
Secondly, there is the opportunity for boards, under the powers conferred by Clause 18, to seek to raise funds for the benefit of their schools. These powers are very limited. For example, a board may not borrow; it may not levy charges on parents for education; a board may not take an interest in land. In short, Clause 18 funds are the kind of thing with which we are already familiar in the activities of parents' associations and similar bodies. They are the funds which result from a dinner dance, a raffle, a school fete and similar functions.
I quite agree that such funds should be managed with appropriate care and should be properly accounted for. If boards want advice on how this should be done, I am quite sure that authorities will be happy to advise them. They may receive good advice from their own schools' parents' associations, too. However, I quite agree that Clause 18 funds should be the subject of appropriate management and accounting procedure. What I am not sure about is the suggestion that formal local authority audit procedures and audit by the commissioner for local authority accounts is a good idea for the results of a school fete. I am sure the commissioner would have little relish for the prospect. Is it not more appropriate for guidance and training material to advise boards that proper accounting for such funds is good practice, and perhaps also to suggest some methods and techniques? That is what we intended. I commend it to the Committee as the best approach.
Lord Carmichael of Kelvingrove: I had no desire to use a sledgehammer to crack a nut in this situation.
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I certainly appreciate that it is undesirable to exercise too much control over school funds. However, throughout the course of the Bill Ministers have been speaking in two different ways. On the one hand they talk about great powers being given to school boards, but on the other hand they talk about money raised by school boards only coming from such events as raffles. They say that school boards cannot invest, borrow money or have an interest in land.
However, if boards become as important as Ministers have suggested they will become as a result of the Bill, they may gather quite considerable funds. My amendment was intended to be a safeguard and not a means of minutely overseeing school funds. It was intended to be a form of guidance for school funds.
The Minister, towards the end of his contribution, appeared to suggest that there was scope within the Bill for proper auditing by education authorities to take place at a later date. If that were the case, it could act as a safeguard. At the first collapse or difficulty of a school fund people might be only too quick to say, much as they said about the Barlow Clowes affair, that the Government had the opportunity to put the correct machinery in place but they did not do it. School funds may not be in the same class as Barlow Clowes investments, but to individuals they could be just as important. However, I do not think the Minister is going to go any further on this point.
Baroness Carnegy of Lour: Before the noble Lord decides what he wishes to do with his amendment, I wish to ask my noble friend whether the Government have any picture of the limit up to which gifts may be received. Clause 18(1) of the Bill states:
"A School Board may—

(a) raise funds by any means (other than borrowing); and

(b) receive gifts,

and may expend any sums so received at their discretion.
Schools may, in due course, receive quite a large gift. As that situation could arise, would it not be wise to include in the Bill some provision as regards the auditing of money? I do not know whether that provision is implied elsewhere in the Bill. I make that point because it occurs to me that we may be talking about more than the proceeds of a fête.
Lord Carmichael of Kelvingrove: The noble Baroness described this matter rather better than I did. No one wants to make this procedure unnecessarily cumbersome, but there is a point at which protection becomes necessary. The Minister seemed to hint that there were powers in the Bill in this regard. Will he expand on that?
The Earl of Dundee: Certainly. As regards limits on gifts I can say that there are none. A substantial gift could be made, but boards will always have to consider a head's advice on how they spend a gift. In addressing the concerns of the noble Lord, Lord Carmichael, again, it might be helpful if I remind him that boards have a duty to abide by correct procedures for accounting and accounting management. If they were to do otherwise they would be in direct breach of that duty as referred to in the Bill.

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It might also be helpful if I remind the noble Lord of the right of parents to bring a board to heel if they feel that the board in any way is guilty of malpractice, and certainly if such malpractice should include mismanagement of funds and accounting procedures. In context I feel that measure provides the right balance. If we were to go further than that, in the words used by the noble Lord earlier, we might run the risk of using a sledgehammer to crack a nut.
Lord Carmichael of Kelvingrove: I have no desire to prolong this discussion. However, I remind the Minister that these boards do not even need to make annual reports to parents according to the Bill. Therefore I do not know how the parents would know about any malpractice. But perhaps this is something we can look at again.
The Earl of Dundee: The noble Lord will recall that at a previous stage of the Committee my noble friend Lord Sanderson of Bowden undertook to look at Clause 12 and consider putting boards under a duty to report to parents at least once a year. With that undertaking to look at the matter, I think we have gone some way to meet his concern.
Lord Hughes: If the noble Lord, Lord Sanderson of Bowden, decides not to call for a report, the one proviso that helps the situation would be removed. In those circumstances will the Minister undertake to have a look at the situation suggested in the amendment?
As the noble Baroness, Lady Carnegy of Lour, said, boards may well be the recipients of substantial gifts. My noble friend Lord Carmichael referred to the Statement we heard earlier about financial matters that had gone wrong on an enormous scale. In such circumstances it is no consolation to parents to know after some such event has occurred that they had been told about it. There is an obligation on the Minister, if he does not produce the suggested safeguard, to look seriously at the alternative as suggested in this amendment.
The Earl of Dundee: I am grateful to the noble Lord. I take his point that if gifts were to be substantial, if we were to fall foul of a time factor—that is to say that the malpractice had already occurred before parents heard of it—and if boards were not to heed whatsoever the advice which had been given to them on correct accounting procedures, there would be an unsatisfactory situation.
However, conversely it does not necessarily follow—and particularly due to existing safeguards to which I have already referred—that, even if my noble friend Lord Sanderson is not able to arrange that there should be an annual report by the boards to parents, the situation is unsatisfactory. But I certainly take on board what the noble Lord has said and I shall link the matter with our current endeavours to improve the Bill as best we can.
Lord Carmichael of Kelvingrove: We shall watch for the publication of the amendments for Report
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stage with great interest. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carmichael of Kelvingrove: Amendments Nos. 56 to 59 inclusive have already been debated and disposed of.
[Amendments Nos. 56 to 59 not moved.]
Clause 18 agreed to.
4.30 p.m.
Clause 19 [Allowances for members of Boards]:
Lord Addington Lord Addington moved Amendment No. 60:
Page 12, line 16, leave out ("section") and insert ("sections 45 and").
The noble Lord said: In moving Amendment No. 60 I wish to speak also to Amendment No. 61. The aim of the amendment is to ensure that loss of earnings incurred by those attending hoard meetings will be no deterrent to attending such meetings and that anyone who loses earnings will be recompensed for those, and only for those earnings. A system under which someone lost wages or salary for attending such meetings might result in some people being barred from attendance because of financial considerations. Although I accept that such meetings would normally be held out of working hours, it might bear rather heavily on people doing shift work or part-time work outside normal working hours.
I grant that the numbers affected would be fairly small. Nevertheless, for the boards to be most effective membership must be an attractive prospect to all those who would be willing to serve on them, regardless of financial considerations. I beg to move.
Baroness Carnegy of Lour: I hope that the Committee will not accept the amendment. I entirely understand the point made by the noble Lord. He made it very succinctly. However, perhaps he has not realised that Section 45 of the Act—which I looked up this afternoon—relates to attendance allowances and is not about refunds for loss of earnings.
Attendance allowances are part of the structure of local authorities in Scotland. Local authorities involve councillors in very many more meetings and hours of work than will school boards. They also have the rather unfortunate effect that, because everyone receives an attendance allowance if they attend a meeting, people want rather more meetings than perhaps are necessary. I believe that school boards would be very susceptible to that tendency. I hope that the number of meetings will be limited and that they will be held at times which are convenient for the members of the boards. I do not believe that it would be at all a good idea to pay an attendance allowance.
The Earl of Dundee: I appreciate the intention of the amendment. However, I believe that we need to distinguish between the kinds of body for which allowances of different kinds are appropriate. Clearly board members may be involved in some activities—training for example—which will require

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them to travel and incur subsistence costs. In that they are similar to members of local authorities and many other kinds of body. It is therefore right that members of school boards should qualify for travel and subsistence allowances. The Bill provides for that. In order to give a degree of tidiness, it relates board members' rates of subsistence etc. to those used in local government.
However, there seems to me to be a very great difference between boards and local authorities in terms of the likely frequency and duration of their meetings and in the other calls which will be made on members. Board members will in no way be like elected members of authorities in those terms. My noble friend Lady Carnegy has already made that point. Therefore it seeems right that board members should not qualify for financial loss allowances simply because such allowances, like the attendance and special responsibility allowances which are also covered by Section 45 of the 1973 Act, are not relevant to the position of board members.
Lord Hughes: One of the points made by the noble Lord, Lord Addington, was that the proposal would not affect many people because most meetings would almost certainly take place in the evening. Therefore the loss of earnings would be limited, as he has suggested, perhaps to people who may lose evening work by attending a meeting. As it stands, the Bill refers to payment of subsistence allowances. If a man or woman loses wages he or she has lost subsistence for that period. Therefore, should such payments not fall quite naturally under the payment of a subsistence allowance?
I must agree with what the noble Baroness has said. Section 45 does not apply because it relates to attendance allowances. However, loss of wages used to be the common basis for payment. I believe that the Government could well consider whether there is a way in which people involved could receive compensation under the terms of payment of the subsistence allowance.
Lord Carmichael of Kelvingrove: I hope that the Minister will give sympathetic consideration to the amendment. There is always concern about abuses, and there have been cases of abuse of attendance allowances in local authorities. I am sure that the problem occurs more widely. It should be remembered that the idea behind the introduction of the allowances was to try to achieve some equity and a reasonable spread of representation. Because someone happened to have a private income it was almost an abuse of their comfort and security that they were able to take on certain jobs that others were not able to do because of the necessity to earn a living. I think that we should always remember that a great many people who were in the position of having to have an attendance allowance almost certainly gave up the chance of promotion by taking part in public service. I know hundreds of such people.
There is another aspect of this matter. There will be instances where a good deal will be involved in attending meetings, particularly in Highland areas. I
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can imagine meetings in Highland areas being too far away for some members if the board covers a collection of schools because the individual schools are too small to have their own boards.
I hope that the Minister will give the amendment a fair amount of consideration. We all know that payment for public work is a difficult matter, but I hope that the Minister will at least give the remarks of the noble Lord, Lord Addington, the care they deserve.
The Earl of Dundee: I believe it is appropriate to consider whether membership of a school board is service which should be recognised for special leave from employment. The Government hope that employers will take an enlightened view of that possibility. Not only is it a valuable local service but there will be many employees who will learn much and develop many useful skills as a result of their participation in the work of boards.
In order to give a positive lead in this matter I can assure the Committee that the Government themselves will act as an enlightened employer in this respect and will regard service on a school board as an appropriate reason for civil servants to claim special leave.
Perhaps I may just return to the remarks about subsistence made by the noble Lord, Lord Hughes. Subsistence payments are for expenses incurred away from home and are not a replacement for earnings.
Finally, in answer to the noble Lord, Lord Carmichael, I think that the kernel of the argument is that, in encouraging people to take an interest in school boards, we hope that they will act on a voluntary basis. We have very much in mind the dissimilarity from local government of school boards, which may be served by volunteers. When people join boards on a voluntary basis it is inconsistent that they should be paid for doing so.
Lord Addington: I regret that the Minister cannot accept the arguments put forward. Although I accept that people would join boards on a voluntary basis, there may be cases, even if they are few and far between, in which someone will have to forgo attendance on financial grounds. The point has been made about the amount of time spent in travelling, especially in rural areas, and the time taken in order to attend meetings. That point should be borne in mind. However, as the Government are not prepared to accept this amendment I beg leave to withdraw it.
Amendment, by leave, withdrawn.
[Amendment No. 61 not moved.]
Clause 19 agreed to.
Clauses 20 and 21 agreed to.
Clause 22 [Interpretation]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove had given notice of his intention to move Amendment No. 62:
Page 13, line 35, at end insert—
(""Community School" means a school designated by an education authority as a community school and which, during the normal school day for pupils of school age, provides one

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or more of the following activities: formal further education, informal further education, or community education for those beyond statutory school leaving age.").
The noble Lord said: We have already discussed Amendments Nos. 62 to 64.
[Amendment No. 62 not moved.]
The Earl of Dundee The Earl of Dundee moved Amendments Nos. 63 and 64:
Page 13, line 40. after ("region") insert ("or of an islands area").
Page 13, line 43, at end insert—
("'islands councillor" means a councillor elected for an electoral division of an islands area, in terms of section 5(1) of the 1973 Act;").
The noble Earl said: These amendments have already been spoken to. I beg to move.
On Question, amendments agreed to.
Clause 22, as amended, agreed to.
Clauses 23 and 24 agreed to.
4.45 p.m.
Schedule 1 [Electoral Procedure]:
The Earl of Dundee The Earl of Dundee moved Amendment No. 65:
Page 15, line 6, leave out ("(subject to paragraphs 4 and 6 to 9 below)").
The noble Earl said: This is simply a detailed drafting amendment which follows from changes made in another place to make authorities' electoral schemes subject to guidance from the Secretary of State. Paragraph 1 of Schedule 1 contains the reference:
"(subject to paragraphs 4 and 6 to 9 below)"
but, since the paragraph goes on to state that arrangements are to be in accordance with this schedule, the detailed references are not necessary. I beg to move.
On Question, amendment agreed to.
The Earl of Dundee The Earl of Dundee moved Amendment No. 66:
Page 15, line 22, at end insert ("including the date at which such eligibility is to be determined in respect of any particular election.
5A. For the purposes of paragraph 5 above, the education authority shall, in respect of each school in their area, establish and maintain a list of the names of the parents of pupils in attendance at that school, and unless a parent's name appears on the list on the date determined by an authority under paragraph 5 above for the purposes of any election he shall not be eligible to be a candidate or to vote in that election.").
The noble Earl said: It is our intention that the electoral procedures for school boards should be secure, safe and efficient. During debates in another place there was much agreement on the need for the smooth running of the electoral procedure. The Government accepted amendments specifically requiring authorities to appoint returning officers and also provided that they should not submit electoral schemes for approval by the Secretary of State. Instead authorities would be required to draw up schemes in conformity with the Bill and in accordance with guidance on schemes which would be issued.
The purpose of this amendment is to give authorities a duty to compile an electoral roll for parent election and a specific power to set a date by
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which eligibility to vote and to stand can be determined for any particular election. For practical purposes it will be important that authorities should be able to set such a date a little way ahead of an election, by which time eligibility to stand or vote will have been determined. This will allow a definitive electoral roll to be established.
All these matters could be secured by provisions in the guidance on electoral schemes which the Secretary of State will issue or indeed inferred from authorities' general powers and duties in regard to board elections. However, we thought it right that these central provisions should appear on the face of the Bill, leaving the guidance to deal with more detailed issues. I beg to move.
On Question, amendment agreed to.
Schedule 1, as amended, agreed to.
Schedule 2 [Appointment of headteachers, deputies and assistants]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 67:
Page 16, line 18, leave out sub-paragraph (h) and insert—
("(b) in any other case, of an equal number of persons nominated by the education authority and by the School Board; and one of the nominees of the education authority shall act as the Chairman of the Committee and one other shall be the headteacher.").
The noble Lord said: It may be for the convenience of the Committee if we deal with Amendments Nos. 67, 68 and 69 together. As regards Amendment No. 67, the principle adopted generally by education authorities in making senior appointments in schools has been to consider that where elected members are involved in the appointment, one of their number should act in the capacity of chairman. This principle is based on the fact that since the ultimate responsibility and accountability to the public rests with the elected members, they should have a say in the appointment. That principle is recognised in Schedule 2 in the case of the appointment of a head teacher but the chairmanship in respect of the appointment of a deputy and an assistant falls to the headmaster.
It is believed that this system is inappropriate, for the reasons advanced above, and also that it would put the headmaster in an invidious position. He would be in a position of authority over those to whom he is accountable—namely, the elected member—and those whom he is advising—that is to say, the school board. In practice, quite correctly, great weight is given to the views of the headmaster. The opportunity to express those views and be involved in the decision to appoint can adequately be secured by his membership of the appointment committee without the need for him to act as chairman. In all the circumstances the public accountability of the committee would be more appropriately reflected by the chairmanship in all cases being exercised by an elected member of the authority.
Amendment No. 68 will have reference to, among other things, the sick pay scheme of the Scottish joint negotiating committee for teaching staff in school education, by whose terms a headmaster may, subject

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to medical certification, be on sick leave for a period of at least one year. If paragraph 3 remains unaltered, any functions of the head teacher in relation to staff appointments might be incapable of being exercised and deputy and assistant head teacher posts might have to remain vacant for long periods. Where that happened it would have a damaging effect on the running of the schools. I shall not bore the Committee with numerous examples of cases in which for perfectly legitimate reasons head teachers have been away from school for a considerable time. I ask the Minister to reflect on that point.
As lines 22 to 28 of the Bill stand, the provision conflicts with the existing line management arrangements and consequently would place the head teacher in a potentially difficult position. The procedures adopted generally by education authorities in making senior appointments in schools have been to consider that where elected members are involved in the appointment one of their number should act in the capacity of chairman. This practice rests upon the basic proposition that the ultimate accountability to the public rests with the elected members. In addition, in view of the possible conflict of interest in the case of appointments of deputies and assistant head teachers, it is recommended that here again the head teacher should not be the chairman of the appointments committee. I stress that the head teacher is a very important person in the school. However, in the instances that I have given, and with the position proposed in these amendments, while his point of view must be seriously taken into account, nevertheless we feel that in almost every case the chairman should be an appointed member. I beg to move.
Baroness Carnegy of Lour: Schedule 2, paragraph 2, proposes somewhat different arrangements for the appointment of the head teachers and of depute and assistant heads. I am happy that, for the appointment of head teachers, the committee should consist of an equal number of people nominated by the authority and by the board, and that the chairman of the committee should be one of the authority nominees. I can see that arrangement working very well.
I have been in some doubt about the arrangements for the appointment of deputes and assistant heads to which the first amendment refers and on which the noble Lord has spoken. This proposal also allows for equal numbers of members of the committee from the authority and from the board. In addition, the head teacher is chairman. When I first studied this schedule I was extremely surprised by the proposal. I gather that I was not the only one. All over Scotland in local authorities people were surprised and interested. They wondered how it would work. The idea that the head teacher should chair the committee for the appointment of his own depute or assistant was unfamiliar to me.
Members of the Committee will know that every local authority in Scotland has chosen to do this in a somewhat different way. I was familiar with the position where the head teacher was not a member of the appointments committee, but its adviser. When the committee had interviewed candidates and was
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discussing whom it might appoint to be the depute, if he or she would prefer not to work with one of the candidates, he or she could imply a preference but need not commit himself or herself to who should be appointed. This meant that if there were one or even two internal candidates the head teacher need not express an opinion for or against one of those people.
When I discussed this with CoSLA and with the EIS—the biggest teaching union— agreed with them at that time that this amendment was a good idea in part. I did not think that it was a good idea for the head teacher to be a member of the interviewing panel and not the chairman. However, I thought that for the head teacher not to be the chairman was sound. I have now heard that the associations which specifically represent head teachers of the secondary and primary schools—apart from the EIS who have some members who are head teachers—are very much in favour of this idea. When my noble friend replies to this amendment, perhaps he will confirm this fact if he knows that it is correct. I have not been able to speak to the associations myself.
If that is the case, it is necessary to consider the matter further. I realise that head teachers will be operating in a very different situation from that which applied hitherto. There will be much more delegation to the schools. They will be operating in a very different atmosphere with much less to-ing and fro-ing with councillors, but more with the board and the directorate.
I suspect that gradually the appointments system will become even less political than it has been hitherto. It has varied in different parts of the country. In some places it has been rather political. Therefore to chair the committee which interviews one's potential deputes and assistants is very helpful in this new atmosphere. For someone who has experience of the old system, as does the noble Lord, Lord Carmichael, one has to think oneself into that situation. However, it could work better than the noble Lord suggests and perhaps better than the present arrangement. If the associations representing head teachers want this arrangement I should not like to stand in the way and vote for this amendment.
On the point raised by the noble Lord about the head teacher who is in post but who is unable to be there, perhaps through illness, for as much as a year—as I have known happen from time to time—an extremely difficult situation is created by the Bill. I do not agree that the acting head teacher should chair an appointments committee for a depute or an assistant. Perhaps my noble friend will look at the Bill to ensure that it provides for an adequate operation of the system when the head teacher is off for some weeks or months. That can crop up and I cannot see that it is allowed for in the Bill, as has been referred to by the noble Lord, Lord Carmichael.
I cannot support this amendment for the reasons that I have given. I ask my noble friend whether he will confirm that the head teachers have indicated through their associations that they are in favour of this arrangement for appointments. Perhaps he will also consider what will happen when head teachers are off duty for a prolonged period.
Lord Hughes: Unlike the noble Baroness, Lady Carnegy, I do not attach the weight to the views of the head teachers that she does. It would be astonishing if they were to write to the Secretary of State to say, "No, we do not think a head teacher should be the chairman". It would be almost like crying, "stinking fish" in their own shop.
However, I wish to tackle the issue in a different way. Paragraph 2(a) requires the committees to be equally composed of persons nominated by the education authority—and one of them will be the chairman—and by the school board. But paragraph 2(b) begins by stating that it will be,
"an equal number of persons nominated by the education authority and by the School Board; and the headteacher of the school, who shall be chairman of the committee".
If one takes that at its face value it will no longer be a committee of equal numbers unless the assumption is made that either the education authority or the school board must nominate the headmaster as one of their nominees. I do not think that that is the most logical interpretation.
I assume that under paragraph 2(b) it will be an unbalanced committee, with the head teacher automatically becoming a member of the committee in addition to the two groups of nominees. Although my name is on this amendment, along with that of my noble friend Lord Carmichael, on thinking about the matter again I am not happy about the part of the amendment which puts the head teacher on the committee as a member. I know that in the past there have been occasions in local government when officials have been suggested as members of a subcommittee. In practice they did not like it because when they were present as the official they were the professionally qualified adviser to the committee. Anything they had to say was treated with the respect that the position gave them. In those cases where they became just members of the committee that is how they were regarded. The education authority members, the education committee members or the members of whatever committee it was, tended to say, "After all, you are no more qualified than I am".
On a different point, I should not like to be a headmaster chairing a committee who had the duty of falling out with a member of his education authority. It may not matter very much on one occasion in the appointment committee; if it happened regularly it would not stand the headmaster in very good stead in future. It would be very much better—I hope that my noble friend will agree—that in either case the headmaster should be in attendance as the professional adviser and the chairman of the committee should be a member of the education authority.
5 p.m.
The Lord Advocate (Lord Cameron of Lochbroom): As the noble Lord, Lord Carmichael of Kelvingrove, has made clear, the purpose of the amendment is to take away the role of the head teacher as chairman of the appointment committee which is to select members of the senior management team at his school; that is, the deputy and assistant head teachers. In parenthesis I should point out to the
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noble Lord, Lord Hughes, that there will be no head teacher at the time when an appointment of head teacher is being considered. I suspect that the noble Lord was aware of the difficulty in this regard.
Lord Hughes: Indeed, I can read, and I noted that. I was talking about the second instance where it would be three, three and one, or where one of the three was to be the head teacher.
Lord Cameron of Lochbroom: As I understand the justification for this series of amendments, it is effectively to preserve the existing role of the education authority in these appointments. The noble Lord, Lord Carmichael of Kelvingrove, referred to ultimate accountability and public accountability. I do not understand the logic of the case put forward; nor, indeed, do I see the force of it.
Let us consider how Schedule 2 stands as drafted in the case of a vacancy arising when a deputy or assistant head teacher post comes to be filled. In paragraph 1 we are told that it is the education authority that advertises the post. We are then told that the education authority, having decided to proceed further with the appointment, sets up a committee for the purpose of considering a short leet of candidates provided by the education authority. I see little here that removes any of the proper rights or responsibilities of the authority. It seems to me that at this stage the authority has had every opportunity to satisfy itself that all the candidates on its short leet are acceptable to the authority. Indeed, I find it hard to believe—as I understand it, this was not suggested—that the authority would include candidates that it did not find acceptable. As pointed out, at this point the appointment committee is made up of equal numbers of members nominated by the education authority and the school board concerned. The head teacher takes the chair.
The noble Lord, Lord Carmichael of Kelvingrove, said that this places the head teacher in an invidious position, to use his term. The Opposition ask us to envisage that the appointment committee will operate on an adversarial basis with the so-called education authority members ranged against the school board members leaving the head teacher to hold the ring and take a difficult decision. I should have thought that that was a travesty, a caricature, of the position. It suggests that that members of the appointment committee would act in an entirely improper way.
Members of the appointment committee are selected with a single, clear task. It is to select from the short leet drawn by the education authority the candidate who in the view of the committee is best suited to the post in question. At that point the members are not there in a representative capacity. If the authority has particular views about the criteria for suitability of candidates, these will already have been exercised at the stage when the authority draws the short leet. At the point under discussion, what is in question is a collective effort to select the best person for a particular post from a group of candidates, all of whom are eligible and all of whom are considered acceptable by the authority that will be the employer.

