Lords Sitting of 21 April 1989

Preamble
The House met at eleven of the clock: The DEPUTY CHAIRMAN OF COMMITTEES (LORD AMPTHILL) on the Woolsack.
Prayers—Read by the Lord Bishop of Newcastle.

Trade: UK and Soviet Union
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What are the prospects for increasing trade between the United Kingdom and the Soviet Union.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, in the light of Mr. Gorbachev's recent visit I deem the prospects to be fairly good, particularly in light industry, including food processing and packaging, electrical and electronic products, and the construction of hotels. It will be up to our companies as well as their Soviet customers to convert these prospects into actual business, but your Lordships may be sure that the Government will give our businessmen every possible support.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply, which is encouraging. The present low level of trade seems surprising in view of the improving relations in general. Could not British consumer goods help to relieve the queues and drabness of shopping in the Soviet Union, and is there not a demand in this country for Soviet products in addition to fur hats and real vodka?
Noble Lords: And caviar!
Lord Young of Graffham: My Lords, our appetite for vodka must be such that we have an adverse trade balance with the Soviet Union! Our imports from there considerably exceed our exports to them. The real difficulty in trading with the Soviet Union is simply their lack of hard currency. That will tend to rule out consumer products. In the main, our endeavours in the Soviet Union are confined to capital projects, particularly concerning power generation, food, and the like. That is where we shall have the furthest and best advances.
Lord Mellish: My Lords, the Minister will be aware that the new change of heart in Russia is entirely due to Mr. Gorbachev. There is a realisation that armaments are out and that the economy of their nation is all-important. Therefore this is a chance for us to prove whether Mr. Gorbachev is genuine by removing every barrier possible to enable the Soviet Union to trade with us.
Lord Young of Graffham: My Lords, perhaps I may convert what the noble Lord, Lord Mellish, said into a question. It is true that we should endeavour to
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encourage trade as far as we can with the Soviet Union. Nevertheless, we should not forget that the overwhelming preponderance of land forces in Europe is on the Soviet side. We should follow the two courses together; namely, to keep up our guard and endeavour to increase our trade.
Lord Bottomley:My Lords, is the Minister aware that I was the Minister responsible for trade with the Russians between 1947 and 1951? I had an expert trade adviser who worked in the Foreign Office and who is now a Member of this House. He is responsible for this Question today. At that time trade with the Eastern European countries was quite high. Have the Government considered using the services of the Minister's noble friend?
Lord Young of Graffham: My Lords, this seems a slightly unusual alliance and I must obviously pay considerable attention to it. I shall speak to my noble friend.
Lord Renton: My Lords, is my noble friend aware that he is not called upon to exceed the call of duty when answering questions?
The Viscount of Falkland: My Lords, while bearing in mind and agreeing with the Minister's remarks as regards consumer items, is it not a fact that one of the main features of perestroika now is the need to produce consumer items in Soviet shops? Their shopping list is absolutely enormous. Is there not some way in which we can encourage British firms to enter into joint ventures to produce consumer items? The future for trade with the Soviet Union is very profitable indeed if we get in now.
Lord Young of Graffham: My Lords, yes. Among a number of agreements that I signed when Mr. Kamentsev, the trade Minister, was here with Mr. Gorbachev was one which involved a British company going into the Soviet Union and working with a producer of washing machines. The company will be redesigning them and then enabling those products not only to be sold in the Soviet Union but exported. Another company is involved there in the redesigning of jeans and their manufacture, and in other clothing apparel. A number of these projects are going ahead, but the difficulty is that they require hard currency and therefore there must be an element of export involved as well.
Lord Williams of Elvel: My Lords, can the Minister tell the House how many British firms took stands at the recent Moscow fair?
Lord Young of Graffham: My Lords, that is a piece of information that I do not have with me. I shall write to the noble Lord and put a copy of the letter in the Library.
Viscount St. Davids: My Lords, does the Minister not agree that the real danger to glasnost and perestroika, which are in our favour, is the lack of consumer products which may cause the Russian people to reject those concepts? Therefore it is very much in our interests to promote every form of