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It may well be that this committee will require direction and guidance. And that is what we have provided. Who better to direct the deliberations of the committee than the head teacher of the school at which the vacancy arises? It is entirely right that the head teacher should have this role. He is the senior manager of the school; he should have the opportunity to wield substantial influence in the selection of his colleagues. I repeat that this selection is being made from a leet drawn up by the authority. There is no question of the head teacher being set over against his employers.
I was distressed at the suggestion of the noble Lord, Lord Hughes, that there would be any question of falling out with an education member. It may be that members of the appointment committee will have different views as to who is the better person, but that will be as members of the committee, not as members of the education authority or of the school board.
I ask the Committee to bear in mind another important provision in paragraphs 14 and 15 of the schedule. They provide that the director of education should be notified of all appointment committee proceedings with a right to attend meetings and give advice, which must be considered. Section 78 of the Education (Scotland) Act describes the director of education as "the chief education officer of the authority". Again I wonder how we are to believe that these provisions remove or weaken authority responsibilities.
Two other provisions in the Bill have a bearing on the matter. There is a small but significant provision in paragraph 17, which reserves the right of appointment to the authority. It is not given to the appointment committee. We shall discuss this further in relation to Amendment No. 71.
There is the far more substantial provision of Clause 15(2)(b) which prevents the selection of a head teacher, deputy or assistant being delegated to a school board. In other words, the careful provisions governing the proper rights and responsibilities of the authority in relation to these appointments are preserved. They may not be replaced by more local arrangements under delegation.
Upon a proper reading of the Bill, in particular Schedule 1, it is clear therefore that the rights and responsibilities of the authority as employer are in no way weakened. It is equally clear that the position accorded to the head teacher is an entirely proper one. Only if we conceive of an appointment committee acting in a quite improper manner does the view of the headmaster as a "ringmaster" have any context whatever.
The noble Baroness, Lady Carnegy of Lour, asked about head teachers' unions. The provisions of the Bill have been warmly welcomed by head teachers' representatives. In an article in the Glasgow Herald of 30th September this year, the President of the Head Teachers Association in his presidential address to the association's conference, is recorded as saying,
"Hope burns brightly …that come next November when school boards are in place headteachers will recover some discretion to do what they were appointed to do, manage their schools".
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What is more germane to the management of the school than to play a leading role in the selection of senior staff? As I have indicated, this entirely proper role can be given to the head teacher without causing any harm to the rights and responsibilities of the education authority. Another point that was raised was what will happen if the head teacher is not available to chair an appointment committee. Concerns were expressed by all three of the noble Lords and the noble Baroness who have spoken.
The effect of paragraphs 3 and 19 of this schedule is that no committee may be formed even if the head teacher's post is being filled by one of his senior colleagues. I know that it was argued opposite that this could cause problems. Perhaps we may look at this in a little more detail to see the extent of the problem. It can only arise, I suggest, if, as suggested by the noble Lord, Lord Carmichael, there was the possibility of the head teacher being on extended sick leave. There is no problem there. There would have to be a combination of other factors. First, he would have not only to be on sick leave but on extended sick leave. Secondly, he would have to be so ill that he could not attend the appointment committee. Thirdly, a vacancy for a senior appointment would have to occur during that period.
Obviously I accept from the noble Lord opposite that there are occasions when the head teacher is on sick leave, and there may be other occasions when that sick leave has to be extended. However, the likelihood of all those factors coming together to cause significant delay must be fairly minuscule. I have no doubt that there are occasions when during a period of extended sick leave a senior appointment vacancy may become available, but the question then is the length of delay. How long will it be before the head teacher comes back to take his proper place or a new head teacher is appointed?
Let us make the assumption that this combination of factors occurs. What happens then? The answer is simple. The deputy head teacher vacancy must be filled on a temporary basis until the head teacher returns or is replaced; then a properly constituted committee can sit. That is not so unreasonable because it reflects the importance which we attach to the head teacher having a major role in the choice of his senior colleagues. I agree that filling senior posts on a temporary basis is unsatisfactory, but it has to be done as a matter of fact. I think that it is still less satisfactory for the senior team in a school to be selected by an appointment committee chaired by someone who is himself only temporarily in charge. Certainly the number of times that that would occur is so limited that it simply does not provide a basis for taking the head teacher out of the chair of the appointment committee.
My noble friend Lady Carnegy spoke about a conflict of interests. If we allowed an acting head teacher to chair a depute head teacher appointment committee we would be causing considerable difficulty. Let us assume the situation of a head teacher on sick leave; the depute head teacher post is vacant; an assistant head teacher is acting for the head in the absence of a depute. In the normal course of events the assistant head would be a candidate for the vacant depute post, but because he is acting head

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teacher he has to chair the appointment committee for that very post. That indicates quite clearly that the way in which we have proceeded is the most sensible way and the one that should stand. The difficulties which it may cause in, I should have thought, almost hypothetical cases, are such that can be resolved by using temporary measures. The difficulties which would be caused by removing it could not readily be remedied.
I have spoken for some time because I recognise the concerns which Members of the Committee have expressed about this matter. However, we take the view that this is a new Bill which is intended to give school boards a proper place in the running of the school and the head teacher a proper place in the running of his school. That is secured by the provisions which are already in the schedule.
5.15 p.m.
Lord Hughes: I thought that the amendment was an important one, but it did not occur to me for one moment that it was so important as to justify this lengthy intervention by the noble and learned Lord, in the course of which he demonstrated that he is well qualified to keep us on our toes so far as the law is concerned.
However, I would suggest that in two respects he is riot as well informed as perhaps he thought he was. First of all, he said that it was most unlikely that an education committee, in putting forward a leet of three, would be doing other than nominating three people, any one of whom would be qualified to do the job. In this matter the Lord Advocate shows his ignorance of local authorities. A predecessor of mine as Lord Provost of Dundee was for many years a very successful and distinguished chairman of the Dundee Education Committee. It was almost unheard of for Sir Garnett not to have the person of his choice appointed. Why? He was very much concerned, as chairman, in drawing up the short leet. Once he made up his mind who should be appointed, he made certain that the other two candidates on the list had not a hope in hell of getting the job. I doubt very much whether that practice died with Sir Garnett Russell.
Secondly, the Lord Advocate glided over the possibility of a difficult situation arising due to a prolonged absence of a head teacher. My noble friend referred to particulars that had been given. There were three given by the convention. The third of these is perhaps the most acute problem that would be created.
The head teacher of a primary school was absent though illness from June 1987 until September 1987. That is a very short period indeed. However, she was again absent from February 1988 until her death in June 1988. The Lord Advocate said that in these circumstances there would have to be a temporary appointment. Who is going to make the temporary appointment? He has stressed the importance of the head teacher being the one who is most involved in the appointment of these members of his staff. Yet we will have a situation where there cannot be an appointment committee because the head teacher is not available and the head teacher therefore is out of
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the count. How is the temporary appointment made? By whom is it made and under what circumstances?
Unless the Lord Advocate can produce an answer to the second point—and I see that he is sending for help—it would be better if the Minister would at least give some further consideration to this matter.
Baroness Carnegy of Lour: I think that the noble Lord is correct in what he has just said. I hope that my noble friend will look to make quite sure that when the head teacher is off sick there are no holes left in the system so that it is not possible to operate these senior appointments while he is away. I do not see how it is going to work either in this respect.
On the question of the drawing up of the leet, with great respect to the noble Lord, Lord Hughes, this Bill is going to create a situation where the local authority will not be able to use that old trick of weighting the leet so that the chairman of the committee stands a good chance of getting the person he wants. I do not think that it has happened in Tayside for quite a while. The Dundee habits died a little when Tayside came into operation. They may be coming back now.
I think that this system, where the local authority produces a leet and the committee makes a recommendation to the local authority, is equally balanced between the authority and the board. The head teacher will be in the chair so the local authority must first produce a short leet of people whom it believes can do the job. I believe that that will be good and more suitable for modern practice. I take comfort from it and believe that it is a good system.
I noted that if there were to be an equal number of members with a head teacher as chairman, he should not have to give a casting vote because there will be seven people.
Lord Hughes: I do not believe that the noble and learned Lord has answered the question. Will there be an equal number plus one, or is it assumed that the headmaster must be a nominee of one of the groups?
Lord Cameron of Lochbroom: It is quite clear from paragraph 2(b) that it is an equal number of persons who are nominated by the education authority and the school board. In addition it is the head teacher of the school who shall be chairman of the committee.
I take up the point made by the noble Lord, Lord Hughes, about the short leet. I believe that he fell into error, which he seldom does, by talking of a short leet of three in relation to the topic which we are discussing; that is the type of appointment committee under paragraph 2(b). It is covered by the terms of paragraph 13 of the schedule which states:
"In every other case the authority shall prepare the short leet (in the case of the appointment of a deputy or assistant headteacher, in consultation with the headteacher) and shall send the short leet to the appointment committee".
I should not like to think of education authorities acting in quite the way he suggested. It may have happened in the past and perhaps it indicates that we are now putting a better system in place.
Temporary appointments are not covered by Schedule 2. That is plain when one looks at the

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function delegated to the school boards which is, effectively, permanent appointments. The education authority would propose the temporary appointments to fill the gaps until such time as the proper appointment is made, which would fall under Schedule 2.
Lord Hughes: Is it clear that the education authority would have the power to make a temporary appointment? That is not stated in the Bill but is it stated elsewhere?
Lord Cameron of Lochbroom: It is not stated in the Bill because the Bill does not deal with that. It deals with permanent appointments.
Lord Carmichael of Kelvingrove: We should be grateful to my noble friend Lord Hughes for his openmindedness because he has said that he has changed his mind about one or two matters to which he had put his name. He spoke powerfully and with a great deal of experience of appointments and short leets.
I do not believe that the noble and learned Lord is as naive as he tried to pretend. He has read too many political biographies and diaries from across the political spectrum not to know that such matters are not unusual. My noble friend Lord Hughes is merely pointing out what we all know.
I suggest that there is another way of looking at the matter. The short leet is merely the education authority saying that three, four or five people are suitable for the job of assistant headmaster or headmaster in its authority. However, one is not merely choosing a headmaster but one is choosing a headmaster for a specific school. Therefore they are not necessarily equal. There are two levels. The first level is the short leet which states that they are suitable for an appointment. The second is the specific level where they are stated as being suitable for a particular school
I should like to suggest to the noble Baroness, Lady Carnegy, that I do not know how many head teachers are members of the EIS. I imagine that there is a high proportion of Scottish assistant head teachers and head teachers who are in the EIS and who may also be in the other organisation.
Baroness Carnegy of Lour: Many head teachers who are members of the EIS also belong to the Head Teachers Association. It is through that organisation that they have expressed an opinion.
Lord Carmichael of Kelvingrove: I should not like to say which is the parent body, but it is obvious that head teachers are concerned and involved parties in the procedure for making appointments. The noble Baroness suggested that she wanted people to move to and from the school board, and we should also like to see that. However, we had to drag out of the Government correspondence and information—which we have been promised only later—from the school boards to the parents. I earlier gained the impression that there may not even need to be an annual report because nothing may have been done.
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Therefore, the parents may not know who are the members. It is difficult enough to know who are councillors but it is more difficult to know who is the school board's chairman when, up until now, there has been no necessity for it to issue even an annual report.
I believe that we were perfectly correct in tabling the amendments and in emphasising the role of the elected member. Despite the fact that there will be school boards, I am sure that the elected member will still be considered to be more available. It may be a long time before many parents will dream of going to the chairman of a committee because, for sad, difficult and historic reasons, even going to a school to see the headmaster is a trauma. However, to go to a local councillor can be a great deal easier.
I am sorry that the noble and learned Lord has not seen fit to say that he will at least take back the amendments. Despite the eloquence with which he put the case, I believe that the fairly simple suggestions made in the amendments would have created a smoother way of solving the problems which have been discussed. However, I realise that we shall not get very far with them and I beg leave to withdraw.
Amendment, by leave, withdrawn.
[Amendments Nos. 68 and 69 not moved.]
5.30 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 70:
Page 17, line 14, leave out from ("Board") to end of line 16.
The noble Lord said: The reason for tabling Amendment No. 70 is that it is inequitable that a staff member should be excluded from the appointment procedure unless he is a candidate for appointment. Unless that is so there is no conflict of interest. If there is to be any kind of partnership among the various interests represented and the boards, one group of members should not have a second-class status. I beg to move.
Lord Cameron of Lochbroom: I do not detect in the noble Lord's utterances and the strength of his arguments the usual note of confidence, and I am not entirely surprised.
We are here dealing with the provisions apertaining to the appointment of a head teacher. Under the schedule, the school board has two stages of involvement in the selection of a new head teacher. First, it may consider the short leet drawn by the authority. Within certain limits it may adjust that short leet. Secondly the school board may nominate half the membership of the appointment committee for the post. As the Bill stands, the staff members of a board may not take part in either of these stages of consideration.
I do not think it is necessary to explain the reasons for this exclusion in any detail. We believe that it is wrong in principle to involve the representatives of staff of the school in the process of selecting their head teacher. This is not an elective office any more than is the captaincy of a ship. We also believe that it is unfair on the staff representatives themselves to

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be so involved. The pressures on them to discuss the details of applications received and perhaps the detailed curriculum vitae of colleagues at the same school with other members of the staff would be intolerable. I believe that the noble Lord would accept that.
It has been argued that the staff member of a board will have an invaluable role in advising the board about what is required in a head teacher for that school. That is as may be. But this advice could be sought and given in general terms before the appointment comes before the appointment committee. We take the view that it would be wrong in principle to involve the representative staff members in that part of the school board's considerations for the reasons that I have given. Therefore, I cannot accept the amendment.
Lord Carmichael of Kelvingrove: I believe that the noble and learned Lord is probably correct. This is a probing amendment to obtain the Government's view. There is a role on the board for the staff member who has been on the board continually, who knows how it works and has the feel of it and who also knows the feel of the school in general and so perhaps can help in that intangible way in deciding whether or not someone will fit in. However, I believe that there are difficulties in that another member of staff could be applying for the post. I shall look with care at what the noble and learned Lord said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 71:
Page 18, line 4, leave out paragraph 16 and insert—
("16. The Appointment Committee shall, unless they consider that no person on the short leet is suitable for the post, make an appointment; other than where the preferred candidate for a Headteacher appointment was not on the short leet submitted by the authority but was added by the School Board.
17. Where the preferred candidate for a Headteacher appointment was not on the short leet submitted by the education authority the Appointment Committee will recommend the candidate to the authority. The education authority will appoint that person accordingly unless it appears to them that the candidate is not, for good reason, eligible or suitable for the post, in which case they may refuse to appoint him.").
The noble Lord said: Although the stages in the procedure differ as between the head teacher and the deputy or assistant head post, those stages conclude with an identical procedure involving interview of the leet by the appointment committee and subsequently a recommendation of an appointment to the education authority. That latter element appears to me unnecessary. It would be in the interests of all concerned if the procedure could be short-circuited to the extent that the appointment committee was empowered, where the preferred candidate had been included on the orginal leet by the education authority, to make an immediate appointment following interview without reference to the authority. That would automatically include all posts of deputies and assistants along with the majority of head teacher appointments.
The only appointment not covered by this proposal would be where the preferred candidate had
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not been included on the authority's short leet but had been added by the decision of the school board. I am not quite sure from where the power for this arises. However, in those circumstances it would be appropriate to safeguard the position of the education authority in terms of its established responsibilities by including a reference-back clause requiring confirmation of the appointment by the authority.
In those circumstances, if the reference is to be meaningful it will not only be on the basis of eligibility, as provided for in the Bill, but also upon that of suitability in order to permit the proper assessment of qualifications and capabilities of the candidate. I hope that, this is not revolutionary and that it will perhaps save a great deal of anguish and backstair bargaining, which is not unknown, if once a candidate selected from the short leet had been selected by the board then a firm appointment could be made. I beg to move.
The Earl of Dundee: I believe that this amendment has two aspects. First, it suggests that the appointment committee should make appointments directly. If I may say so, this is a little misconceived. Schedule 2 has been drafted specifically to reserve the right and power of appointment to the authority itself. This emphasises that appointment—rather than selection—is a matter for the authority alone and preserves the authority's rights as an employer.
Secondly, the amendment gives the authority the right to decline to appoint a candidate chosen for the post of headteacher. This is the most important feature of the amendment. It may allay some fears if I explain the appointment process. The schedule is complex and it is difficult to see the whole process in the words of the Bill. I hope that I can explain the procedure clearly and briefly.
The Bill provides that an authority will advertise the post and draw up a short leet. The leet is then passed to the board who will consider it and can subtract or add names from among eligible candidates. The leet is then passed to the appointment committee who will make a selection provided it considers a candidate suitable. The authority is obliged to appoint the chosen candidate if he or she is eligible for the post. Eligibility in effect means being registered with the General Teaching Council but for certain posts—for example, in a special school—eligibility might also include a specialist qualification. But such cases will be rare.
It is important to distinguish between suitability and eligibility. They are not one and the same. Although suitability is a more subjective judgment, it does have strong professional components and that is why we have included in the schedule express provision for the director of education to advise both the board and the appointment committee in the exercise of their functions.
The authority will have its own view as to a candidate's suitability. Similarly, the board will have its view. The authority will be able to declare its view by drawing up the short leet. the board when it considers the leet. The appointments committee then has the final say, based on the revised leet. And here

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the authority has the major say. As the Committee is made up of half board and half authority-nominated members with the authority in the chair, it will be the authority's view on suitability which prevails in the final analysis.
There is therefore ample scope for the authority to have a decisive voice in regard to the suitability of a candidate and yet another opportunity to declare its view is unnecessary. At the same time, I believe that a good balance of input is able to be made by the board.
Lord Carmichael of Kelvingrove: The Minister will realise that he made a very important and detailed reply with many references and cross-references. At this stage I believe the best that I can do is to withdraw the amendment and read what he said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 agreed to.
Schedule 3 [Delegation Orders]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 72:
Page 18, line 19, leave out paragraph 1 and insert—
"1. Where an education authority propose making a delegation order under section 15 of this Act on their own initiative, they shall provide a draft of the Order to the School Board.
2. The School Board shall then call for a ballot of all parents of pupils in attendance at the school to determine whether a majority of the parents voting in the ballot are in support of the request for delegation of that function.
3. The education authority shall carry out the ballot under paragraph 2 above by providing to all parents of pupils in attendance at the school:

(a) a ballot paper;

(b) a statement of the education authority's proposals and of any reasons for them given to the Board by the authority;

(c) a statement of the School Board's position on the proposals, and the parents shall be invited to vote "yes" or "no" to the proposals.

4. Schedule 1 of this Act shall apply (with the exception of paragraph (9) and of references to candidates) to a ballot under paragraph 2 above as it applies to an election of parent members held under that Schedule.
5. Only if a majority of parents voting in a ballot under paragraph 2 above express support for the delegation order will the order be made.").
The noble Lord said: It will be convenient to discuss at the same time Amendments Nos. 73, 74 and 75. The purpose of these amendments, which have been suggested by the Lothian Parents' Action Group and Education Alert, is to increase accountability of school boards to ordinary parents, particularly with regard to the important area of delegation orders.
As the Bill stands, school boards may take on delegated functions without consulting the parents at the school when an education authority initiates such a proposal and the school board agrees to it, or where the school board requests the delegation of a function and the education authority agrees. Only in the latter case, where an education authority refuses a request from a school board, may a ballot of parents be called.
These amendments are proposed on the sure basis that the representative views of the majority of parents are expressed during the consultation process and that the board should be properly accountable. It is further supported by the results of the survey conducted by the Lothian Parents' Action Group and Education Alert in June when a very high percentage of those asked were opposed to the board being able to apply to the local authority for, and being granted, extra powers without consulting or advising the schools' other parents or teachers.
When discussing the results of this survey in another place the Minister said that the survey statement was unfounded and untrue. However, when asked to explain this the Minister replied in subsequent correspondence with the Lothian Parents' Action Group that the Bill puts,
"a general duty on Boards to…consult parents…and would certainly include any proposals a Board might have for increasing the range of its functions which were likely to be of interest to parents of pupils at the school".
It is clearly the Minister's intention that consultation should take place in all cases where delegation of functions is sought, not just where there is a dispute between the school board and the local authority.
However, parents must feel that such an important point should not depend on a general duty. It should be clearly stated in legislation that the School Boards (Scotland) Bill will be used as a reference document by parents who will understand what they read but will be unaware of any further duties that may be required of them by the general legal principles that govern all statutory powers and duties. It is therefore important that it is both the wish of parents and the Minister's intention that school boards should consult parents on any proposals for delegated functions and that provision for such consultation should be clearly made in the legislation itself.
I make one further comment. The Minister originally sought to suggest that the survey of the Lothian Parents' Action Group and Education Alert was perhaps not as general or as powerful as claimed and had not been carried out as scientifically as it might have been. Nevertheless, he agreed that the general duty should be to consult parents. Therefore, I believe that the Minister has largely conceded the case made by these bodies that delegated powers should be notified to all the parents of the school and that the proposal to seek delegated powers should be noted by other parents in the school. I beg to move.
The Earl of Dundee: I can understand the noble Lord's concern in this respect, but the effect of this group of amendments, if adopted, would be to produce a recipe for democracy run riot. They appear to require that a ballot of all parents is held before a board takes on any additional functions, no matter how small.
I think that the amendments rather miss the point of the ballot procedure. It was not included in this schedule as a consultative mechanism or as a substitute for proper communication between a board and parents locally. Rather it is a part of the specific procedures which apply when a board seeks additional responsibilities but cannot gain the agreement of the authority that these functions

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should be delegated. Support of a majority of parents in a ballot is then a necessary pre-condition for the board to appeal to the Secretary of State.
The Bill already provides separately for boards to have a duty to communicate with parents. There is a general duty to this effect in Claue 12. In correspondence with the Lothian Parents' Action Group, the Scottish Minister responsible for education and health has clearly stated his view that a board which is considering taking on substantial functions would need to let parents know about its proposals as part of its discharge of that duty; and the general duty is backed up by a power for parents themselves to call for a meeting with a board if the board fails in its duty to communicate.
It is always theoretically possible that some board somewhere will act in a way that is unacceptable to parents in its locality. We have included in this Bill a range of safeguards and provisions to ensure that boards are representative and accountable: half the parent members demitting office every two years; secret postal ballots; the duty to communicate in Clause 12, and so on. All of these are reasonable and sensible provisions which will guarantee that boards behave in an appropriate and reasonable manner. To legislate—as this group of amendments would have us do—for the wildly extreme case, would be to risk producing a Bill full of chaotic, jumbled and bureaucratic procedures. In view of those comments I ask the noble Lord to withdraw his amendment.
5.45 p.m.
Lord Hughes: There is some merit in what the Minister said and I am inclined to think that my noble friend will accept it, subject to reading those comments later. In the great majority of schools the parents will fairly quickly become aware of what is going on. The difficulty will be in the large schools in the cities and in the senior secondary schools in the county areas. It will not be so easy, informally, to contact the parents.
However, I am reassured. I do not think there is any great danger that the authorities will be rushing in to delegate further powers to the school boards. They will want to be satisfied that the school boards are working in a satisfactory manner before they divest themselves of their own powers and pass them on to the school boards. There will therefore be plenty of time to come back to this point if it should prove that the boards are not working as we hope they will work.
Lord Carmichael of Kelvingrove: I agree with my noble friend that in the light of what the Minister said my amendments would be taking rather more powers than are required. However, it should also be accepted that the Lothian Parents' Action Group and Education Alert were putting these amendments forward when there was a great inadequacy of routes for allowing parents to be aware of what is happening in the schools.
I draw the attention of the Minister to the fact that Clause 12, when we were debating it on Tuesday, was shown to be woefully inadequate and needed a great deal of beefing up. The noble Lord, Lord Sanderson
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of Bowden, therefore said that he would look at the possibility of giving more formal duties to the board to keep parents involved. Perhaps that will solve the problem. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 73 to 75 not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 76:
Page 19, line 11 after ("school") insert, ("and having regard to the duty of the authority to operate within its budget and to run the whole education service efficiently").
The noble Lord said: This is an important amendment. From August 1989 the education authorities will have to have submitted a number of services to compulsory competitive tendering in order to comply with the provisions of Part I of the Local Government Act 1988. These services—or, as they are known, "defined activities"—include, specifically, school cleaning, the provision of school meals and ground maintenance.
In order to achieve value for money and to avoid being challenged by private contractors for acting in a manner having the effect, or intended or likely to have the effect, of restricting, distorting or preventing competition, an authority may have to package contracts for the provision of defined activities in a way which would not allow it to delegate responsibility for these services to individual school boards.
Therefore the Secretary of State should have regard to the requirements placed upon education authorities by the 1988 Act when considering a request by a school hoard for the delegation of a function. The Minister will be aware that the problem is that large contractors will claim that they are able to take on a group of schools for, say, school meals, ground maintenance or other functions, and that the task will be much more profitably done by a firm that has the equipment and the resources to take on a number of schools rather than individual ones. Obviously, in some areas it would be more profitable for the school board to have the job done by a local contractor. However, in some cases—this may be even more so in the future—central depots may be set up by the big contractors. They may think that there was unfair competition if they were allowed only to tender piecemeal for each school in the area instead of for the schools en bloc. I beg to move.
Lord Cameron of Lochbroom: I am grateful to the noble Lord for making clear the purpose of this amendment. Let us consider the manner in which Schedule 3 is set out. If the kind of considerations that he has put forward are material as regards certain functions requested by school boards and as to whether they should be delegated, they would have two bites of the cherry. First, under paragraph 4 of this schedule they are able to put their reasons for refusing the request before tie parents. The parents are then able to see the counter proposals and to vote upon them. If a majority do not support the reasons for the authority's refusal, the matter has to go before the Secretary of State.

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Paragraph 8 makes it clear that the Secretary of State has only to reach a decision after considering the views of the education authority and the school board. If those considerations are germane, again the Secretary of State is required to consider them before he reaches a view on the proper basis which is consistent with the overall intention of the Bill; namely, that the delegation would not prejudice the good running of the school. The effect of this amendment in other circumstances might allow the excuse of administrative inconvenience to feature in the matter of the refusal of delegation.
We take the view that here we are putting the matter on a proper basis; namely, that the decision has to be taken in what is the interests of the school concerned. That situation is reached only after the education authority has an opportunity both to influence the parents and subsequently the Secretary of State. For those reasons I feel that this is an unnecessary provision.
Lord Carmichael of Kelvingrove: I am grateful to the noble and learned Lord the Lord Advocate. I assume that I can take it from his words that there is no conflict with the schedule and with the Local Government Finance Act 1988. If that is the case, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 3 agreed to.
Schedule 4 agreed to.
[Amendment No. 77 not moved.]
House resumed: Bill reported with amendments.

Ozone Layer: ECC Report
5.56 p.m.
The Earl of Cranbrook The Earl of Cranbrook rose to move, That this House takes note of the report of the European Communities Committee on The Ozone Layer—Implementing the Montreal Protocol (17th Report, 1987–88, HL Paper 94).
The noble Earl said: My Lords, this report deals with proposals for joint action by the international community, the European Community and member states to overcome a serious threat to the global environment posed by the release into the atmosphere of a group of synthetic chemicals commonly and conveniently known as CFCs and halons. The major uses of CFCs are in aerosols as propellants, as foam-blowing agents and as refrigerants in freezers and air conditioners. The main use of halons is in fire extinguishers.
The report before your Lordships has been prepared by sub-committee F which is the environment sub-committee of the Select Committee on the European Communities. The sub-committee is grateful to its specialist adviser, Mr. Nigel Haigh of the Institute for European Environmental Policy. I should also like to thank our witnesses who were of great assistance. I look forward this afternoon to hearing the noble Lord, Lord Bridges, make his maiden speech on this subject. It is my great regret
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that we cannot have with us today two Members of this House who took part in this committee; namely, my noble friend Lord Sandford, and the noble Baroness, Lady White. I am sure that your Lordships will join with me in wishing them a speedy recovery to good health.
There are two sets of issues, scientific and political. On the scientific issues the sub-committee accepted the specialist evidence that had been given to the House of Commons Select Committee on the Environment a little earlier in the year. This was supplemented by the executive summary of the Stratospheric Ozone Review Group's second report which was released in advance of the full report and printed in the Select Committee's report on page 17. The scrutiny of the Select Committee therefore focused on the political processes both international and internal within the European Community. These are the points that I wish to emphasise in the main today.
First, I shall deal with the international background which is covered in paragraphs 7 to 12 of the report. The framework is the Vienna Convention for the Protection of the Ozone Layer which was agreed in 1985. After this convention has been agreed there was a period of international dispute when the leading producers and users of CFCs fell into two camps. First, there was the Toronto group which included the United States, Canada, Norway, Sweden and Finland, that wished to see a ban on aerosol propellants. This was opposed initially by the European Community which felt that the best way to tackle the problem was by production controls. Ultimately a compromise was reached and this compromise appears as the Montreal Protocol under the convention which was agreed in September 1987.
Under the Montreal Protocol, production and consumption of designated CFCs and halons are to be frozen immediately at 1986 levels and subsequently reduced by stages to 50 per cent. by 1999. To come into force the Montreal Protocol must be ratified by at least 11 parties representing at least two-thirds of global consumption. These figures will both be achieved (as is made clear in Table 1 on page 6 of the report) if the United States and the member states of the European Community collectively ratify. The protocol, once ratified, includes mechanisms for periodic review of target reductions, but it must be ratified before the review process can begin.
Within the European Community developments have been as follows. On 16th June of this year the Environment Council adopted a resolution, which is printed on page 16 of the report, calling for further research into the subject and urging voluntary methods to achieve reduction in CFC use. Further steps had to be taken in order to achieve ratification of the Montreal Protocol, and the Commission proposes, first, a Council decision. This decision will enable the Community to become a contracting party to the convention and to the protocol. Secondly, the Commission has proposed a regulation to ensure consistency in the law in all member states. Details of the regulation are laid out in paragraphs 17 to 18 of the report.
Our witness, Mr. Patrick Szell, who is from the Legal Directorate, explained to the sub-committee that, in terms of treaty obligations, problems could arise if all member states do not ratify simultaneously. This is one of the declared objectives of the Commission's proposals. Certainly, in the case of the United Kingdom, and very likely in the case of other member states, were it not for the fact that a regulation is proposed, new legislation in some form would be needed. The regulation undoubtedly makes progress more rapid.
So much for the political nuts and bolts. Since our report was published there have been advances on several fronts. Since 3rd October the full version of the Stratospheric Ozone Review Group's second report has been available. In a covering press release my noble friend the Minister called for an accelerated review and a target reduction in emission of CFCs of at least 85 per cent., thereby carrying the target well beyond what at present is laid out in the Montreal Protocol. In view of news, as recent as October 1988, that ozone depletion in the Antarctic atmosphere this year has been less than predicted, does my noble friend feel that he needs to change his target for reduction? His press release also stated that the United Kingdom, together with its dependent territories, has completed the necessary formalities and is ready to ratify the protocol. In view of Mr. Szell's remarks, it is important to know whether all other member states are also ready. If they are not ready, will ratification be delayed beyond the expected date of 1st January 1989?
The third development in the United Kingdom and in the Community at large is widespread public recognition of the danger of damage to the ozone layer by CFCs and halons. Consumers are looking for substitutes for aerosols, and the United Kingdom aerosol industry has announced its intention to phase out harmful CFC propellents for non-essential uses by 1989. Some imaginative substitutes have also been brought on to the market. Similar moves are being made in other member states. As aerosol propellents account for about 60 per cent. of CFC use in the United Kingdom—and only slightly less in the European Community as a whole—these changes will have a considerable effect of consumption. Can by noble friend assure the House that CFC production will fall in step with consumption in the United Kingdom and in the European Community as a whole? It is important to note that if production is not reduced in this way, the prompt responses of consumers and of manufacturers will bring no environmental benefit.
In other countries, particulary those of the so-called Toronto group where aerosols have already effectively been phased out, the next stage in reduction is much harder. It will be equally hard in the United Kingdom and other member states of the European Community.
In the use of CFCs as blowing agents there has been work on substitute gases. It is also possible to devise methods of containing the gases so that they are not released to the atmosphere. The problem is probably also soluble by seeking substitute materials which do not involve the use of CFCs in their manfufacture.
The remaining major use of CFCs is in refrigerators and in air conditioners. Throughout the Western world and more widely refrigeration is indispensable for the food industry. We have come to depend on frozen food for economic reasons, and much more importantly perhaps, for reasons of public health. It would be wrong to dismiss air conditioning as a trivial use. In large areas of the world with seasonally or permanently hot climates modern architecture has created buildings which are uninhabitable without cooled atmospheres. Many car drivers now rely on air conditioning, which is standard in all but the most temperate parts of the world. The disposal of refrigerators and the breakdown of air conditioners in cars provides a major route by which CFCs are released into the atmosphere.
It is unfortunate that for these important uses CFCs are remarkably suitable. It is also unfortunate that developing countries naturally and understandably aspire to the standards of the Western world. The Montreal Protocol recognises such ' aspirations. Although the term "developing country" is not defined in the protocol, if it were to be applied to the Peoples' Republic of China the threshold allowance of 0·3kilogrammes per head within the next 10 years, which is considered necessary to meet basic domestic needs, would mean at least an additional 300,000 tonnes of CFCs. As Miss McConnell, the head of environmental protection of the international division of the Department of the Environment, said in answer to our question, "That would be very serious". Does my noble friend agree that the search for substitutes must be given high priority? How will he promote the necessary research.
A further fear must be aired. Certain countries may choose to remain outside the group of contracting parties and may deliberately enlarge their production of CFCs for export to other non-signatory developing countries. Does my noble friend anticipate such a development? Is Hong Kong, for instance, among the "dependent territories" that will be signatories along with the United Kingdom? If so, what will be the status of Hong Kong in this respect after 1997?
Finally, in looking at the scene more generally, it becomes increasing obvious that the most alarming threats to the environment are now global in their scope. This case will be the precursor of others. It is important to note again the view of Miss McConnell that the process of forming a consensus in the Community and subsequent action by the Community as a single negotiating body at Montreal was,
"extremely successful and profitable, not only for the Community but I would like to think for the environment".
It is vital that we should recognise the legitimate aspirations of developing countries. It is essential therefore that we contribute to the solution of a global problem by striving to find alternative and environmentally less damaging means by which those developing nations can catch up with the rest of the world in standards of living. In those key aspects, I believe that the action now being taken to protect the ozone layer will be a model for future international

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measures of environmental protection. It must succeed. I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on The Ozone Layer—Implementing the Montreal Protocal(17th Report, 1987–88. HL Paper 94).—(The Earl of Cranbrook.)
6.11 p.m.
Lord Cocks of Hartcliffe: My Lords, I should like to thank the noble Earl, and the committee, for all the work that has been done and also for the most comprehensive way in which he introduced the report. Despite the decision of the House over a year ago that maiden speeches should not be trailed, which seems to be honoured more in the breach than in the observance, I should also like to say that I am looking forward to the maiden speech of the noble Lord, Lord Bridges.
I should perhaps inform your Lordships that I have recently become associated with a major attempt at environmental rehabilitation in London Docklands. Those noble colleagues who attended the memorial service this morning for our dear late colleague Lord Peart will recall that during the address it was mentioned that he was one of the few science graduates in the other place. However, there is another science graduate there now; namely, the Prime Minister. She is not only a graduate in chemistry but had as a tutor a woman who won a Nobel Prize in X-ray crystallography and went on to become Chancellor of Bristol University.
I do not share the cynical remarks which were made when the Prime Minister made her seminal speech about the possibility of a global catastrophe. I believe that she assessed the available scientific evidence and realised that urgent action and awareness were necessary. Concern about the environment is on an exponential curve, not only in this country but in many other parts of the world. I believe that the problem is so serious that we must do our best to adopt a by-partisan approach towards it. It must not be regarded as a political football to be kicked about for temporary party advantage. Indeed, there may well be a temptation to do so because, on the face of it, there would appear to be a contradiction between the philosophies of the two sides of the House. There are those who tend towards the free market economy and those who prefer rather more planning in our affairs. That apparent difference on opposite sides of the House must not be allowed to cloud the issue.
We must also recognise that the solutions to such problems will be most expensive. They will be expensive in terms of the research required and also in terms of the counter-measures which will be needed. Therefore we must all be prepared to stand up and justify that fact whatever the position we are in. The effort will require a strong economy. It will also create a tremendous problem in identifying to the general public the problems which we are dealing with and the need for everyone not only to become interested in the matter but to make his own contribution towards the solutions. However the
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response of motorists to the availability of unleaded petrol has hardly been encouraging in this respect.
Many years ago I was not in the least enthusiastic about the prospect of this country joining the EC. In fact, I voted against it consistently. However, in the autumn of 1974 the noble Lord, Lord Mellish, sent me to the General Assembly of the United Nations—more for rest and rehabilitation than anything else, because I had been the pairing Whip in the other place during a time when we did not have a majority in the House. While I was there I learnt to appreciate the advantage that the EC, which was able to speak on issues with a common voice, had over a number of disparate voices issuing from separate countries.
While I recognise the difficulty, I feel that the point touched upon by the noble Earl towards the end of his address is one to which we must give serious thought; namely, the problems of the Third World. There is an enormous potential source of friction here, because the developed countries—I do not wish to be drawn into a definition of that—or the industrialised West, in fact all industrialised countries, have built up their economic strength by the use of resources from the Third World. Certainly in the case of a number of West European countries, including our own, a great deal of that was done during the colonial phase. The countries were exploited for their resources and our strength was built up on that basis, although I must say in this respect that the record of this country was far better than many others that I could name if tempted.
We now face the danger of lecturing such countries. They will say to us, "It is all very well for you because you have a standard of living where even your poorest people are living in conditions which our people would regard as luxurious. Now you tell us that we have to be careful about using this and that." Obviously, fossil fuel is one of the major problem here. We must recognise such problems and be sympathetic towards them, otherwise we shall enter a phase of stress with those countries which could be disastrous.
The debate is about the issue of CFCs. They are actually made in Bristol. When concern about the matter first arose I recieved a number of representations from people who worked in the manufacture of CFCs regarding their job prospects, and so on. That sort of problem must be faced and overcome. It is so serious that, while people must be looked after if their livelihood is affected, the overall concept is the one which we must embrace.
The question of production havens abroad is mentioned at page 10 of the Report. It is no good trying to cure the problem in countries where we have some say if it is only to be exported abroad. There is also the problem of exports themselves. It is not enough to say that the countries of the West must cut down on usage. We must be prepared to cut our usage far below a pro rata basis. We cannot expect the Third World to take us seriously unless we say, "We have reached a certain standard of living and therefore we are prepared to make a much more substantial sacrifice than people who have yet to catch up with us".