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export to the Russian empire which would help Mr. Gorbachev and those concepts.
Lord Young of Graffham: My Lords, my responsibilities lie within the United Kingdom and not with other countries. It is very much a matter for the Soviet authorities. I am sure that they are aware of these matters and they figured very much in the talks that we had a few weeks ago. I have no doubt that they will figure again in the talks when I go to the Soviet Union in June this year.
Lord Peston: My Lords, can the Minister say whether it is the case that we have a problem in trading with the Soviet Union because of a lack of facility with the Russian language? Is he aware that one cause of that is the considerable shortage of Russian language teachers in our schools?
Lord Young of Graffham: My Lords, it is true that we are not blessed with too many speakers of the Russian language. Increasingly the commercial language of the world is English and many of these transactions take place in our language.
Lord Campbell of Croy: My Lords, can the Minister say whether the press reports are correct that my noble friend is to lead a trade mission to Moscow in June this year? Whether the reports are correct or not, I am sure that he has the best wishes of the Members of the House in that mission. Is the Minister aware that a recent manifestation of perestroika which has helped good relations was the tour of a Soviet rugby team in Scotland where its excellent play, sportsmanship and success was admired and appreciated?
Lord Young of Graffham: My Lords, it is true that I am going to the Soviet Union and I will be taking a team of businessmen with me. I shall in fact be holding my third series of meetings this year with their trade Ministers. That shows that the tempo of our talks is certainly rising. As regards sporting activities in Scotland, I hear what my noble friend says.
Lord Annan: My Lords, can the Minister say whether the level of the rouble is one of the reasons impeding trade between this country and the Soviet Union? Some people have found the level to be unreasonably high.
Lord Young of Graffham: My Lords, I suspect that there are many impediments to trade, one of which is the shortage of currency. I suspect that that is more important than the rate of exchange.

Water Supplies Standards: Compliance
11.14 a.m.
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
What steps they are taking to respond to the European Commission's reasoned opinion that
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the water supply of the United Kingdom must be cleaned up by the end of this year.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh): My Lords, the European Commission reasoned opinion refers to the absence of UK legislation directly applying the EC drinking water directive and the fact that some supplies do not yet comply with the nitrate standard in England and the lead standard in Scotland. The Commission should know that the Water Bill and regulations to be made under it, as soon as it is enacted, will fully meet the first point. On the other two points, discussions are being held with the Commission about the timescale of compliance programmes and the technical difficulties involved. However, I can assure noble Lords that public water supplies in the United Kingdom are already of a very high standard.
Lord Hatch of Lusby: My Lords, I have two further questions for the Minister. First, is it not the case that the British Government agreed to the convention of 1980 which provided for legislation to be introduced by 1982 and for the clean-up process to be complete by 1985? If that is the case, why have they not fulfilled their obligations under that convention?
Secondly, is the Minister aware that today about 7.5 million people in Scotland are drinking water with a lead content above the EC standard, which is particularly dangerous to the brains of children? Is the Minister further aware that 5 million people in England and Wales are drinking water in which the nitrate content is above the EC level?
Lord Hesketh: My Lords, as the noble Lord, Lord Hatch, will be aware from the previous occasion when I answered a Question concerning water, for the first five years averaging was accepted as being the method which would be used; it was only then that the Commission changed the method and required individual sampling.
As regards Scotland, steps are in hand to improve the supplies which do not presently meet the directive's standards on lead. In most cases such steps will be completed by the end of the year. Of the remaining 17 supplies, all in the Strathclyde and Lothian regions, seven are expected to comply by March of 1990 and a further eight during 1991. Of the two major schemes which need remedial work, only part will need to be finished by 1992.
Lord Mackie of Benshie: My Lords, is the Minister aware that there are not 7·5 million people in Scotland?
Noble Lords: Oh dear! Save him!
Lord Boyd-Carpenter: My Lords, if my noble friend is not going to reply to that question, perhaps I may put another to him. While we are deeply touched by the concern of the European Commission for the purity of our water supply, can he say whether it is showing equal interest in the perfectly appalling water supplies which exist in parts of France, Spain and Italy?
Lord Hesketh: My Lords, I think it is correct to say that the United Kingdom has the highest rate of connection to water supplies of any country in the European Community. I shall certainly draw my noble friend's remarks as regards compliance in other countries to the attention of my right honourable friend the Secretary of State.
Lord Ezra: My Lords, would the noble Lord care to indicate whether it is correct, as reported in The Times yesterday, that the release of data about water quality standards complying with EC regulations has been suspended pending the privatisation of the water companies? If it is correct, this raises serious problems of non-disclosure of essential information to the public.
Lord Hesketh: My Lords, I do not have that information with me at present. However, I shall certainly write to the noble Lord.
Lord Campbell of Croy: My Lords, some of us—including, clearly, the noble Lord, Lord Mackie—thought that we heard the noble Lord, Lord Hatch of Lusby, state during his supplementary question that there are 7.5 million people in Scotland. Is my noble friend aware that the total population of Scotland is about 5.5 million?
Lord Hesketh: My Lords, I am most grateful to my noble friend for pointing out a fact which I failed to understand when the noble Lord, Lord Mackie of Benshie, was trying to draw it to my attention.
The Earl of Halsbury: My Lords, will the noble Lord agree that 250 years of environmental indifference since the industrial revolution cannot be rectified overnight? Will he further agree that these EC standards are counsels of perfection which we can take as targets and that we cannot abrade problems at the snap of a finger?
Lord Hesketh: My Lords, the noble Earl is absolutely right in what he says. The reasoned opinion refers to a period of only two months. As most noble Lords will be aware, civil engineering cannot happen in the space of eight weeks.
Lord Campbell of Alloway: My Lords, will my noble friend the Minister confirm that that Commission's opinion is but an opinion; that Her Majesty's Government are not in breach of any relevant directive; that the only enforceable procedure would be before the Court of Justice; and that there is no machinery on the basis of an opinion, reasoned or unreasoned, upon which that process could be invoked?
Lord Hesketh: My Lords, I am given to understand that the United Kingdom has never been before the European Court on an environmental directive. Perhaps I may draw to your Lordships' attention the fact that we wrote to the Commission. We expected to discuss the material that we sent it. We find it extremely discourteous that it did not bother to come back to us before proceeding with a reasoned
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opinion, without any consideration of the technical difficulties inherent in achieving earlier compliance.
Lord McIntosh of Haringey: My Lords, is it not the case that such a reasoned opinion will have to be disclosed in the prospectuses for water privatisation? If the Government do not give better answers than those of the Minister this morning, will not privatisation be seriously in jeopardy?
Lord Hesketh: My Lords, all potential costs will be included in the prospectuses.
Lord Monson: My Lords, important though the quality of our water supply undoubtedly is, is it not a purely domestic matter which has nothing to do with creating a level playing field in advance of 1992? Does the Minister agree that our domestic water supply is no more a legitimate concern of the Common Market than our National Health Service, the schools curriculum, restaurant hygiene or speed limits on motorways?
Lord Hesketh: My Lords, the question asked by the noble Lord, Lord Monson, begins to move rather away from the reasoned opinion.
Lord St. John of Fawsley: My Lords, does my noble friend agree that instead of being so obsessed with the purity of our water supply, those countries would be better employed seeking to improve the quality of their wine supply?
Lord Hesketh: My Lords, as always, my noble friend Lord St. John has placed his finger upon the core of the problem.
Lord Cledwyn of Penrhos: My Lords, is the Minister aware that Welsh water is outstanding in every way and that we do not want touched by the Commission or anyone else? More specifically, will he say what the position is under the new dispensation about adding fluoride to the water?
Lord Hesketh: My Lords, I do not believe that the point about fluoridation made by the noble Lord the Leader of the Opposition is part of the Question on the Order Paper; but I agree with him entirely about the quality of Welsh water. As a consumer of it I can say that I am extremely satisfied.
Lord Hatch of Lusby: My Lords, perhaps I may return to the Minister's answer to my first supplementary question. Is it the case that the British Government agreed to the convention of 1980? If so, that puts out of order many of the supplementary questions that have been asked. Why have the British Government not kept to their obligations under a convention which involved their participation and to which they agreed? If the present considered opinion is not adhered to by the British Government, may not the Government be taken to the European Court by the European Commission?
Lord Hesketh: My Lords, I fear that the noble Lord, Lord Hatch, may have slightly misunderstood what I said. I tried to make it clear that for the first