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In conclusion I must say that with the problems we are now facing, together with other matters such as the build-up of CO2 in the atmosphere, we are entering a phase which adds a new dimension to the whole concept of overseas aid and the need for planetary co-operation.
6.18 p.m.
Lord Winstanley: My Lords, today we are debating a matter of great complexity but one which is of the utmost importance to each and every one of us. Therefore we should all be most grateful to the noble Earl for giving us the opportunity to debate such flatters. I am especially grateful to the noble Earl, Lord Cran brook, for giving so clear an exposition of the difference between the Vienna Convention and the Montreal Protocol—matters which previously seemed to me to be somewhat obscure. He has certainly clarified the issue for me.
In his introductory remarks the noble Earl referred to the report and also to the matters which we are discussing. He said that there were two sets of issues involved: scientific and political. I shall deal briefly with both of them.
As regards the scientific aspect, let may say at once that I am no more a scientist than is any other medical doctor. That means of course that I am hardly a scientist at all. However, I do know scientists. Indeed, I have a brother who is by way of being a mad scientist and it is many years since he curdled my blood by telling me what might happen were the ozone layer to be seriously damaged. That was a long time ago.
Knowledge of the threat of damage to the ozone layer has been with us for much longer than some of us think. We had clear quantitative information in 1984 and further information this year with regard to the thinning, or the hole if it is indeed a hole, of the ozone layer over Antarctica and to a lesser extent over the Arctic. We were aware of the problem a long time ago.
I was once unwise enough to mention the possibility of damage to the ozone layer in a debate on the environment in another place way back in 1969. My words were not treated with derision, but they were regarded with great scepticism. I believe that I am right in saying that in another place at that time we did not have the benefit of outstanding scientists such as the noble Lord, Lord Zuckerman, and the noble Earl, Lord Halsbury, who will speak to us later. Perhaps I may at once say how much I am looking forward to hearing what they have to say. Like all noble Lords, I am also looking forward to hearing the maiden speech of the noble Lord, Lord Bridges.
In the House we have an expertise which is a little different. There are those in the House who have perhaps been aware of the danger for much longer than have the public. I remember a long time ago that the late Lord Ritchie-Calder, when he was the president of the Conservation Society, gave a splendid address in which he referred to the possible dangers of damage to the ozone layer. It was a wonderful speech. I have read it several times since with, of course, proper attribution. It is worthy of reading.
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I mention all that to demonstrate that here is a potential danger to the environment in which we hope to live of which some people have been aware for a long time, but that it has taken a very long time to achieve any real measure of public awareness of the threat, as indeed it took a long time to make the public aware of other types of threat to which we are exposed. I am talking about the greenhouse effect and other matters, but we do not want to talk about all of them now.
I shall move straight away to the second of the issues mentioned by the noble Earl; that is, the political aspect of the problem. This timely debate gives us an opportunity to discuss the problem in the present climate of opinion following the Prime Minister's recent statement, which, sitting where I do, I welcome most warmly and which I hope all will welcome warmly. Noble Lords will remember that it was only on Tuesday that a question was asked by my noble friend Lord Ezra and answered by the noble Earl who is to reply to the debate. It is possible that in the debate we may take a little further some of the matters which were discussed at Question Time.
It is my recollection that in the course of his replies the noble Earl was taken to task by some noble Lords for having said that these were the kind of matters which were the responsibility of everyone and not just government. I absolutely agree with him. However it is important that everyone should have an understanding of the fact that conservation costs money; and that one can do almost anything at a price. If we do not pay the price now, we shall all have to pay a much heavier price later on.
Looking at the political side of this matter, how often we have seen that happen in the past. I am straying from the subject, although the point is related, but perhaps I may mention the subject of clean air. As a Manchester man, I can speak with some pride. As many noble Lords will know, Manchester was the first city in the world to be covered entirely by smokeless zones. It made a dramatic change. As a boy at Manchester Grammar School I expected to walk home from school every night in November because of the thick black fog which made it impossible to see and impossible for trains, buses or anything else to run. After a few years when smokeless zones had been introduced one went through thick fog until one reached the city centre, where suddenly there was sunshine again. The atmosphere was clean.
I have mentioned that because it took a long time to make the British public understand that it was worth paying the price to have clean air. Once there was a general realisation by the public that it was worth paying that price, which was a high price that had to be paid not just by central government but by ordinary individuals, then it was easy to take effective action. It was easy for governments of whatever political complexion to take action, and they took action.
We are faced with a similar dilemma with regard to this matter. It undoubtedly costs money to pioneer and develop substances which are ozone-benign to replace CFCs and refrigeration gases. I understand that the only danger from those gases in a refrigerator

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is when the refrigerator is finally broken up. There is no threat when the refrigerator is in use. ICI has done a great deal of work on benign alternatives to CFCs for aerosols and into gases used in cooling plants and refrigeration. That work takes time, and it costs money.
Here I return to the exchange which we had at Question Time the other day. The noble Earl will remember that a pointed question was put to him by the noble Lord, Lord Barnett, who asked whether he was entitled to assume from the Prime Minister's words that there would be increased public expenditure on the general matter of environmental protection. I hope that at the end of the debate the noble Earl will be able to give a categorical "yes" to that question, which he did not have an opportunity to answer at Question Time on Tuesday.
In answering that "yes" we must all understand that there is a price to be paid not just by government but by each individual. That applies to almost everything in this field. We must take public opinion with us. We must get people to understand that it is worth paying the price and that unless they pay that price the long-term consequences could be absolutely catastrophic. I hope that a highly intelligent report such as that produced by the committee which we are discussing, and the publicity related to it, will have played a part in increasing public awareness of the problem.
There are many other problems. People are slowly becoming used to the idea of the greenhouse effect. At the moment that is not necessarily changing people's attitudes towards such things as nuclear power, but they will possibly have to change in the end as we realise the potential dangers of burning fossil fuels and so forth. There must be public awareness.
There must also be a slight change in industry's attitude. I do not wish to embark upon political matters such as those touched upon by the noble Lord, Lord Cocks, in his interesting speech. Sitting where I do in your Lordships' House, I have no objections to profits, especially if I have an opportunity to share in them in any way, but we must realise that in many fields what is profitable in the short term can be desperately damaging in the long term. That is the kind of message which must be got over to industry. The kind of message which must be got over to ordinary people is that if they want a world fit for their children and grandchildren to live in, they will have to pay a price for the kind of steps which must be taken with regard to the matters which the noble Earl has brought to our attention today.
6.28 p.m.
Lord Bridges: My Lords, I begin by asking your Lordships to extend your customary indulgence to a maiden speaker. In my case the indulgence is perhaps rather greater than your Lordships realise; it was some 15 years ago that I took my seat in your Lordships' House, but I have not been able to make a speech until now, not because of any lack of respect to your Lordships' House or any lack of interest in its proceedings, but rather because of the rules and
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regulations that I had to observe as an employee of the Crown for nearly 40 years.
As the noble Earl, Lord Cranbrook, has said, I am a member of the sub-committee which produced the report. My purpose in speaking today is to endorse its conclusions and to support the Motion which stands in the noble Earl's name. It is a rather unusual report, dealing as it does with broad and difficult environmental questions, and it makes some precise and concrete suggestions. That is something which we can all welcome. I do not intend to follow the noble Earl in the more detailed and precise points which he made, but wish to raise some more general issues about environmental policy which should, I think, be in our minds when we consider the report.
The first observation I wish to make is that in general I think all governments, not only the British Government, find it difficult to deal with these environmental questions. They raise issues which are very large in extent, very far-reaching and very complicated. It is difficult to get a grip on the issues in the lifetime of an average government around the world; the remedies tend to be both partial and very expensive. Moreover, many governments may feel—and with reason—that the causes of these problems lie in the very distant past. When we consider the problems of the pollution of the atmosphere, for example, it is reasonable to suppose that the origins lie many decades ago, probably at the beginning of the Industrial Revolution. These problems have come home to roost in our time because of the success of other government policies: governments in this country and elsewhere have for many years been committed to the expansion of industrial production, with growth in prosperity and improvement of transport and other means of communication. In all these causes we have registered some successes. However we have only lately come to realise that consumption of fossil fuels which has contributed to our success is also a cause of pollution.
Thus now we turn to governments around the world and expect them to accomplish another miracle; namely, that the pollution must be removed but the prosperity which has been created must be continued. That is a very hard task because it calls for a fundamental change in human attitudes. I think that it will take some considerable time before those attitudes can be changed. All of us can illustrate this from our own experience.
The point was made very graphically for me some 20 years ago when visiting the Tretyakov Gallery in Moscow where there was on show at that time a picture which I suppose dated from the era of socialist realism. The picture portrayed in the foreground an elderly woman clad entirely in black, reaping corn with a scythe. In the background an enormous factory dominated the horizon. Above it stood a vast chimney belching smoke. I think that the attitude of many Russians at that time was very well compressed by this picture. They were looking for the abandonment of subsistence agriculture; they were looking for the prosperity which industrial life could bring. I do not think that they have the same opinions today; nor indeed do we. However the point I am making is that such basic notions cannot be changed quickly. Responsible governments will try to act as

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the agents of change but they do not find their task easy here or elsewhere.
Another cause of the difficulty we have in solving these international problems lies in the need for international action. It is fairly obvious that if we wish to reduce the scope of pollution, which extends well beyond national frontiers, it can only be done by international action. We might suppose that at least within the European family, and within the EC in particular, it should not be difficult to agree on programmes of joint activity. Experience shows, however, that this is not as easy as it might seem at first sight because the circumstances of national industries differ, as we have found, for example, in trying to deal with the motor-car exhaust. Also, the geographical circumstances of the member states are different when effluents are handled. Historically they would be dealt with in a different way depending on whether one is living in a continental country or whether one has, as we have in our country, an extensive coastline.
So although the urgency of the problems like the one we are considering today—the ozone layer—is there for all to see, the timetable is often slow. I think that that is particularly noticeable in this coutry. We have a distaste for hasty decision; we have a preference for extensive debate. We prefer convincing standards of proof. However that is not perhaps always the right approach. As a contrast, when I was living in the United States in the late 1970s, 10 years ago, a formal ban on the use of CFCs in aerosols was imposed. Perhaps it is a pity that we could not have moved more quickly on this side of the Atlantic.
That said, it is highly satisfactory to see that progress is being made on the ozone layer. As the report rightly says in paragraph 21, the Vienna Convention and the Montreal Protocol represent milestones on the road to effective international cooperation, and the achievement deserves our support. There are of course a number of issues to be followed up and the questions put by the noble Earl, Lord Cranbrook seem to me to be very relevant. I look forward to hearing the Government's reply in due course. I shall also be interested to learn whether the Government feel able to follow the recommendation made in paragraph 26 of the report about the need to seek amendment to the protocol and the regulation so as to prevent diversion of CFCs to the export market. That would be a valuable reinforcement of the work already done.
In short, it is encouraging that some definite progress is now in train to limit the damage to the ozone layer. The growth of scientific opinion about the dangers facing us has been impressive. It is unusual that governments can make a contribution to so large a world problem by phasing out the production and use of an article—the CFC aerosol can—which we can all do without. But the next steps—the replacement of CFCs as refrigerants—will be much more difficult, as other speakers have observed.
I wish to make one other point about the effect of damage to the ozone layer on the population of this country. Those of us who live, as I do, in East Anglia are aware of the long, exposed coastline of Eastern
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England. It is a low coastline. I think that those of us living there are conscious of the dangers which this country faces if damage to the ozone layer continues at the current rate. As the Government know, I speak of a particular region of the nation where defences against the sea are already weak. They require further investment to protect them. Other major investments already made by the Government, such as the major investment in the Thames barrier, could be at risk if deterioration of the ozone layer continues. I say these things not to advance a particular interest of my own but to suggest to your Lordships that we have a strong national interest in accelerating the tempo of work on this subject, and that our interest is perhaps more marked and more evident than that of other European countries, with the possible exception of the Netherlands.
In conclusion, perhaps I may say how encouraged I am to have read the recent statements by the Prime Minister which underline the importance of our environmental issues. I am sure that she is right in thinking that these problems will assume increasing importance for the citizens of this country. I suggest to your Lordships that the measures described in the report are in the right direction and I hope that there will be more of them. I thank your Lordships for your attention.
6.38 p.m.
Lord Kennet: My Lords, it falls to me on behalf of the House to congratulate the noble Lord, Lord Bridges, on an interesting and thoughtful maiden speech. I do so with particular pleasure, which we all share, that he has been able at last to break an enforced 15-year silence, although it was in a good cause. It is a personal pleasure to see that he is well, since we have shared for many years the membership of a distinguished but little known body, the governors of the British School in Florence, of which he was ex officio chairman while ambassador in Rome—and a very good chairman he was. The House must also be grateful to the noble Earl, Lord Cranbrook, for introducing this debate so skilfully and in such a balanced way.
I wish to address myself for a moment to the noble Earl, Lord Caithness, because about 19 or 20 years ago I sat in the chair he now occupies. I had the duty which the noble Earl now has of trying to co-ordinate government policy towards the environment in general from a non-Cabinet Ministerial post. It was not the easiest thing in the world then, and I do not suppose that it is now.
In 1969 and 1970 we created the plan which led to the formation of the Department of the Environment itself. We set up the Royal Commission on Environmental Pollution and the Central Pollution Control Unit, as I believe it was called, in Whitehall. Sir Martin Holdgate was able to report directly from that unit to the Secretary of State. That arrangement lasted for a long time.
In all that time, we relied heavily on the advice and skills of the noble Lord, Lord Zuckerman, who I am glad will shortly be speaking. We felt sometimes, and we were very glad of it, that we were being skilfully stage managed by him. Even then he had greater

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experience of Whitehall than any Minister in the Government. I believe we got it about right then. I am very glad that subsequent governments of both parties were for long able to use the structure that we devised, part of which was carried into effect by the succeeding Heath Government.
Perhaps it is partly due to all those factors that we have not had the trouble with militant Greens which has occurred in France and Germany over the past 20 years. To a certain degree, at least structurally, the British Government have been green enough to avoid that.
It is disquieting that the report states that no decision has yet been taken as regards the department which will take the lead in dealing with the ozone layer, and presumably the greenhouse effect also. These matters cannot be left to the interdepartmental reactions of civil servants, who generally wish to increase their turf. It is not fair to do so; it is not their duty. In any case interdepartmental divisions are part of the problem, and their adjustment cannot be part of the solution. I stray a little from the subject of this evening's debate when I say that the glaring example of that at the moment is the Ministry of Agriculture. That ministry cannot be allowed any longer to continue protecting the environment from the abuse of farm chemicals as it is so closely tied to the short-term economic advantage of farmers.
There are two basic doctrines here, the neglect of which will lead inevitably to the ruination of the human environment. One is the polluter-pays principle, which means that we have to identify the polluter and make sure that he does not offload the cost of his pollution on to either the taxpayer or the ordinary citizen, in so far as that is possible. We must make sure that provisions are always in place to ensure that if a polluter slips through the net he or his successors in the same industry will have to find the cost of posthumous cleaning-up operations.
The second doctrine is quite simply that a stitch in time saves nine. If the polluter does not want to make a stitch in time, he must be in no doubt that he will have to pay sooner or later. The polluter must realise that the later it is, the closer to nine times as much will be the bill.
These two cardinal laws are matters of politics and economics. This is not, as the Government have been inclined to say until recently, a matter of science. The noble Earl, Lord Caithness, is in a very happy position. Although he has held his present important position since January, he is now largely responsible for putting flesh on the bones of the Prime Minister's remarkable speech. After nine years, suddenly, for the first time, the Prime Minister has showed that she is aware of the global implications of these matters. She has demonstrated that she is aware of the general outline that solutions must have. That is a very major change. We wish the noble Earl the best of luck in his task. It gives him a remarkable opportunity to shift a lot of logjams.
This is a matter of politics and economics and not of science. The noble Earl in a Written Answer to me last week stated that the Government's,
"first priority is to improve our scientific understanding".
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With due respect, that has been for too long the theme-song of governments. Scientists do not, cannot and will not know all there is to be known about the causes of various pollutions, let alone about the best way of putting them right. They will advance their best hypotheses, and answer questions put to them about known facts. That is all they can do. This is a matter of political economy. Politics is the art of taking good decisions on insufficient evidence. The evidence will always be insufficient, and it is up to politicians to do the best they can with it. That is how they are judged, and will be judged later.
Let us take, for instance, the three-phase history of the ozone hole itself. When it first began to worry people 10 or 12 years ago, scientific opinion held that CFCs were indeed guilty. Then there was a change in that opinion. Now scientists have returned to the orginal opinion, with the difference that it is now believed the effect is achieved by the CFCs by another chemical path from that which was orginally surmised. As it turns out, it would have been good to do whatever could have been done 10 years ago. However, it is better to do something late than never to do it. Perhaps it is not too late. Having said that we should indeed carry out scientific research. But politicians must not wait for that to be perfect in every respect.
The Stratospheric Ozone Review Group has the initials SORG. What a wonderful name that is incidentally. Sorge in German means concern or worry. That is a happy acronym. The SORG report states about its field of study:
"Indeed the promotion and proper resourcing of fundamental research … has been quite inadequate. The majority of scientific initiatives since 1985 have been taken elsewhere."
That means that they have been taken outside Britain. Let us hope that as a result of the Prime Minister's recent speech and the future efforts of the noble Earl, Lord Caithness, such things will no longer be said in major British scientific reports.
Market forces do not help and will not help. By definition they operate within too small a time frame. The Treasury must lengthen its view. It must adjust its general concept of taxation, and what taxation is for, to encourage the stitch-in-time approach to these matters. Its economic analysis must now learn to cope with cost-benefit comparisons where the factors are not quantifiable. That is difficult, but it is not impossible. Its difficulty must not be allowed to prevent it. If the Treasury pleases, let it call that no longer cost-benefit analysis but cost-benefit topography, which implies an understanding of where the costs fall—whether now or later, whether on us or on others.
I now mention specifically the ozone layer which we are discussing. The exemption for low-use countries for 10 years strikes a chill into my heart, as does the.3 kilograms annually a head for China which has already been mentioned in the debate. The non-limitation of exports strikes another chill. The words:
"Satisfying the basic needs of developing countries"
strike a chill. What on earth is a basic need? How is it that both developing and developed countries got

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by very well without CFCs for the whole of human history minus 15 years? A bit of small print in the Community instrument which is very difficult to make out is that the report was considering that after a certain date exports are to be subtracted from our own consumption. Does that mean that if we export X tonnes of CFCs to the third world we are counted as having consumed it ourselves? How does it work? It is not at all clear from the documents we have before us.
The phrase "non-essential use" does not really strike a chill because it seems so ridiculous. What is an essential use for a CFC or a halon? I believe it was the noble Earl, Lord Cranbrook, who pointed out that public health depends to a certain extent on refrigeration. He also said that in certain countries driving around in an air-conditioned car has become quite normal. Indeed it has. That is not to say that the use of CFCs for that purpose is essential.
It would then be another step to prove that air-conditioning is essential; it would be another step to prove that driving around in an air-conditioned car is essential. It would be another step again—pace earlier speakers in the debate—to prove that even the largest, most centralised air-conditioned modern building is essential. If we are dealing with the future of the human race itself and the future of mammalian life on earth, which we are, then it might be thinkable to blow up those modern buildings and have others which would be habitable without air-conditioning, let alone CFC-based air-conditioning. The use of the word "essential" in a matter of this importance is truly ridiculous.
When the new substances come along—which the report tells us will cost four or five times as much—what will be the situation about commercial secrecy, intellectual property and all that? May we hope —I think that we ought to hope—that they will be in the public domain in order to hasten the spread of their manufacture and use throughout the world?
We are told in the report that the third world is even now building CFC plants. Who in the third world is doing that? It is obviously not financed by third world capital; it must be multi-national corporations. Are they American based or British based? Are pollution havens being set up in this respect, as in so many others before? How many plants are being built, and of what capacity? The report gives figures only up to 1986. What is the most recent figure?
A word to our own CFC industry. It has been kind enough to circulate, no doubt to many noble Lords, evidence of all the good things it is doing and the ways it is beating the gun over reductions and so on. That is all very much to be welcomed. However, it ought to avoid phrases such as CFCs which are "thought to damage" and "alleged to damage" the ozone layer. That is tobacco-industry language, and the CFC industry would be wise to avoid it. There are plenty of other ways to express that without using hackneyed and discredited language of that kind.
Lastly, our committee wants the protocol tightened up. That is the gist of the report. It is difficult to pick one's way through the international bureaucracy. Can it be done? How can it be done? Do
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the Government want it to be done, and have the Government identified how to do it and the timetable for doing it? I think that that is the answer which most of us would wish to hear from the noble Earl, Lord Caithness, at the end of the debate.
6.54 p.m.
The Earl of Liverpool: My Lords, I should like to join in thanking my noble friend Lord Cranbrook for enabling us to discuss this matter tonight and so clearly outlining the contents of the report. I should also like to say how much I enjoyed listening to the speech of the noble Lord, Lord Bridges. It is apparent to me that he knows a great deal more about the subject than I do—and most of your Lordships also. As I say, I am not an expert in this matter. However, as I grow a little greyer, I grow a little greener. I am happy to find myself in such good company.
As we move towards the 21st century and beyond, it is apparent that the good management of our habitat and environment will become vital to us and more particularly perhaps to future generations. Whatever happens we must mount every effort to reduce pollution, which if allowed to go unchecked could literally asphyxiate us.
Unfortunately, in the case of the ozone layer the stratosphere has become polluted with chlorine and bromine from CFC and halon emissions, as we read in the report. We must try to redress the balance. However, the damaging qualities of those emissions are long lived and we cannot gather up what is already there. We must therefore take every possible step to reduce future emissions.
I am very much encouraged by the statement of the noble Earl, Lord Cranbrook, that the Minister's efforts will be directed to seeking a faster reduction than that proposed by the Montreal Protocol. I believe he referred to an 85 per cent. reduction. That will be a great achievement. However, as I understand it, the current objectives of the Montreal Protocol are to freeze the manufacture of CFC gases at 1986 levels. Globally production in 1986 totalled just over 1 million tonnes of CFC gases. That figure will remain stable for four years and will then reduce by 20 per cent. in 1993 or 1994. Surely that is not good enough; it is a case of not even beginning to shut the stable door after the horse has bolted.
I want to be brief, but I should like to quote from Appendix 3 of the report which seems to me to be very worrying. Item 8 states:
"Models predict that, even with CFC emissions assumed to result from the Montreal Protocol, chlorine in the stratosphere will double within the next 50 years. To stabilise chlorine at present levels would require an 85 per cent. cutback on CFC emissions".
I suppose that that is the origin of the figure which the Minister is seeking to achieve. I wish him the very best of luck in achieving it. I believe that it was widely felt by those who served on the committee with the noble Earl, Lord Cranbrook, that this was too slow but that the department advised that it would not be possible to revise the protocol until after it comes into effect.
The greatest area of concern lies with refrigerants and air-conditioning. CFC used in aerosols is apparently diminishing at quite a rapid rate. That is

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the most encouraging fact that I have learnt tonight. However, when one considers the number of refrigerators in use both in this country and globally, and then adds the number of refrigerators which may come into use in third world countries and China, the mind boggles. So far as I know there is no current control on methods of disposing of redundant refrigerators. Therefore presumably, as noble Lords have already observed, each time a refrigerator is destroyed its CFC gases are emitted into the atmosphere, adding to the problem.
I do not wish to detain noble Lords further tonight. I should just like to wish the Montreal Protocol well. I hope that it will come into effect, that the necessary signatures will be obtained and that it will have enough teeth to deal with the global pollution of the ozone layer.
6.58 p.m.
Lord Zuckerman: My Lords, perhaps I may add my word of thanks to the noble Earl, Lord Cranbrook, for bringing the attention of your Lordships' House to the problem of the ozone layer. I should also like to add my congratulations on the most statesmanlike maiden speech of the noble Lord, Lord Bridges.
As we all know, the ozone layer is only the most recent of a series of environmental challenges which have suddenly become matters of general interest. They are also matters that intrude uncomfortably into the inventory of more immediate political problems with which the Government have to contend. What makes them even less welcome is the fact that they are problems which cross international boundaries, as previous speakers have pointed out.
The main editorial in this week's Economist opens with the sentence: "Green is the world's political colour". We are told that this is the second time in the course of 20 years that it has become "fashionable to worry about ecology"—as a scientist I find that a rather odd way of putting the problem. The first time was 20 years ago when a body calling itself "The Club of Rome" published a book entitled Limits of Growth, which foretold the imminent doom of mankind as a result of unrestrained population growth, the exhaustion of resources and environmental pollution. That particular doom has not come about. We have managed so far to get along with our resources. The market mechanism has been able to help deal with that problem. On the other hand, the underlying problems remain. There is the same unrestrained growth of population and, naturally enough, increasing worldwide demand for better standards of living, and ipso facto of course, for the use of more resources.
New problems of pollution, of which the ozone layer is only one, unfortunately keep revealing themselves. There is the question of the disposal of radioactive waste, about which your Lordships have heard a great deal but for which we have not yet heard a solution. There is the matter of the destruction of tropical forests, to which the noble Lord, Lord Vernon, drew attention toward the end of the last Session of your Lordships' House. There is
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the greenhouse effect, to which reference has been made in the course of this debate, with the threat of the flooding of vast coastal areas due to a rise in sea levels. That is a real threat because, strangely enough, in advanced industrial societies most people happen to prefer to live in areas which are threatened by the possible rise in sea levels. There are other problems also.
The editorial in the Economist tells us that the Government have three main weapons for dealing with these problems. The first is the imposition of regulations, the second the levying of pollution taxes and the third selling companies what they call tradable permits which allow them to pollute up to a certain aggregate level. The old, old story of making the polluter pay is merely allowing the polluter to engage in a certain level of pollution for which he can afford to pay but his competitor cannot.
We are told that the most effective anti-pollution programme is one that has both rules and charges and that these need not put a brake on economic growth. But we have heard references made to the third world. What is said in that editorial may well be true of specific issues like dumping toxic wastes in coastal waters, but I doubt whether the measures to which the article referred are adequate to deal with longer term dangers, such as the depletion of the ozone layer.
Diffuse long-term environmental problems are not matters that can be left to be decided by the forces of the marketplace. They demand governmental action. The question now is whether we can rely upon governments—not just our Government but governments—to display the courage to take action as rapidly as they can and should do. Previous speakers quite correctly have already said that any measures will cost money, by which is meant the use of resources which might otherwise be put to different purposes. One cannot have a no-risk world. One has to pay in order to eliminate any risks, whether they be short term or long term.
I have asked whether governments have the courage to take necessary actions. But past history provides no great cause for optimism. I recall that many years ago a member of the Central Electricity Generating Board came to me to tell me that an American concern was ready to put up money—I think it was half a million ounds—provided that the sum was matched pound for pound, in order to design scrubbing plants to extract sulphur from the flue gases in fossil-fuel power stations. Despite the most powerful advocacy I could bring to bear, I was unable to persuade the Treasury of those days to release the money to the then Department of Energy. It is only now that we hear about scrubbers being added to our power stations. We knew about them then, and know they are absolutely essential now.
The noble Lord, Lord Winstanley, referred to the fogs of Manchester. That is another example. For years we knew the cause of the fogs and their deleterious effects upon health. But it took years, and a disastrous spell of fog in London over a period of about three days owing to an inversion which cost the lives of several thousand elderly people before real action was taken and a clean air Act was passed.

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Governmental action to guard against possible environmental disaster has never turned out to be either premature or unnecessary. I can well remember hearing that there was no need for the costly Thames barrage. The chances against the kind of North Sea surge that would flood London that was spoken about then were infinitesimal. One could calculate them on the basis of the rises in water levels that had been measured at Tower Bridge for years and years. It is perfectly true that the barrage has not been called upon to prevent London from flooding. However, if the pace with which the greenhouse effect reveals itself increases and leads to a rise in sea levels, we certainly will not regret that the barrage was built.
The paper which the noble Earl, Lord Cranbrook, has brought before us leaves the impression that the Montreal Protocol, which was agreed only two years ago, is not stringent enough, as indicated by new information. One needs to ask therefore what action the Government propose to take to encourage stiffer and more urgent international action to prevent the situation from worsening. One has to ask: how much notice do we need to avert possible disaster? One might well ask how much notice Noah had before he started to build the Ark which allowed him and his cargo to ride the floods—and was he subject to discordant scientific advice about the likely dangers. We cannot afford any longer to stand back and wait for better scientific evidence than we already have about the dangers that now affect the biosphere.
Sometimes scientists have been able to see further than politicians when it comes to predicting the deleterious consequences of the application of new scientific knowledge. I shall not however go into that matter. There are one or two outstanding examples. After all, it is new scientific knowledge which has brought about the problems that we are now discussing: the problems of the ozone layer and the greenhouse effect—and we know their causes.
It is always possible to delay political action of the kind recommended in the report on the ozone layer on the excuse that we do not yet have all the scientific evidence that we need to decide what the best action should be. The major environmental concerns of today will not be changed as we wait for more scientific information to explain their nature. We need action now, not debate.
7.10 p.m.
Lord Reay: My Lords, despite what the noble Lord, Lord Winstanley, had to say about himself and his brother and their evidently remarkable prescience in this matter, the committee records a date no earlier than 1974 for the discovery by scientists of the battle that was raging in the stratosphere between chlorine and ozone and the terrible danger of defeat that our good friend and protector, ozone, was in as a result of the reinforcements that we were sending to his mortal enemy chlorine.
This Miltonian conflict, with the fate of mankind hanging on its outcome, having been revealed to us by those prophets qualified to discern the truth and warn us in these obscure and distant matters, we on earth have been in a great state of anxiety, erecting partial bans in this group of countries and that, and
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eventually negotiating the Vienna Convention and the Montreal Protocol. For so long as scientists have the same story to tell—as I have no reason to suppose that they will not—this is what we must continue to do, perhaps, as several noble Lords have warned, even more stringently than is currently proposed.
The Prime Minister, in her speech to the College of Europe at Bruges in September, said of the Community:
"I want to see us work more closely on the things we can do better together than alone".
As the noble Lord, Lord Cocks of Hartcliffe, discovered in the United Nations, one thing we in the Community, normally speaking, can do better together than alone is to negotiate international agreements. The Community is a major weight in international negotiations; an equal party to the United States, for example. In this instance the Community succeeded in getting the United States to replace its own preferred principle of a ban on non-essential uses of CFCs with the principle of production control of all CFCs.
The Single Act gave the Community new powers, indeed new duties, so far as policies relating to the environment are concerned. Article 130, paragraphs 1 and 4, require the Community to take action "to preserve, protect and improve" the quality of the environment to the extent where this can be attained better at Community level than at the level of individual member states. This was the first introduction of environmental considerations and objectives into the Treaty of Rome.
Apart from the common sense of making use of the Community to try to reach a desirable international objective when it is more efficent to do so, there are economic reasons for tackling some of the issues at Community level. For one thing, all environmental restrictions impose costs on industry. It is contrary to the principle of a single market ruled by the spirit of fair competition, for an industry to suffer legally imposed restrictions and costs in one member state which it can escape in another.
In addition, industry must manufacture to a single specification throughout the Community. If different sets of requirements, deriving from national environmental legislation, were to apply to the same basic products in different member states, we would have fragmented markets in which none of the promised cost savings of a single market would hold good. Hence the Single Act, whose primary purpose was to assist in attaining the single market, introduced for the first time in treaty form environmental policies into Community competence, it having been recognised that increasingly environmental considerations were going to impinge on economic activity.
Incidentally, the Single Act deals with the question of environment quite soberly. It enjoins the Commission, in preparing any action it judges necessary, to take account of the potential benefits and costs of action or lack of action. It does not call for measures to be introduced regardless of expense. It is not a charter for blank cheques to be written for all those with bees in their bonnets—as the Prime Minister succinctly put it in her speech to the Royal Society.

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As a final justification for many forms of action being taken on the environment at Community level, there is the fact that pollution knows no frontiers. Polluted air drifts from one member state to another; rivers and lakes, and even seas, are shared; and the interests of each demand action by all. International action above the level of the Community may often be preferable but Community action is generally more easily obtained, although, as the noble Lord, Lord Bridges, in his notable and wise speech made plain, even at Community level agreements on environmental legislation are not easy, so numerous and disparate are the interests involved.
Action to protect the ozone layer is a case where Community-wide action is both an important component of wider international action, and also a constructive and often an essential step towards it.
The Montreal Protocal envisages the progressive reduction of CFC production to 50 per cent. of current levels by the end of the century. However, the British Stratospheric Ozone Review Group hypothesises that CFC emissions would need to be reduced by 85 per cent. to stabilise the quantities of chlorine in the stratosphere and to be phased out altogether if the stratosphere is to be given a chance to recover.
This suggests that an eventual ban may be necessary. A ban may also be preferable for other reasons. Quotas are not satisfactory in the long term as they freeze patterns of production. They also foster the growth of bureaucracy. No limit is to be placed in this case on Community exports of CFC products but, in the words of the sub-committee:
"figures on exports (together with data on production, sales, imports, stocks and quantities destroyed) are to be given to the Commission. Separate figures are to be given for countries that are not parties to the Convention. This regime enables each producer to calculate exactly how much it can produce, sell or use within the Community".
This sounds suspiciously like an example in miniature of that bureaucratic, over-centralised state which was correctly anathematised by the Prime Minister. Such arrangements for rationing production should surely therefore only be temporary.
As several noble Lords have pointed out, the convention contains a derogation in favour of so-called developing countries although no list or definition is provided. I find it unsatisfactory that a major derogation should be made in favour of unspecified countries although it is not surprising that no definition of "developing" countries was reached since "developing" in fact is a euphemism for "economically backward". Some, like China or India, are developing. Some are regressing. Others are static. Such lists in the past have included countries like Romania, or some in Africa, whose evil and/or incompetent policies are responsible for them being on the list in the first place.
I think that it is undesirable to excuse any group of countries, whether backward or distinguished in some other way, from having to adopt standards of international behaviour required of the remainder. The committee identifies a danger that "production havens"—in the words of the committee—might be established in certain countries which are not parties
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to the protocol, and which would cater for the demands of other countries not party to the protocol, and for the economically backward countries which are excused. It is to be hoped that this will not happen, but in any case there will be plenty of further tests for international co-operation in this field.
I should like to end with a question to the Minister who is to reply. The Stratospheric Ozone Review Group in its report calls for a co-ordinated European programme of further research into the ozone layer and the environmental Council of Ministers meeting last June also called for further research by the Community and member states in consultation with industry. Climatology evidently now calls for more of our resources.
Can the Minister say what the Government's research programme is and in particular what its principal effort is intended to be? Is it intended to be a national effort—and British research has produced some important results in Antarctica—or a contribution to a Community-wide effort that would have the advantage of avoiding costly duplication?
7.20 p.m.
The Earl of Halsbury: My Lords, as I speak towards the end of a debate that began rather late, I shall be as brief as I can. I start with thanks and congratulations to the noble Earl for bringing the matter before your Lordships. I offer a double measure of congratulation to the noble Lord, Lord Bridges, for participating in the work of the committee and for giving an excellent maiden speech.
The noble Earl took the words out of my mouth about the disposal of refrigerators. These are closed systems with the offending liquid inside, which cannot be removed unless the refrigerator is left to rot on a dump or heap. Refrigerators should be designed so that they can be decommissioned at the end of their useful life.
I agree with the noble Lord, Lord Cocks of Hartcliffe, in his commendation of the bi-partisan approach, which was echoed by the noble Lord, Lord Reay, and other noble Lords.
As to the third world, I agree with everything that was said. In order to convice the third world, we have to confess our own sins, namely, greed and ignorance and that we left a lot of mess lying about. If third world countries want help to catch up with us now that we have become reformed characters, they have to agree to do this in terms of thinking that it is not right to leave things lying about.
The noble Lord, Lord Winstanley, referred to the complexities of the matter. I know how complex they are. I had the pleasure of entertaining Sir John Mason over lunch yesterday. He was director general of the Metereological Office during the 12 years when I was chairman of the advisory council. He has retired. He is now the chairman of the organising committee for world climates research. He is director of the UK-Sweden-Norway acid rain research programme. He is chairman of the co-ordinating committee of marine science and technology, the chancellor of UMIST and the chairman of the Royal Society's national committee for world climatic research programmes. When he had given me a

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briefing, I realised that some of the expressions are complex, and total knowlege on a number of subjects is not yet with us.
There are things that we do not understand. I do not think that it helps to introduce what I would call journalistic over-simplifications into the discussions. It is fashionable, for instance, to talk about the hole in the atmosphere. There is no hole in the atmosphere. There is a depletion of ozone during the Antarctic winter. Ozone is synthesised in sunlight and is immediatly attacked by anything that can oxidise, so that it is depleted. When two processes work in opposition, of course, a working level of ozone is established in the atmosphere. It migrates to and fro. The circum-polar vortex on the South Pole is so strong that ozone generated in more temperate latitudes cannot reach the South Pole. That is why depletion occurs. It is wrong to talk of a hole in the atmosphere. It confuses the issue.
I entirely agree with the noble Lord, Lord Kennet, that militancy on these matters does not help. It gets the emphasis all wrong.
I end on this note. Cleanliness and tidiness are cultural acquisitions. They are not genetic endowments. We have no inherited instinct towards tidiness and cleanliness. One has to be brought up by a house-proud mum who keeps the house clean and then one learns to do the same: one cleans up one's own kitchen, desk or whatever. When I was young there was a little notice in every public lavatory saying, "Please leave this place as you would like to find it". That is what we should do with mother earth. We are born into it, we live on it and we depart on our way in due course. Let us leave it tidy.
7.25 p.m.
Baroness Nicol: My Lords, for all its brevity this is probably one of the most important reports before the House, certainly in my time as a Member. We are grateful to the committee for its work and to the noble Earl, Lord Cranbrook, for the way in which he presented the report.
I am aware that the noble Earl asked about the present status of the protocol; I am not clear whether he asked about the status of the convention. It was my understanding that the protocol could not be activated until the convention had been signed by 20 contracting parties. The last news I had was that only 19 have signed. If there has been a delay in signing the convention, can the Minister say whether that will hold up the starting date of the protocol? As we have heard, the protocol is of vital importance. It is now perhaps more an expression of acceptance of the existence of the problem than a blueprint for action. I know that we have to wait for it to be activated; I think that we are wise to look ahead of that. Events are moving with speed, as the noble Earl said, and later evidence proves the need for more urgent action.
I do not intend to be sidetracked about whether the Prime Minister had said anything about the environment at some earlier time or had a particular reason for saying what she did on 27th September; the fact is that she said it, and it was very important that she did. She is a lady of considerable influence in this country and elsewhere. We should all welcome
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the fact that an impetus—even if we choose to say that it is an added impetus—will now be given to what we are trying to do.
We welcome the positive statement of the Minister on 3rd October that he is convinced of the need for a reduction of at least 85 per cent. in the emissions of CFCs as a matter of urgency. We fully support his wish to speed up the first review of the Montreal measures. Can the Minister say what hope there is of that and how it can be done as an exercise?
In the last few days it has been suggested—I think that the noble Earl referred to it—that there is a lessening in the visible effects of ozone damage in Antarctica. I took informal advice yesterday from the department of physical chemistry in Cambridge. I am advised that fluctuations take place because of variations in the strength of anticyclones— this has happened before—but the trend continues to be downwards, and it is now very alarming that the holes are growing steadily deeper as well as wider. It is apparently considered that the fluctuations reported this week are not important.
Increasing awareness of the size of the problem is shown by public reaction to the use of aerosols and by industry's response to general concern. As the noble Earl mentioned, the British Aerosol Manufacturers Association reported this month that many manufacturers have moved in advance of the protocol. Many aerosols in use are already propelled by gases other than CFCs. By the end of 1989 the BAMA estimates that only 10 per cent. of aerosols will use CFCs. A new label will help customers to choose when they buy.
My noble friend Lord Cocks of Hartcliffe was concerned about the loss of employment in making CFCs. Alternatives will have to be found. These surely will create employment.
We welcome the moves by the aerosol industry and commend it for its efforts, but they will be wasted if the reduction in CFC use in aerosols simply allows increased uses in other ways. The protocol uses consumption as the control target. As can be seen in the report, consumption is defined as production plus imports minus exports. Savings on aerosols in this country therefore could be exported to be released elsewhere.
It seems that the availability of "surplus" from the aerosol industry may lessen the urgency of finding alternative chemicals for other industrial uses. We would welcome assurances about this. It would be wrong if so much public concern and co-operation were to be side-stepped.
We note with interest the new CFC recovery plant at Glossop. Can the Minister give an indication of the capacity of this new plant and say whether it represents an increased capacity within the recovery industry; or is it a replacement for existing facilities? I gave notice of this question and I hope that he has been able to find an answer. Can he tell me what the overall position on recovery is? Is he satisfied that disposal of residues from this industry after recovery is satisfactory?
These may seem to be small matters, but we have been talking about saving small quantities in aerosols

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and in other ways. It is important that every effort should be made to conserve waste within the industry.
Are there arrangements yet for small users of solvents to have their wastes collected? I understood as late as mid-1987 when I raised this question before that users below a certain level could not obtain the services of the waste disposal authority for special wastes. When one thinks of the enormous number of small technological firms that we have at present, this represents a considerable amount. I wonder whether the waste disposal authorities are now taking a more enlightened view than they did last year.
As we are trying to put our house in order, we hope that the United Kingdom Government will take a responsible line on exports and on advice to United Kingdom industries with foreign subsidiaries. We feel that the Government should use their considerable influence to persuade underdeveloped countries—and I hope that the noble Lord, Lord Reay, will find that a more acceptable description than "developing"—not to go in for inessential uses of CFCs such as aerosols and foams. However we recognise the importance of refrigeration both here and in other countries and the present lack of alternatives for that use.
As the noble Lord, Lord Cocks, explained so eloquently, and indeed the noble Lord, Lord Bridges, and many others, there is a major job of persuasion to be done. We have to explain why we have been so long in putting our house in order. We have to persuade other countries that they cannot enjoy the advantages that we have enjoyed for so long, although this seems to be unjust. One can understand the difficulties of transitory governments, as the noble Lord, Lord Bridges, said, who have to face these long-term problems and persuade their people to make a restriction in their living conditions.
The protection of the ozone layer, as almost everyone has said, is a global problem. This, together with the emerging menace of the greenhouse effect, to which CFCs also contribute and which has been mentioned by the noble Lord, Lord Zuckerman, among others, may present the planet with a threat which transcends commercial, national and certainly party political considerations.
Others have asked for a bipartisan approach. We will encourage and support government measures to meet our national and international responsibilities. However, we will be forthright if we consider that the measures that are taken are inadequate or that the situation is being used for party political ends.
7.32 p.m.
The Earl of Caithness: My Lords, I agree with the noble Baroness, Lady Nicol, that this has been a most stimulating and interesting debate. The expertise of your Lordships has again been demonstrated. I very much welcome this opportunity to debate the committee report on the Montreal Protocol. I should like to echo the point made by so many of your Lordships that the environment is too important to be treated as a political football. I am all for criticism at the right time when it is justified, but to use it for
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political purposes, as the noble Earl, Lord Halsbury, and the noble Lord, Lord Cocks of Hartcliffe, said, would be entirely inappropriate. I mentioned that point in a press interview the other day and the press reporter looked at me blankly as though I had come from a different planet.
The report quite rightly describes depletion of the ozone layer as a global environmental issue of the greatest seriousness—and matters are moving very fast indeed. The representatives of the scientific community. industry and governments, including the UK, are meeting in The Hague to take stock of the science, to study the development of alternatives to CFCs and halons and to begin work on the first review of the protocol, currently scheduled for 1990.
I fully share the committee's view that the protocol and its parent Vienna convention are milestones in environmental policy-making. The convention has now come into force—on 22nd September to be precise—and the number of signatories to the protocol now stands at over 40. The UK and the EC were of course among the initial signatories in Montreal last September. I welcome the committee's recognition of the key role played by the Community in the negotiation of the protocol and of the crucial importance of the member states acting together as a single bloc. I have no doubt that the Community's solidarity in negotiating the protocol, and indeed the convention before it, was a major factor in reaching global agreement.
In the relatively short time since Montreal we have seen much new scientific evidence about the damage to the ozone layer, including depletion in the Antarctic and the role of CFCs. The committee was able to take into account the executive summary of the second report of the department's stratospheric ozone review group. This made it clear that as an essential step to prevent further depletion of the ozone layer we must stabilise chlorine in the stratosphere, which itself requires an 85 per cent. cut in CFC emissions.
We have always believed in basing policy measures on sound science. Having studied the review group's full report, I announced earlier this month that the Government agreed that worldwide emissions of CFCs must be reduced by at least 85 per cent. as soon as possible.
I agree with the noble Lord, Lord Zuckerman, and indeed other noble Lords that the Montreal Protocol must be significantly strengthened. Indeed, ICI has called for an urgent review with a view to phasing out CFCs. We have proposed that in order to accelerate action the international community should consider bringing forward the timing of the protocol's 20 per cent. and 30 per cent. cuts. We should like the first review of the protocol to be speeded up so that work can be completed in 1989 rather than 1990. The report of our review group will be a major input to the review process. I have written to my fellow EC environment ministers commending the report and urging them to follow our lead. At my request there will be substantive discussion of this issue at the Environment Council in November.
Although we have taken the initiative, in line with the central recommendation in the committee's

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report, we must work with our EC partners. The challenge will be to maintain the momentum and to follow the initiative through in the months that lie ahead. But, as the committee observed, the resolution of the Environment Council on 16th June is a clear signal that the Community accepts the need to make reductions over and above those required by the Montreal Protocol.
There is the wider dimension of global warming, which cannot and must not be ignored, and to which my right honourable friend the Prime Minister referred in her speech to the Royal Society last month.
The noble Lord, Lord Bridges, in what I thought was an excellent maiden speech. said that we were suffering from a legacy of the past. He is absolutely right, and he was right to point out that we might also be inadvertently suffering from modern technology.
Your Lordships will be interested to know that molecule for molecule, CFC12, for example, is 10,000 times more powerful a greenhouse gas than carbon dioxide. If countries outside the protocol increase their emissions, CFCs could rival carbon dioxide as the dominant greenhouse gas in the next century. Climate change is potentially the greatest global environmental challenge of all and makes the further international action to control CFCs, for which we are all calling, doubly important. The UK is making an important contribution to international efforts to evaluate potential effects or ozone depletion and climate change. Our research on these two linked issues currently totals more than £6½ million.
The noble Lord, Lord Winstanley, said that it is going to cost a great deal of money to put right what has happened in the past. I can tell him that it is going to cost a lot of money because we are planning virtually to double the department's funding in the next year.
The Government's action on these recently recognised problems should be seen against a background of real progress on air pollution issues that have a longer history. We are taking extensive action on acid rain. We have a programme initiated domestically for a £billion 10-year power station clean-up programme to cut emissions of sulphur dioxide and nitrogen oxides. On top of this we have agreed further substantial measures in the EC to reduce sulphur dioxide and nitrogen oxide emissions from large combustion plants and nitrogen oxide and hydrocarbons from vehicle emissions.
We should not forget that these major reductions in our output in atmosphere pollutants will have important knock-on effects in other environmental media. For instance, there will be corresponding reductions in the deposition of airborne contaminants in the North Sea. Such interactions between the environmental media and the transfers of pollutants between air, land and water underline the great environmental gains to be achieved by taking an integrated approach to pollution control. The proposals we published in July for giving Her Majesty's Inspectorate of Pollution a cross-media role in pollution control make us the world leader in this field. And I trust that other countries—particulary in the EC—will be encouraged and guided by our example.
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Our immediate priority on CFCs is to ensure that the Montreal Protocol enters into force at the beginning of January as planned. It is vital to have the widest possible participation, including Eastern Europe and developing countries with large populations like China and India. I ask noble Lords to pause and consider that China alone could neutralise the effect of a complete CFC phase-out in the EC. We have therefore, as the committee recommended, been encouraging other countries to join and to focus on alternatives to the Montreal substances.
That is why we believed that it was right to make derogations for developing countries and I know that that matter concerns some noble Lords. However. surely it was right to entice them into the protocol. At the meeting in The Hague this week we are working on a definition of all criteria for developing countries, but we must have them on board. I believe that the noble Lord, Lord Cocks of Hartcliffe, was right to say that they are not to be lectured. If we do so they will turn round and say, "You are the developed part of Northern Europe. It is all right for you but it is not very good for us". Practical help is needed and we welcome ICI's plans to hold a seminar on substitutes in Peking in December, when my right honourable friend the Secretary of State will be there to give government support.
On the commitee's other recommendations, I am afraid that we do not agree that the Commission should propose a Community-wide ban on nonessential use of CFCs in aerosols. The approach in the EC regulation to implement the protocol is to control consumption through the control of overall supply of CFCs (and halons) in the Community. The Government fully support this approach as the most efficient and effective method and I note that the committee's report considers this an efficient approach. We do not favour the control of specific uses of' CFCs—which leave other uses of CFCs uncontrolled—and prefer market forces to determine the use to which available supplies are put. Indeed, as the noble Lord, Lord Bridges, reminded the House, the United States banned the non-essential use of CFCs in aerosols some 10 years ago. But I question whether that helped, as overall US per capita use of CFCs remains on a par with that in the EC. A ban is in any event simply not necessary. In the UK and some other EC member states action has already been taken on a voluntary basis to reduce use of CFCs in aerosols: the UK aerosol industry expects to phase out non-essential use of CFCs in aerosols by the end of 1989. Given that aerosols constitute over 60 per cent. of CFC use in the UK, this will give us a head start in achieving the Montreal reductions. I am sure that the House will join me in commending the efforts of UK industry generally and our aerosol industry in particular.
The committee also suggested that the Government should consider means for reducing emissions by industrial users in conjunction with Her Majesty's Inspectorate of Pollution. We are strongly encouraging CFC users to reduce use of CFCs to the maximum possible extent, and officials of my department and of the Department of Trade and Industry are discussing with them the steps they are

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taking. Chlorine and fluorine compounds are already included in the list of noxious and offensive gases in the Health and Safety at Work Act but before HMIP could set requirements on emission levels it would have to be satisfied that practicable and reliable abatement technology was available. The noble Baroness, Lady Nicol, reminded us that there are encouraging developments with regard to recovery and recycling of CFCs emitted during the production of polyurethane foam and, as the committee noted, the DTI has given a grant towards the cost of installing a large-scale activated carbon absorption unit in the UK. My honourable friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs officially opened the first phase of the project in September. The company expect that when fully operational well over 90 per cent. of CFCs used in the plant will be recoverable for reuse. The Government will keep the overall situation under review in conjunction with HMIP.
My noble friend Lord Reay reminded us that the committee recommended that the Government should review the adequacy of their support for scientific research on the ozone layer. We are reviewing the situation in the light of the recommendations of the Stratospheric Ozone Review Group. Research must be carried out efficiently and effectively. It needs to be co-ordinated in both the UK and Europe to avoid unnecessary duplication of effort and to make the best use of research funds and expertise in the field of stratospheric ozone. The UK took the initiative almost one year ago in offering to act as a focus to co-ordinate research in EC and EFTA countries. That initiative matured last weekend in The Hague and the UK, Norway and the EC Commission agreed to fund and establish a coordinating unit which I am delighted to say will be located in the UK.
In addition, four UK members of our review group took part in The Hague in this week's first scientific meeting to review the protocol. I understand that our desire to speed up the review process was well received, as was the UK's offer to host further review meetings.
I should like to answer some of the questions which have been asked. I know that I shall be unable to answer them all and I shall write to noble Lords who have asked questions that I do not answer. I assure the noble Lord, Lord Kennet, that the Department of the Environment is the lead department in terms of policy on both the ozone layer and climate change. The uncertainty in the report is merely about which department will implement the Montreal controls, such as the import and production licences. That is a decision for my department, DTI and Customs and Excise.
My noble friend Lord Cranbrook, who so brilliantly introduced the debate, referred to the recent report on what appears to be the less serious depletion of the Arctic ozone layer. It is true that according to some reports it appears to be slightly less deep this year than last. But scientists tell us that this is probably due to natural variability. Let there be no mistake: there is no cause for complacency or slowing down action. Indeed, quite the reverse, because some
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of the evidence from last weekend's meeting in The Hague was disquieting.
As regards entry into force of the protocol, I can tell the House that the United Kingdom and its dependent territories are ready; most member states are ready; procedural delays in France, Greece and Belgium are expected to be overcome very shortly; and the Community expects simultaneous ratification next month. This will enable the protocol to come into force as planned next January and then we can officially start the review process. I should like to say to my noble friend Lord Liverpool that the action that we have already taken has in its own way already started that review.
As regards the non-signatories taking up the production of CFC, I can offer no guarantees to your Lordships. However, I repeat that our independent territories, including Hong Kong, wish to be associated with the United Kingdom ratification. The Chinese have assured us that after 1997 the protocol will continue to be applied in Hong Kong.
I can appreciate the concern that reduced United Kingdom or Community consumption could leave more CFCs available for export. However, exports from one member state to another will count as Community consumption, as the Community consumption will be calculated in a block form. Exports to a country that is party to the protocol will count towards that country's consumption. From 1993 exports to non-parties will be added to the exporting country's consumption. In addition, the acceleration of the protocol's 20 per cent. and 30 per cent. cuts that we are seeking will be for both production and consumption.
As regards the search for substitutes, I am glad to say that British industry has already responded positively. The United Kingdom producers, ICI and ISC are expanding their research and development work to find substitutes and have joined international consortia of producers worldwide to hasten the process of commercial development. The Government are encouraging producers to bring substitutes on to the market as quickly as possible but it is essential that those are not only suitable but safe and that adequate time is given for toxicity and environmental testing. I am sure your Lordships would agree that it would be quite wrong to substitute for something which is causing damage something else which is equally, or more, damaging. It is important that producers maintain the dialogue with user industries, both to ensure that new chemicals meet their requirements and to assist the process of developing technology to use new substances as quickly as possible.
My department is holding regular meetings with representatives of all sectors of industry who are aware of the criteria for seeking funds from the Department of Trade and Industry. It is also important to stress the scope for replacing CFCs with existing substances, for switching to existing technology and for reducing unnecessary or wasteful use by better housekeeping, recovery and recycling. The protocol has given strong emphasis to developments in all those areas as well as to the search for substitutes. I am confident that British

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industry will continue to play a leading role stimulated by public concern and encouraged by the Government.
Finally, I should like to thank the committee both for producing such a concise and focused report and for having agreed in advance of the debate to the UK removing our parliamentary reserve on the Commission's proposals thus paving the way for their formal adoption by the Council. I should also like to thank the committee's scientific adviser for his work. I believe too that we owe a debt of gratitude to the department's officials. They have ploughed a lonely furrow in the lead for some time. They are thoroughly respected throughout the world: much of the work that has gone on over the last couple of years or so has now come to fruition and I am delighted at the lead that they have been able to take on Britain's behalf.
British scientists discovered the ozone depletion problem in the Antarctic. We have come a long way in a short time but we have a lot more to do.
The Earl of Cranbrook: My Lords, I welcome the way that this debate, which was initiated on a topic of fairly narrow scope, has been widened to cover so well and so broadly a field of great importance in environmental concern. I welcome the words from my noble friend the Minister and I commend the Motion to the House.
On Question, Motion agreed to.

Sheepmeat Regime: ECC Report
7.53 p.m.
Lord Gallacher Lord Gallacher rose to move, That this House takes note of the report of the European Communities Committee on the Review of the Sheepmeat Regime (18th Report, 1987–88, HL Paper 98).
The noble Lord said: My Lords, the proposal now before us by the Commission to vary the sheepmeat regime is not in itself new. I recall that your Lordships' Select Committee reported on this subject in 1984 and, as a matter of interest, reached much the same conclusion then as does the present report now. The significant difference, if any, is that the reception of the proposals from interested parties by the Select Committee has been much more favourable than it was in 1984. So there has been a change of thought in the intervening four years.
I hope that I shall not be accused of wasting time at this late hour if I say a word about the regime as such. Sheepmeat has had a Community regime since 1980. It is not a major source of Community expenditure. In that respect it does not rank with cereals, milk, wine or meat. Nevertheless, it represents a growing source of expenditure by the Community and, although the Community is not yet self-sufficient in sheepmeat, undoubtedly under present pressures the Commission feels obliged to keep the cost of sheepmeat under review. That in part is one reason for the present proposals.
It is a significant proposition from the point of view of Britain because we have a regime for sheepmeat
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which differs from that of other member states. It differs because instead of a single ewe premium as a basis for remuneration, under the regime we have a smaller ewe premium and an additional premium known as the variable premium which is in the nature of a deficiency payment. Again, those familiar with the subject will know that under the variable premium there is a market price for sheep set week by week throughout the year, and if qualifying lambs fail to reach that market price then a variable premium is paid. In consequence that has, as I say, something of the character of the old deficiency payment scheme.
One difficulty about the variable premium from the point of view of the completion of the internal market by 1992 is that, given the fact that common producer prices are the basis of the CAP, there is of necessity a system of claw back when the lambs are exported. That system works at present but will not fit in so readily with the completion of the internal market by 1992. I think we should also state that in Britain we are the largest producers of sheepmeat in the Community and are also the largest consumers.
I should also say, although it is spelled out in the report, that in fact the production of sheep and sheep farming represents a very important industry, given the stratification which exists in Britain whereby in hill, upland and lowland areas we have a system which works in harmony. In consequence the industry is well integrated and has prospered since the introduction of the regime in 1980. Any disturbance of a severe character would present problems and your Lordships' Select Committee asked witnesses what upland and hill areas could do in the event of any serious deterioration as regards the production of sheep. We were assured that at the moment it represents the only viable kind of agricultural activity which those areas can undertake. Therefore, we have an industry which is important both economically and socially, and your Lordships' Select Committee is mindful of that fact.
The main proposition which the Commission makes under the present review is that the variable premium in Britain should be phased out by 1992. I am told that that has now been extended to 1993. After taking fairly wide evidence—and we express our appreciation to those organisations which gave evidence—your Lordships' Select Committee have reached the conclusion that the phasing out of the variable premium in this fashion is acceptable but on conditions. There are already a number of conditions in the proposals and I shall mention some of them as I go through the piece. We felt it prudent to attach additional conditions and I shall also mention those.
The first condition which we feel is necessary is that if there is to be a single annual ewe premium then it must be increased to compensate British sheep producers for the loss of the variable premium. In addition, under the stabiliser regime—and already the stabiliser has been activated as regards sheep—we feel that the calculation of the stabiliser in Great Britain should be based on the Community ewe flock and not simply on the Great Britain ewe flock alone. We feel that the voluntary restraint agreements which currently apply to sheepmeat need to be renegotiated.
I should mention that in addition to home produced sheep, the Community is a substantial

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importer of sheepmeat from a number of countries and in the case of Britain the New Zealand frozen lamb trade is a very important part of our diet. It is a traditional trade and one which has been well conducted over the years so that the British housewife not merely has a choice between home produced lamb but also imported New Zealand lamb. In addition she has the benefit, during the period when prices of home produced lamb are high because of scarcity, of a fall-back if she wishes in the form of New Zealand lamb.
Under the voluntary restraint agreements which have been negotiated by several countires and the Commission, they enjoy a reduction on the tariff which they would otherwise have to pay of 20 per cent. Under the VRAs that tariff has been fixed at 10 per cent. We took evidence from the New Zealand High Commissioner on this subject and we were very familiar with the problems confronting New Zealand not merely as regards its exports to Britain but worldwide in this regard. While we are very conscious of the necessity for renegotiation of the voluntary restraint agreements under the proposed review of the sheepmeat regime, we stressed in our report—and I do so again this evening—the importance of fairness and equity as regards the voluntary restraint agreements and, in particular, as regards the important imported trade from New Zealand.
We also feel that a new method for calculating the ewe premium must be achieved. At the moment the Commission is proposing that there should be only two regions for calculating the ewe premium and that in those two regions—roughly the north and south of the Community area—the co-efficients should be arrived at. These co-efficients are then applied to give the premium which will be payable under the proposed new arrangements.
That represents a reduction in the number of regions and a new method of calculating the premium. I understand that the two regions have now been increased to three, but that has been on the basis of dividing the southern region into two and we still think that it does not meet the problem for Britain. The system proposed by the Community is, in our view, both simplistic and unfair to Great Britain and we commend to the Government the suggestion that they should advocate, as part of the renegotiation of the regime, a region for the calculation of co-efficients based on Great Britain, Northern Ireland and the Republic of Ireland, which should constitute one region.
We do not accept—indeed, we reject categorically—the Commission's proposals that there should be a limitation on the number of eligible ewes per farm under the proposed new regime. We feel that that is designed to be specifically unfair to the United Kingdom, which conducts its farming on a much larger scale than many other member states, and any such limitation would bear harshly upon us. We feel that the ewe premium should be paid more frequently to farmers in the absence of a variable premium. I understand—no doubt the Minister will confirm this when she replies—that that has already been conceded and that two payments are
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contemplated. This will improve the cash flow position for farmers and ease the transition for them from the variable premium to the ewe premium.
We believe that the current definition of eligible ewes in the United Kingdom should continue so that yearling lambs qualify. We would not wish to see any change in the current definition of eligible ewes without good notice to take account of farming practice and breeding requirements.
we agree that intervention arrangements for sheepmeat should be abolished and although we feel that storage aids which currently exist should be preserved, we do so only in so far as these do not lead to stockpiles of frozen lamb. On past evidence that situation is not likely to arise, but if it does your Lordships' Select Committee would review its present belief that private aids for storage should continue.
There is the question of the volatility of sterling against other currencies of member states who are in full membership of the European monetary system. Noble Lords will be aware that there is not a monetary compensation system for sheepmeat. Consequently, the divergencies between green rates and actual currencies reflect at once in prices paid. In view of the emphasis which has been placed on the importance of exports for the United Kingdom after the elimination of the variable premium, we feel that any volatility as regards these exchange rates could reflect adversely on farmers. Therefore, we feel that this problem must be faced, although we are diplomatic and discreet enough not to suggest to Her Majesty's Government the manner in which it should be faced. However, it exists and we feel it right that it should be mentioned.
We felt that there was a view widely held among those who gave evidence that the DG6 directorate in Brussels did not have extensive experience of the sheepmeat industry in Britain. This, of course, is in marked contrast to our own Ministry of Agriculture where there is a clear and keen appreciation of all that the industry involves. Given the nature of this question and the importance of it, as I have already said, on both social and economic grounds we feel that it would be advantageous both now and in the future if experience of this kind existed by way of an addition to the staff in DG6.
We make the recommendation, again based on the evidence given to us, that United Kingdom producers, with an eye to export markets, need to improve the quality and marketing of lamb by 1992 if the full export potential of the industry is to be realised. For example, when we asked for evidence of the grading system which currently applies before the variable premium can be paid—specifically, whether this qualification had raised standards—there did not appear to be a view at all within the farming unions to which we spoke. That seems to be an indication of a complete lack of awareness by the producer of the ultimate market.
That contrasted sharply with the evidence given to us by the New Zealand High Commissioner, who, when questioned about this appreciation of the British market, was able not merely to tell us how much New Zealand had sent to us, how much was

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charged for it and what economic grouping in the British market he was seeking to supply, but also how much he spent on advertising, where he was advertising and how the division of the advertising budget was made. All in all, as chairman of the subcommittee I had the impression that the New Zealanders were much better organised vis-à-vis our market than we are vis-àvis, say, the French market. Therefore, we have made this recommendation in our report which we hope will be noted.
For example, in looking at who does what and who is responsible for what in this area in Britain, I find that the Meat and Livestock Commission has an interest and that the Food from Britain Organisation has an interest, both on its marketing side and its co-operative development board—though judging by recent replies to Written Questions in your Lordships' House the prospects for Food from Britain, in the long-term at least, seem to be somewhat less than rosy. Therefore, I believe it would be unwise to regard that organisation as being a natural source for an extension of the kind of activity that we should like to see in this area.
Finally, there is to be a lamb promotion council, funded from the bolt-on levy and thus I have the personal impresssion that this is everybody's responsibility and that, in the end, nobody in particular does anything about it. Certainly there is nothing comparable in my experience to the New Zealand Meat Producers' Board or even, come to that, the Irish Meat Producers' Board.
I hope that the report as it stands is a clear and concise document which will commend itself to your Lordships. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on the Review of the Sheepmeat Regime (18th Report, 1987-88, HL Paper 98).—(Lord Gallacher.)
8.6 p.m.
Lord Stanley of Alderley: My Lords, I speak as a shepherd— or I try to be a shepherd—and I thank the Select Committee, and the noble Lord, Lord Gallacher, in particular, for bringing this very valuable report to the attention of the House and the sheep industry. I shall confine my remarks to just two aspects.
First, the report repeats the previous report made by your Lordships on the sheepmeat regime in the 1983–84 Session which stated that if our industry is to survive we must export and we must produce what the customer wants. To do that, it is of prime importance to remove any obstacles to our export trade. While we operate a system that is different from the rest of Europe it allows our European competitors—I repeat, competitors, because they most certainly are—to discriminate against us, which they delight in doing.
Therefore, I totally agree, as I did in 1983, that subject to the conditions laid down in the report and which have just been enumerated by the noble Lord, Lord Gallacher, the variable premium must go unless, of course, it is operated by the rest of Europe and that, as your Lordships report states so clearly, is tantamount to asking for the moon. It is the old
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story—if you cannot beat them, join them. I shall therefore be fascinated to hear what my noble friend Lady Trumpington says on this matter. When subcommittee D recommended such a change in 1983 —mentioned by the noble Lord, Lord Gallacher with a smile on his face; and there was a smile on my face, too—we had a discreet note back from the Ministry of Agriculture politely asking whether we were out of our crazy little minds. I hope that the department was referring to the report and not to your Lordships!
Having said that, I realise that at that time most sheep farmers preferred to keep the variable premium. Indeed, they still do today. Therefore, whose side are the Government on now? Secondly, on a rather less important point, although the report is remarkably consistent with the previous report produced in 1983–84, there is one matter that is not now emphasised to the same extent. I refer to recommendation 74(j) in that report. That states that all grading should be done on a deadweight basis. I presume that the reason is that it is assumed that once the variable premium is done away with there will be no need for any grading of livestock. I agree that liveweight grading should be done away with. I believe it has aided and abetted the industry in producing poor quality lamb as a similar system did after the war in the pig industry. That allowed the Danes to capture our bacon market. We, as sheep producers, should look back to the period from 1947 to 1950 to see what happened to the pig industry.
However, some system of deadweight grading should be preserved so that the producer and the retailer know what they are producing and buying. I ask my noble friend Lady Trumpington that should there be an end to the variable premium for sheepmeat and, for that matter, the premium for beef, the Government should ensure that there is an independent system of grading so that the producer knows what the trade wants. That was a point made by the noble Lord, Lord Gallacher, so forcefully. It is an important point; in many instances, I regret to say, there is little confidence or love between the farmer and the slaughterer. It may be that the Meat and Livestock Commission can continue to do this job, but it must prove beyond doubt that it is unbiased, incorruptible. And it must be given the powers to do the job fairly and properly.
There is of course the question of who will pay. However, as your Lordships are told not to discuss money, I do not intend to discuss that matter now. If the industry is to adjust to these changes and win the export battle, I implore the Government to continue to fund research on the scientific methods of grading carcasses now being so successfully developed.
8.12 p.m.
Lord Hooson: My Lords, unlike the noble Lord, Lord Stanley of Alderley, I cannot claim to be a shepherd, but I am a sheep farmer in a less favoured area. "Less favoured" in this context of course is within the terms of the agricultural policy of the EC. I congratulate the noble Lord, Lord Gallacher, and his committee upon the report. I apologise for the fact that my noble friend Lord Mackie of Benshie, who was a member of the committee and who would

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have liked to have spoken in the debate, is unable to be here. It must not be thought that my views and those of my noble friend Lord Mackie coincide on every point with regard to the report.
The report is one with which I largely agree, although I have some reservations. The committee has marshalled the evidence very well in its comments and the evidence itself is extremely interesting. When I was in the other place I represented an area which has probably more sheep per acre than any other part of the United Kingdom. I know how valuable the EC sheep regime has been for agriculture generally in the United Kingdom. I believe that it was getting into a fair state of chaos before the sheepmeat regime came about. We should not underestimate the enormous contribution it makes to the stability of the economy of country areas particularly the hill and upland districts.
From recollection I believe that the variable premium system was introduced when Mr. Peter Walker was Minister of Agriculture. It suited this country very well. It benefited not only the producer but also the consumer. I believe that there is a great deal to be said for it. We are by a long way the largest sheep producers within the EC. I was rather horrified to read in the report and in the evidence that few members, if any, in the office that deals with sheepmeat in Brussels are British or have any detailed knowledge of the British system. I wonder how correct is the bald statement which I quote from paragraph 37 at page 15 of the report. The committee says:
"However they feel bound to acknowledge that the likelihood of all other Member States being able to adopt the variable premium system as used in Great Britain is so low that it may be inevitable that British sheep producers will have to depend on the annual ewe premium as the instrument for income support in the sheep sector".
That is a bald statement, but is it actually correct?
What are the efforts that have really been made to persuade the Common Market countries of the benefits of the variable premium system? I suggest that when the Minister of Agriculture next goes over to discuss matters with his fellow ministers, it might not be a bad thing to take with him the present Secretary of State for Wales, Mr. Peter Walker, who is responsible for the sheep industry in Wales, to try to persuade the Commission of the benefits of the variable premium system. I believe that there is a great deal to be said for that system. I am very glad that it is to be extended until at least 1993 which gives some longer period for adaptation than was originally feared.
I am a great supporter of Europe and a great believer that we must aim at common economic and agricultural policies as in regard to other products of the Common Market. So long as the money that is to come to the sheep producers of this country does not exceed pro rata what is to be allocated to other countries, I wonder whether it would be possible to negotiate within the EC to divide the money between the annual premium on ewes and the variable premium as we have done in the past. That would not do any harm to the EC sheep system because it would still leave the question of the clawback. Other than that I cannot see any great disadvantage in it.
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One of the problems is that support has been based entirely on the annual ewe premium which is to be paid twice a year under the arrangements. It seems that one of the dangers of this is that it tends to encourage people to overstock. We have seen this happen in parts of Wales in the past where one simply has a payment on headage. There is also a tendency for more and more people to go in for sheep in order partially to get the benefit of the headage payments. Is it really meant to be a social payment or one made in order to bring about some kind of economic stability?
If it is intended that it should be a social payment to alleviate some of the effects of the market, then there is a great deal to be said for the recommendation of the Commission that it should be limited as regards numbers. I appreciate that it will adversely affect some producers in this country but if it is intended to be a social payment then I cannot see why there should not be a limit upon it. There should be a limit of 500 for lowland flocks and 1,000 for upland flocks. That seems to me to be about right. I believe that we should give further thought to that question.
Another point is our relationship with New Zealand and the agreement that we negotiated at the time of our entry into the Common Market. That agreement needs very careful review. I believe that we should not finally agree a new sheepmeat regime without the Common Market having first negotiated with New Zealand. It would be a very strange thing indeed if we agreed the sheepmeat regime with all its details and then negotiated with New Zealand. That would be putting the cart before the horse. This aspect needs to be looked into.
One of the greatest worries among farmers is the enormous increase in the national sheep flock. We have a structured sheep industry. The hardy sheep come down from the hill breeds and are then crossed to produce the Mule and other crossing ewes. They are then used with the terminal sire for the fat lamb. The evidence of the Ulster Farmers' Union showed that since the new premium has been paid in Ulster the flock has increased by 40 per cent. That is quite a large increase. Farmers did not have the variable premium because the sheep industry was a relatively small part of the Northern Ireland agricultural economy. It was not on the same scale as the industry in Scotland, Wales and certainly in the hill areas of England. From the evidence of the representative of the Ulster farmers it appeared that the flock had increased by 40 per cent. That seemed to flash a warning light and there are sudden fears in the agricultural community that, with the restriction on milk production and the attempted restriction on grain production, more and more farmers will rush into sheep production and add yet another headache to the Common Market of excessive lamb production. I do not know how far the committee went in addressing that problem.
The committee is to be congratulated on the report. It is helpful in setting down certain guidelines for this country to follow and in particular in marshalling the evidence.
8.22 p.m.
Lord Northbourne: My Lords, I should like to congratulate the noble Lord, Lord Gallacher, on his firm but tender chairmanship of our committee and on the excellent distillation of our discussions which constitute the report under discussion. I shall restrict my comments to one issue—fairness to the British producer and British consumer. In his evidence Henry Fell wrote:
"The British sheep industry has all the natural and structural advantages which should enable it to dominate the sheep market within the Community. A perfect example of a product which fits the commercial logic of the Common Market, whereby movement between member countries enables the best possible use to be made of resources. It has happened with fruit and vegetables, but not with sheep. It would he greatly to the advantage of the British sheep industry if this blockage could be cleared".
This country has a natural and structural advantage in sheepmeat production. We have a relatively efficient industry. Are the Government going to allow these advantages to be neutralised by conditions imposed by our partners in the Community or by missing this opportunity to remove some of the current restrictions? I should like to refer in particular to the proposal that new premiums should be paid only on the first 500 ewes in lowland areas and on the first 1,000 ewes in the hills. I must respectfully disagree with the noble Lord, Lord Hooson. In its evidence the National Farmers' Union said:
"The Commission's proposal that the payment of the ewe premium should be limited to the first 500 ewes per holding (1,000 in less favoured areas) appears to be a deliberate attempt to penalise the United Kingdom. It should be rejected outright".
The acceptance of a limit on the number of qualifying ewes would undoubtedly discriminate most damagingly against British producers. It would not even make a very substantial saving in the cost to the Community. The likely saving would be about £16 million out of a total expenditure of £700 million. It would also be a subsidy on inefficiency.
In this respect my experience is very much confirmed by the evidence to the committee of Mr. Gourlay, the president of the NFU. A lowland shepherd can comfortably manage 600, 700 or even 800 ewes. In the uplands 1,200 to 1,500 is not uncommon. To encourage any lower level of stocking per unit, or indeed per labour unit, is to penalise efficiency, or to penalise the specalist producer.
My second point is touched on in the report and has been referred to by the noble Lord, Lord Gallacher. I refer to the basis of calculation for the new premium. I shall not recite the proposals of the Commission as these have already been covered. The evidence received by the committee shows that the Commission proposals would result in a significant drop in the amount of new premium payable to British producers. The committee recommends—and I urge the Government to pay serious attention to the recommendation—that a list of Community regions distinguished by the characteristics of their sheepmeat production should be drawn up and that the United Kingdom, or the United Kingdom combined with Ireland, should constitute a separate unit. The Commission's proposals as they stand represent an unjustifiable penalty on United Kingdom producers. They must be resisted.
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I should like also to refer to stabilisers. The so-called stabilisers are a device for penalising overproduction and came into operation last May. Increases in production over the base quantity are penalised by reductions in the headage payment. Because Britain is the only country in the Community to have variable premiums, it was originally agreed that the United Kingdom flock should be treated separately for the purpose of calculating the stabiliser penalty. It is clear—and it is recommended by the committee—that if the variable premium is to go, the separate national flock basis for calculating the stabiliser penalty for the United Kingdom must go too. Any other solution would be totally inequitable. The Commission's proposals do not address this point.
I should like to say a few words about the external aspects of the proposals. Paragraph 46 of the committee's report sets out clearly the difficult issues involved in the United Kingdom's close and traditional links with New Zealand as a source of supply. I have spoken to French sheepmeat producers who believe passionately that British imports of New Zealand lamb are responsible for British sheepmeat being available on the French market at prices lower than those to which they have been accustomed and to which the French consumer has been accustomed. It may well be that this is true in the short term. In the slightly longer term, if New Zeland supplies are cut back there is a considerable capacity for expansion of efficient sheepmeat production in this country, which will ensure that, in the slightly longer term, both the home market and the French market will be supplied with sheepmeat at reasonable prices. The problem with the French sheepmeat industry is that it is inefficient. Artificial protection will only perpetuate that inefficiency and seems to be contrary to the principles of the Common Market.
Finally, I should like to ask the noble Baroness whether she can give an assurance that the British sheep industry will be given a fair opportunity to compete on equal terms with our European partners and to benefit from its relative efficiency and from those natural and structural advantages which it enjoys.
8.28 p.m.
Lord Middleton: My Lords, the noble Lord, Lord Gallacher, has given such a lucid account of our report that I wish merely to expand on the first of our conclusions set out on page 20. It is the one on which my noble friend Lord Stanley of Alderley has concentrated. I find myself in close accord with him in what he has said.
I am not at all surprised that the noble Lord, Lord Hooson, has expressed concern about the idea of phasing out the variable premium, because it was seen by all those who gave evidence to the committee as the proposal which would make the greatest difference to the way in which the sheep regime would operate in Great Britain.
The farmers' organisations expressed strong misgivings. The Farmers' Union of Wales was an unequivocal advocate of the variable premium,

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which it regarded as a safety net. The CLA said that the variable premium had proved itself and that its replacement by a single new premium would be harmful. The National Sheep Association said that it would be a disaster if it were to be removed. The Scottish Farmers' Union feared massive disruption and the National Farmers' Union was opposed to the proposal, giving as two of its reasons, first, that the variable premium encourages quality in lamb production, and, secondly, that it makes for efficiency.
As members of the sub-committee we were not convinced. We felt especially that the two reasons given by the National Farmers' Union which I have just mentioned should be looked at more closely. We believed that the achievement of a single market for sheepmeat in 1992 would require that change and therefore to expect all the other member states to adopt our system was unrealistic. Indeed, the National Farmers' Union admitted that fact in evidence.
With certain qualifications—to which the noble Lord, Lord Gallacher, has referred—we took the view that the removal of the variable premium would present an opportunity of which the British lamb producers were well capable of taking advantage. So far from encouraging quality, we believe that the present grading system on which the variable payments are made—here I found myself in agreement with my noble friend behind me— has the opposite effect.
Mr. Volans of the Edinburgh School of Agriculture, who has made a special study on the marketing of sheepmeat, told us that the present certification was, "a very crude quality mark". In answer to a question that I put to him, he said he thought that the present lamb grading system had been an obstacle to improvement in the market.
In his written evidence Mr. Volans said that the removal of the variable premium could lower the average market price because the range of quality would be greater but the spread of prices between high and low quality lambs would be larger. That opinion confirmed our view that the market would play a significant part in encouraging a better product. There would be increased opportunities for British exporters. We already have a thriving export trade in lamb, especially to France. We were told that freer trade between member states and the effect of the removal of clawback would be likely to result in increased exports from Great Britain.
However, because British consumption would be likely to fall as our lamb prices increased, there was a real need for development of the marketing of lamb in this country. This of course has already been stressed by the noble Lord, Lord Gallacher, who is an authority on the matter.
As we say in the report, there has been little adoption by producers of the Meat and Livestock Corporation lamb classification system; there has been little communication between producers and consumers; there has been little promotion of new lamb products, and presentation for consumption has been poor.
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Here lies the challenge. If our farming organisations are hesitant to dive into the colder waters of market competition, then they should take heart from the Ulstermen. As the noble Lord, Lord Hooson, reminded us, in Ireland the annual ewe premium system now applies as in the rest of the Community—that is, apart from Great Britain. The Ulster Farmers' Union told us in evidence that if the chance to return to the variable premium system were offered it would not be taken. The ewe premium system gave money direct to hill and upland breeders in Ulster and their farmers' union suggested that the loss of the variable premium and the consequent focus on returns from the market was the key to improved breeding and marketing.
As regards exports, farmers in Great Britain already have certain advantages over both Southern and Northern Ireland. They have a classification system in being. They have a far larger stock of lambs from which to select a smaller proportion for the export trade. I think that that summarises the reasoning behind our recommendations that the variable premium be phased out and there should be a major drive, starting now, to improve and increase the quality of British lamb-marketing channels so that British sheep producers can gain the maximum benefit from the completion of the single market.
Perhaps I may echo the sentiments expressed by the noble Lord, Lord Gallacher, by saying that we were perturbed by features both in the stabiliser proposals and in the scheme for the reform of the sheepmeat regime which showed a great lack of understanding of the British sheep industry. As the National Sheep Association reminded us, ours is the largest and most important in Europe in terms of live numbers, volume of production and home consumption. Not only is there lack of understanding in the Commission but many proposals in both schemes—that is, the stabiliser scheme and the proposals for the new sheep regime—discriminate against British producers.
First, the sheepmeat stabiliser for Great Britain is calculated on an unfair base quantity of sheep. Secondly, the calculation in the new sheep regime proposals for the ewe premium would penalise our farmers. Thirdly, the proposal to limit the number of eligible ewes bears no relation to the reality of economic production in Great Britain and is quite unacceptable.
As we say in the report, bearing in mind the dominant position of the UK with regard to sheepmeat production and consumption, every effort should be made, if possible, to include more British nationals in that part of the Commission's directorate which deals with sheep.
Finally, while I am very bad at remembering figures and statistics, there is one which should always be borne in mind where British agriculture is concerned; that is, that only about 40 per cent. of Britain is capable of being ploughed. The rest, apart from urban land, is upland grassland and, in the Highlands, grass or heather moorland. A large proportion of those who farm some 50 per cent. of our land area depend on sheep for their livelihood. Therefore there are the strongest possible economic

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and social reasons for ensuring that the new sheep regime does not put them at a disadvantage. We believe that the recommendations which we have made in the report will ensure that that does not happen.
8.39 p.m.
Baroness Elliot of Harwood: My Lords, I should like to start by congratulating the noble Lord, Lord Gallacher, on the way in which he conducted the inquiry and the writing of the report. It was absolutely first class. Those of us who were members of the committee enjoyed the experience very much indeed and were deeply interested in the subject. I should also like to congratulate the noble Lord, Lord Middleton, who will now take the place of the noble Lord, Lord Gallacher, as our chairman. I am quite sure that we shall enjoy his skilful work equally as much. I also hope that he will enjoy working with us.
The report deals with one of the most important sections of British agriculture. If one looks at the map of England, Wales and Scotland, the hill land in Scotland includes the whole Border area, the Highlands and the islands. In England and Wales it is Northumberland, Cumberland and all the other areas there. It is the same in Wales. To date sheep production is one of the agricultural products not in surplus. It also provides some of our exports—although that, as I am sure your Lordships will know, depends on what the French do.
In 1972, our self-sufficiency was 42·2 per cent.; in 1987 it was 78·6 per cent., and the forecast for 1988 is that it will be 83·9 per cent. Therefore we are still within the 100 per cent. level. Further, the areas where sheep are raised are generally the so-called less favoured areas. That means that even in the hill country land can be used wisely and profitably, although subsidies are necessary on the breeding stock.
Sheep production keeps the hill land in good condition, and even the most enthusiastic preservation societies do not complain about us. The idea that all that land should grow trees would be disastrous for the conservationist and for the consumer. In this country we still consume more sheepmeat than any other European country. That is noted on page 8 (figure 4) of our report. We still consume a considerable amount of New Zealand lamb, but not so much as in the past. New Zealand now exports to countries in the Far East, which helps consumption. We import in the winter months when our production is hardly on the market, and we can sustain trade in that way.
In the most recent programme sent to us from Brussels, the worst aspect for the United Kingdom sheep industry is the proposal to limit farms to 500 ewes and in the hill areas to 1,000. Speaking as a hill farmer in the heart of the Border country, that would be a disaster. The 1,000-ewe limitation means more blanket afforestation, which would be Sitka spruce, and a further depopulation of the Border lands, because in an area where one can run only two ewes to one acre a hill farm with 2,000 or 3,000 acres or more would have no alternative but to sell land for afforestation, thus reducing the employment of shepherds and farm workers, as trees do not provide
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nearly as good employment as sheep farming. That would be a disaster for all hill land in England, Scotland and Wales.
There is much controversy about doing away with the variable premium scheme; but our committee, after much inquiry and discussion, came to the conclusion that if the variable premium were done away with the ewe premium must go up and should be related to the demand for hill sheep and the consumption. That involves the arable areas which buy the store lambs, fatten them and put them on the market. It is a system which suits everyone and should be continued. Those recommendations are in paragraphs 61 and 62 of our report.
Paragraphs 63 and 64 suggest that ewe premiums should be paid more frequently. That would help farmers during the year when sheep are not ready for sale—until July, August and September. A further proposal that I support is that in the agricultural section of the EC in Brussels there should be more staff with direct experience of the sheepmeat regime. I have been to Brussels twice with committees from this place. Each time we have commented on the fact that few civil servants, or whatever they are called in Brussels, know anything about this type of hill farming.
With the permission of the chairman, I should like to mention a new suggestion as an alternative to sheep; that is, the production of cashmere fibres through the growing of cashmere goats. That is not in our report, but I mention it because the Nuffield Farming Trust gave a scholarship to my nephew Andrew Lubbock to go to New Zealand and Australia to investigate the proposal as a possible alternative to sheep.
The report is technical, but my nephew came to the conclusion that cashmere goats could graze happily with sheep, but the climate here would mean that they would have to be housed in winter. At present the greatest quantity of cashmere fibre comes from Mongolia and China. In New Zealand, Australia and India there are areas where cashmere goats are raised. Our hosiery industry could take more cashmere wool. The Chinese are beginning their own production, so there will be a shortage of cashmere fibre for the United Kingdom hosiery trade. The cashmere fibre is desperately wanted by companies such as the Dawson Company in the hosiery trade.
In the report there is an interesting analysis of the production of cashmere goats. There is a possibility of breeding cashmere goats for export to areas in southern Europe such as Spain, Italy and Greece where the climate would be more favourable. We could produce the breeding stock for export. That could be profitable. The report goes into interesting detail but it is rather outwith our debate tonight. If any of your Lordships are interested, I can obtain copies of the report for your information.
Finally, I hope that the Government will not agree to the limitation of sheep numbers in areas where sheep production is the one vital product and the best way to produce mutton and lamb, which are still in strong demand. I implore the Minister to see that that point of view is strongly put because it represents the opinion of the whole sheep industry.
8.45 p.m.
The Duke of Somerset: My Lords, perhaps I may add my thanks to the chairman, the noble Lord, Lord Gallacher, for his skill and expertise and the manner in which he organised the assimilation of the evidence in this report, as in past ones.
I fully agree with the committee's opinion as to the central feature of the proposals; that is, as we have heard, the phasing out by 1992, or 1993 now, of the present variable premium system. A number of qualifications, which are highlighted in the report, are needed to safeguard our farmers. They have also been mentioned by one or two of your Lordships tonight.
I should like to draw the attention of the House mainly to the social side of the debate. The most important aspect of that is discussed in paragraph 39, which notes that the proposed ewe premium system directs money directly to the hill and upland breeders in a way that the variable system cannot do. It goes along in hand with the social benefits of the hill livestock compensatory allowance headage payments. As that paragraph also notes, it is in those geographical areas that British farming is at its most difficult. The climate and topography preclude many alternative farming enterprises except for afforestation, as we have heard. It is surely essential to allow the chance of an economic existence to a sustainable industry in the hills. That ensures a viable rural population. Pressures from all sides threaten those communities. One of the worst of those is house prices brought about by outside money from those retiring from town properties and those seeking second homes in the countryside. No one on an agricultural wage can afford to get into that market and landlords naturally succumb to the temptation to sell, thus diminishing the letting market.
Weekenders rarely take part in village life and so there is no one to run the youth club, the village hall or the sports club. I feel that that type of social decline is happening in many of our rural counties. Here we have a wonderful way to help to reverse the trend—by putting the money where it will do most good. It will provide income support for farmers in the hills without also benefiting the more advantaged farms in the lowland areas—those that merely finish the animal.
Many of your Lordships have been interested in the evidence of the Ulster Farmers' Union and I too noted what they had to say, namely, that the annual premium now in force in Northern Ireland is favoured by their members although they had at first opposed it. Many witnesses indicated that payments under the sheepmeat regime were often the main source of income in the less favoured areas. Sheepmeat production is a very important sector of the UK agricultural scene and for the Community to start looking for financial savings in this marginal sector can be seen as a direct attack on this country. So I feel that both the proposal to limit eligible ewes per farm and the proposed new method of calculating the premium by the use of just two or possibly three north-south regions should be most strongly resisted.
Perhaps I may comment on one other aspect or issue raised in this report. It is that of certification or grading. As we have heard, this system is under threat
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from the new regime. The committee received opposing evidence as to whether or not this procedure produced better quality lamb and more uniform marketing. I believe that there is a need for a more vigorous and clever marketing of lamb and sheepmeat products.
One of the ways in which this can be achieved is an expansion into the fringe market for the specialist buyer. Not everybody believes in the modern trend for all lean and no fat on meat. It is fat that gives the flavour and as in beef this, together wth proper hanging, is much sought after by consumers who want to get away from the all-encroaching blandness of much of today's food. The abolition of certification would allow for a wider choice at a competitive price. Do the graders really know what the consumers want?
An additional bonus to the impetus of marketing would be given to the export trade by the removal of the clawback system. So I feel that all the advantages lie with the UK sheep farmers adopting these measures. They should be welcomed, subject to the caveat that has been mentioned already tonight. British farmers and their unions should look again at the implications and the possibilities.
8.52 p.m.
The Earl of Radnor: My Lords, speaking this late in the debate, I find it rather difficult to know quite what is left to say. It is certainly not easy to follow any preconceived ideas. However, I intended to say and would very much like to say that it has been a real pleasure and very instructive to work on Sub-Committee D under the chairmanship of the noble Lord, Lord Gallacher.
Having listened to the speakers, the only point that I have missed in this debate is any real emphasis on the fact that in Europe there is not self-sufficiency in sheepmeat. I am a very keen Marketeer and I am also a patriot. I am very keen to see Great Britain and nobody else filling that need in Europe over the coming years. It is for that reason that I am very keen that the variable premium should be phased out. I think that there are reasons, which I shall come to, within this country, most of which have been mentioned. But the abolition of the clawback would be an added advantage to the one that we already seem to have in this export market. I believe I am right in saying that there is an advantage in putting ourselves right in the marketplace and having to find out exactly what is wanted, rather than having animals graded. There may be an awkward period before we fall into that habit. It is very salutary to have to find out what the Frenchman wants to eat. If our livelihood depends on it we shall find out.
Parochially, in England, I think it is good that the variable premium goes. The ewe premium, so long as it is at the right price and frequent enough, is directed straight to the person with the ewe flock and not to the perhaps richer fattener in the lowlands.
I take the point of the noble Lord, Lord Hooson, that a premium of that sort could lead to overstocking on the hills. It is possible that this is something we shall have to put up with. If we are to fill this export gap we want a bigger ewe flock. And

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we need that bigger ewe flock if cereals, as to a certain extent they are now doing, go down the drain. For those reasons primarily, I am very much in favour of getting rid of the variable premium. Like everybody else I found interesting the only example—from the Ulster Farmers' Union—of moving from one regime to another and never wanting to return.
I believe that there is a very serious thread running through all this argument. It is not entirely to do with the sheep regime. It has been seen over cereals, and it will be seen again when beef is discussed. To put it bluntly, in my opinion it is the discrimination against Britain by other EC countries, for whatever reason—presumably for political reasons. Clearly, it is present in the limitation of ewe numbers; it is present in the way that stabilisers have been drawn up; and it is present in the way that the ewe premium is calculated. Every single time, these forms of calculation and rules militate against the English farmer who is larger and better. There is no point in mincing words. Broadly speaking the English farmer is larger and better. And, again broadly speaking, as far as I can see, Europe is always protecting its own; that is, the smaller and not so efficient farmer.
Noble Lords may remember that it happened in respect of cereals over the co-responsibility levy and letting off farmers below a certain acreage which would have been disastrous to us. I am told, or I suspect, that when the beef regime comes before us we shall find that animal numbers will be limited again. I should like an assurance from my noble friend. I should like to be told what is happening to counter this very undesirable move within Europe, this feeling against us which is bad from our point of view and extremely bad from the point of view of Europe as a whole.
We must face up to the fact that Europe is a protectionist area: the Common Market is a protectionist area with a tariff harrier around it. One day, as a Community, we shall have to acknowledge the rest of the world. We might as well prepare ourselves, little by little, by becoming slightly more efficient in agriculture. Let Europe follow us, so that one day we shall be able to look the rest of the world in the face and possibly even compete. That is harsh. And, politically, it is unacceptable. Other countries have passed through that period, or they are in the middle of it. In the Cairns group, New Zealand and Australia farmers are allowed to go bankrupt. No one comes to their aid. I must ask my noble friend what steps we are going to take to have better official representation in Brussels so that these matters can he dealt with as efficiently as possible. That question is not disconnected with our present discussion.
Those are the salient points that I wished to mention. There is also a minor point about which I warned my noble friend. I know from my farming activities, particularly fish farming, that when a product from a certain area is thought to be bad in some way the market disappears for a period. The market disappears very severely. I am thinking of the case of a gentleman who ate a badly smoked trout and died of botulism. My fish farm manager visited a fishmonger's the next day. He heard someone in the queue in the fishmonger's say about some trout, "Don't have those. Those are the ones that kill you."
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As my noble friend knows, there is a problem in Wales and Cumbria as yet unresolved. In 1986 the Chernobyl incident occurred and the pastures in those two areas were polluted. I have no doubt that all the right steps were taken to counteract the effects of the pollution. I shall not go into the details. But a relatively small number of farmers both in Wales and in Cumbria still have worries and face hardship as a result of that incident.
Would it not be better if that matter were tidied up—the expense is not that great—as soon as possible? When we start our exporting no one can then say, "Oh, don't have sheep from Wales. Those are the ones that kill you", or, "Those are the ones that are radioactive." We do not want such remarks to be made. That is a small but perfectly valid point from a commercial point of view.
Having said that, I support everything in the report. I have just two small further points to make. I hope that the voluntary agreement entered into with New Zealand will be maintained. I say that on purely emotional grounds. I do not see why one should not show a certain amount of emotion every now and again and put New Zealand above other countries. Further, I cannot for the life of me understand why we have to subsidise storage. That has not been explained to me satisfactorily, either in the report where it obviously should have been as I was a member of the committee, or this evening.
9.3 p.m.
Lord John-Mackie: My Lords, the noble Lords, Lord Stanley of Alderley and Lord Hooson, and myself are the three non-members of the committee who are speaking tonight. The three of us must congratulate the noble Lord, Lord Gallacher, and his committee. Fifty per cent. of the members of that committee have spoken here tonight on this report. I should like to congratulate them from a technical point of view. The report is less than 16 pages long, but it provides a tremendous amount of information. If a few more government reports were less than 16 pages long, it would save an awful lot of time. Therefore I congratulate the committee not only on the content of the report but also on its terseness.
I left this Chamber at about a quarter to midnight last night. I do not want another late night and I do not want to say too much as members of the committee and other speakers have gone over the main points of the report very well. Therefore, there is no point in my repeating them. The main bone of contention concerns the variable premium versus an increase in the ewe premium. It is the old story of where one puts one's money—on the source of production or on the product itself. The argument goes that if one puts one's money on the product itself, one obtains a better result because one produces more and therefore obtains more of the premium.
The Ulster Farmers' Union made a very interesting point. The committee took particular note of it and it came down in favour of putting the money on the source of production, which is the ewe. Although there are arguments on the other side, I think that that was the right decision. The noble Baroness, Lady

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Elliot of Harwood, and the noble Lord, Lord Middleton, mentioned the tremendous variation in sheep production. The difference in production between low ground sheep and sheep in the Highlands of Scotland is tremendous. Therefore, a ewe premium would be the fairer option. The committee was right to come down in favour of that.
Although I did not notice this point in the report, I was intrigued to discover that because of the variable ewe premium, the size of sheep flocks in Ulster had increased by 40 per cent. I do not know what flock size was like before. If a flock consisted of only a few hundred sheep, a 40 per cent. increase is not a lot; but if it was large, a 40 per cent. increase would make a big difference.
The matter of a high ewe premium and its effect on various matters was raised, as was the overstocking point. Overstocking is a very real concern. In the early days of ewe premiums there were all kinds of rumours about people who took the wool off them and the premium and never had a tup near the sheep. But there is something to be said for the premium. After all, we are paying arable farmers to set aside arable land, so why should we not pay a sheep farmer for setting aside his ewes? There may be a point in that. The premium helps farmers in less favoured areas to survive. The noble Duke, the Duke of Somerset, was very anxious that they should. He is right to be concerned about that.
There is the matter of the ewe lamb getting a premium in the case of low ground sheep. I believe there was some argument about the date that had to be proved for the ewe lambs in order to receive the premium. But hill farmers cannot put young ewes in lamb at the same age and at the same size as low ground farmers. There is an anomaly there which should be looked at. That matter is set out in paragraph 52 of the report. I believe it is important to look at that.
I turn now to the question of postponing the premium until 1993. I often think that it is a bad idea to postpone things. People say "Oh, I have another year" and do nothing. I have done that myself. The Government postponed set-aside registration for three weeks; I thought that I had plenty of time and found myself tearing around to get my registration in a day before it was due. I should have thought that the thing to do would have been simply to fix the date for 1992. However, that is perhaps something of a digression.
I should like to take the noble Baroness, Lady Elliot, to task on the question of afforestation. She does not like blanket afforestation. But blanket afforestation was created because farmers would not co-operate in forestry. That is the long and the short of it. I can give any number of examples of individual farmers—and I could give the noble Baroness their names—who have co-operated in their forestry for many years and doubled their sheep production because of the shelter and of the accessibility by forest roads to areas which they could improve, to grazing and so on.
The noble Baroness's point about labour will not bear examination. Forestry takes three to one in
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labour as against agriculture. I know that it is argued that much of it is contract labour, which does not stay in the area. That could be got over if every hill farm had a forestry policy. I should just like to make that point.
The noble Baroness's point about goats is very interesting. However, they have to be on low ground under grazing control because if you let goats loose on land in the hills they will ruin the pasture before you know where you are. The greatest example of that is Yugoslavia where Tito was advised that he would need to get rid of the goats if he was to have a decent sheep policy. Unfortunately, being a dictator, he got rid of the goats and slaughtered them all before he bought his flock of sheep. It was slightly disastrous.
I believe that the noble Duke is looking for the ideal if he wants people to eat sheepmeat which is well covered with fat, well hung and of an age that would give the proper taste— in other words, a three year—old wether from the hills of Scotland, which of course is now extinct. Nevertheless I like to think that someone is thinking of the value of fat on any sort of meat. However, the price of doing that is very high indeed.
Perhaps I may finish on the subject of currency. There is no doubt that all the arguments that have gone before about the green pound have needled British farmers more than anything else. There are very great differences in prices because of the green pound. If we just joined the EMS, we could have fair competition and we could look forward to 1992. However, if the Government are going to dig in their toes on joining the European Monetary System that problem will continue.
Again I should like to congratulate the committee on an excellent report and I hope that we shall see some good results from it.
9.11 p.m.
The Parliamentary Under-Secretary of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, so far as I am aware, this is the first time—either awake or asleep that sheep—have crossed my path in a debate such as this. First, I should very much like to congratulate the noble Lord, Lord Gallacher, on his committee's valuable report on the sheepmeat regime. As others have said, they have tackled a complex subject and have produced a clear and well reasoned report which could not have been more helpfully timed both for this House and for my colleagues who will be negotiating on this subject in Brussels. I am also grateful for the many thoughtful and constructive interventions which your Lordships have made this evening.
I should like to add my best wishes to those of my noble friend Lady Elliot to my noble friend Lord Middleton —I think that this is the second time I have done so but it is always worth doing a good thing twice—and join in her tribute on his taking over the chairmanship of the committee.
The work of the committee is very important, since sheep farming is one of the major success stories of British agriculture. After listening to the noble Lord,

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Lord Hooson, and my noble friend Lord Middleton, I am mindful that sheep farming in the hills is particularly important. The committee's report reflects the determination—which I know we all share—that the review of the Community sheepmeat regime should result in arrangements which enable our industry to continue to capitalize on its natural advantages and superior efficiency.
Some noble Lords may not be aware of the fact that the EC Commission has just produced revised proposals for the review. They were presented to the Council of Agriculture Ministers in Brussels earlier this week. I hesitate to suggest that the Commission was trying to act in time for our debate today, but it is helpful to have proposals on the table at last, even if we do not yet have the legal text.
It may help your Lordships if I start by briefly outlining what is now proposed, since it differs in some respects from the Commission's earlier proposals which were considered by the committee.
Variable premium and clawback would be phased out over a four-year transitional period by progressively reducing the guide price which determines the rate of payments. From the 1993 marketing year, the variable premium would cease altogether. The Commission also proposes a progressive reduction in the frequency of payments. The reduction in the rate of variable premium would result in a progressively higher rate of annual ewe premium being payable in Great Britain. From the start of transition in 1989 two advances of annual premium would be payable during the marketing year to all eligible producers.
The Commission has also proposed some new arrangements for making the transition to a single ewe premium calculated on the basis of a Community-wide income loss. The existing seven regions would be reduced to four: Italy and Greece; Spain and Portugal; Great Britain; and the other northern member states. Each region would have a ewe premium calculated on the basis of the regional income loss and a regional lamb productivity coefficient. From 1993, Great Britain would be integrated into the larger northern region so that only three community regions remained. Each would have their own lamb productivity coefficients, but these would be applied to a Community-wide income loss to derive three separate rates of premium.
The other internal aspects of the Commission's proposals remain broadly as suggested by the Commission in 1987. These are principally the redefinition of "eligible ewe", the introduction of a limit on the number of ewes per flock which may receive annual premium, the phasing out of the intervention system in tandem with the variable premium, and retention of the possibility of private storage aid.
The Commission is also proposing for Council approval a mandate for negotiations with third country suppliers on the future arrangements for access to the Community. The Commission has illustrated its ideas by setting out what it has in mind following initial talks with New Zealand, the Community's principal third country supplier.
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I hope that your Lordships have been able to follow me so far. The essence of what the Commission proposes is that most regional and local variations in the sheepmeat regime would be phased out by the end of a four-year period. The underlying assumption must be that this will result in a better alignment of market prices in the Community. This would then justify a single ewe premium on the basis of a Community-wide income loss; and permit the abolition of barriers to free trade. The only regional difference thereafter would be in the three separate lamb productivity coefficients. These would reflect the agricultural and practical differences in production patterns, and generate a different rate of ewe premium per head in each of the three separate regions.
It is evident from the committee's report and from your Lordships' comments on it—and indeed from the many public reactions to it—that the element of the Commission's ideas which is of most concern to British interests is the abolition of the variable premium. The noble Lord, Lord Gallacher, spoke in depth about the variable premium and for my part I would say that we have greatly valued this over the years. It enables market support to be paid to finishers of lambs as well as to breeders, a feature which is very well suited to the particular characteristics of our national system of sheep husbandry. It enables market support to be limited to lambs which meet particular quality standards. It provides an incentive to production out of the peak season while giving support to producers throughout the year. It gives confidence to the market, and so enables orderly disposal of our lamb production. These have all been very significant benefits for producers and consumers in Great Britain.
I listened with care to my noble friend Lord Radnor and indeed the committee has very correctly pointed out that there may be difficulties in retaining the variable premium. No other member state has chosen to operate it, and there is reluctance elsewhere in the Community to accept a situation in which one region of the Community has a different system of market support. There is also the difficulty that the Commission sees the export charge which is used to claw back variable premium as incompatible with the establishment of a single market.
I must reply to the challenge of my noble friend Lord Stanley of Alderley and say that I am not going today to anticipate the Government's position on the variable premium in the negotiations in Brussels. They are only at the very earliest stage. What I will say—and I think that this is really at one with the committee's recommendations—is that we must ensure that the future regime, whether through variable premium or by some other means, enables our industry, including the industry in Northern Ireland, to prosper and to gain the full advantage of its excellent structure, efficiency and expertise.
I can, however, however, be more categorical in responding to the committee's remarks about intervention. This is in theory available to other member states instead of variable premium. No one wants even modest foothills of frozen lamb, let alone mountains. We quite agree with the committee's conclusions on

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intervention and equally on the potential usefulness of private storage aid.
One particular concern expressed by the committee, and this evening by the noble Lord, Lord Northbourne, was that the Commission made no provision for the future abolition of the separate stabiliser currently applied to Great Britain. We understand the committee's views on this. The separate stabiliser is certainly an undesirable feature of the present arrangements. But I can offer your Lordships some reassurance on this point. The council regulation introducing the stabiliser contains the provision that the separate stabiliser in Great Britain applies only as long as the variable premium is operated. If the variable premium were to end we would certainly insist that this corresponding termination of the separate stabiliser was adhered to.
Turning now to the proposals for the future of the annual ewe premium, the committee has drawn attention to the Commission's ideas for headage limits on the number of ewes per holding which may receive the ewe pemium. I listened with great care to the words of noble Lord, Lord Hooson, but I have to say that in our view this is a highly objectionable proposal. Because of our agricultural structure, UK producers would bear the brunt of the budgetary savings which resulted. Yet the fact is, as my noble friend Lady Elliot said, farmers with more than 500 ewes in the lowlands or with more than 1,000 ewes in the less favoured areas still need support. We are talking in particular in the LFAs about producers who are often making the only possible agricultural use of the resources at their disposal.
The proposals would result, very simply and directly, in a reduction in sheep flocks, a consequent reduction in jobs, and thus in further rural depopulation. I hope that what I have just said responds to the points made so eloquently by my noble friend Lady Elliot and the noble Duke, the Duke of Somerset. This is not consistent with other broad Commission policy objectives. We shall again be opposing this proposal which we have had to fight off in the Council of Ministers on various previous occasions.
The other annual premium issue on which the committee felt strongly was the Commission's proposal for premium to be based in future on a Community income loss rather than a regional one. We agree with the committee that the Commission's proposal for a single income loss would indeed be disadvantageous for the UK if it were introduced now. However, the Commission's revised proposals envisage that, during the four-year transitional period, regions would continue to have their rates of annual premium calculated on the basis of regional income losses. The single income loss would only be introduced in 1993 when Community market prices had aligned more closely. I do not think that we can be entirely confident that that will happen. We shall therefore have to look very carefully at the proposal for a Community income loss.
The committee drew attention also to some other points on the detailed operation of the annual ewe premium. It suggested that the imposition of just two
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regions for the purpose of setting productivity coefficients for ewes might be simplistic, inefficient and unfair. The Commission's new proposals in a way acknowledge the force of this in that they now propose three regions, the southern region now being split into two. We need to examine whether this goes far enough. However, we shall most certainly have to ensure that the arrangements for income loss and coefficients are fair and equitable from the British point of view.
As the noble Lord, Lord John-Mackie, will no doubt agree, the proposed redefinition of "eligible ewe" is a very technical issue but nonetheless an important one. As the committee pointed out, the present definition has the advantage to producers that in certain circumstances it includes ewe lambs put to the ram for the first time. Set against that are control problems that arise, which have led the Commission to propose a change. We shall seek to achieve a sensible definition that is fair to all producers within the Community and that enables them to secure the premium to which they are entitled without having to comply with requirements that constrain sensible husbandry practices.
We would agree with the committee, whose views were so ably expressed by the noble Lord, Lord Gallacher, on the cash flow benefits that would accrue to farmers as a result of the Commission's proposal for two advances of ewe premium to farmers during the marketing year.
I turn now to the question of access for third country sheepmeat. The committee was right to focus on the sensitivity of imports and the need to take account of producer and consumer concerns as well as those of the traditional suppliers of our market. We can welcome the way that the Commission is handling negotiations. It is seeking mutually acceptable arrangements with third country suppliers, starting with New Zealand, which is by far the most important. This shows proper respect for the Community's obligations under the general agreement on tariffs and trade. The emphasis on mutual agreement should achieve the fairest possible deal for consumers and suppliers alike. It is encouraging that by all accounts the Commission sees prospects of progress with the New Zealanders in this area. This is doubly so since the absence of progress on the third country element has been seen previously as an important obstacle to progress on the internal market review.
My noble friend Lord Radnor spoke of Chernobyl. We sympathise with the problems faced by farmers after Chernobyl. He will admit that the Government did a lot to help. We have paid out £5·5 million so far. Schemes are still operating to assist sheep farmers.
The committee—this point was taken up by the noble Lords, Lord Gallacher and Lord Hooson, and my noble friend Lord Radnor—regretted the lack of Britons in the services of the European Commission dealing with sheepmeat. I must stress that Commission officials do not serve in a representative capacity. It would be wrong to view their work in that light. Of course I quite agree that anyone who does work on sheepmeat cannot operate effectively without a thorough knowledge of the British sheep

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sector, which is after all the largest in the Community. I assure noble Lords that my officials are in close and regular contact with Commission officials to ensure that they are aware of what is happening on our market.
My noble friend Lady Elliot of Harwood mentioned a cashmere fibre report made by her nephew. She was kind enough to give me a copy of this useful document, which is now being studied by officials. Any new crop that is economic and profitable is always of interest to us. My noble friend's nephew should be congratulated on the excellent report.
I should like to close by stressing that the Government welcome the forthcoming Community review and the opportunity that it provides for all concerned to consider how the Community sheepmeat market can best be organised. It is understandable that on an occasion like today we should perhaps focus on the details of what is proposed and in particular on the aspects that concern the future of our industry. We should not forget that the review offers the opportunity to create a unified Community sheepmeat market and that progress in that direction should offer us the prospect of better access than we have at present to continental markets. For that reason I think that the stress placed by the committee on the importance of improving the marketing and the quality of British lamb is something that all of us who are concerned with the British sheepmeat sector should take to heart. This has been recognised in the Meat and Livestock Commission's strategic objectives and in the work of the MLC's Lamb Promotion Council, which has helped to increase British lamb's share of the domestic market and to boost our exports.
My noble friend Lord Stanley of Alderley will appreciate from what I have already said that the variable premium is still with us, as are the quality standards which certification gives us. One can always improve quality and grading, and I hope that the industry will do all that it can to move in that direction. I agree with the noble Lord, Lord
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Northbourne, that potentially no sheepmeat industry within the Community is better placed than ours to take advantage of a single market. We must make sure that that potential is fulfilled.
I should like to stress to the noble Lord, Lord Northbourne, that the Government for their part will be guided by three principles with which I believe your Lordships will agree. Here I should like to speak to all noble Lords. There must be free but fair competition. Market support must be provided, and at reasonable cost. Finally, and most important, the new regime must allow our sheep producers, whether in highland or lowland, to continue to capitalise on their natural advantages and their superior efficiency, as they have done so successfully in the past.
Lord Gallacher: My Lords, I thank all members of your Lordships' House who have taken part in this important and interesting debate. The speeches that have been made have filled out the details of the report before the House. I express my thanks to the Minister for the manner in which she has replied to the debate and for updating us so effectively on events subsequent to the drafting of our report. In the jargon of this place, I should like to say that I will study what she has said. Unfortunately I cannot promise to write to her because I have a lifelong rule never to put anything in writing to a lady, and particularly to one as attractive as the noble Baroness. I commend the report to your Lordships.
On Question, Motion agreed to.

British Railways (No. 2) Bill
Brought from the Commons; read a first time, and referred to the Examiners.
House ad journed at twenty-seven minutes before ten o'clock.