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five-year period both parties continued with average sampling. Because of that, for five years there was no difficulty. As the noble Earl, Lord Halsbury, pointed out, having changed the system, which results in a different standard, one cannot expect all the civil engineering involved thereafter to be achieved overnight.
Lord Hatch of Lusby: My Lords, will the Minister answer the second part of my question? Are we going to be taken to the European Court if that order is not complied with?
Lord Hesketh: My Lords, that is a matter for the European Commission.

NATO Anniversary
11.24 a.m.
Lord Brougham and Vaux Lord Brougham and Vaux asked Her Majesty's Government:
Whether they are satisfied with the results of their efforts to publicise the achievements of NATO on the occasion of its fortieth anniversary.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, we are very satisfied with the publicity that is being given to NATO's fortieth anniversary and we hope the importance of NATO in securing peace, security and democracy will be further emphasised at the time of the NATO summit next month. Among the other measures, my noble friend may have seen the postal slogan which appeared on no fewer than 46 million items of mail.
Lord Brougham and Vaux: My Lords, I am grateful to my noble friend for his Answer. Does he agree that it is a pity that the postal slogan made no reference to the achievements of NATO, especially in securing peace in Europe for 40 years?
Lord Trefgarne: My Lords, we should have preferred to put on the postal slogan a reference to the peace that has reigned in Europe since the end of the Second World War. Unfortunately, the Post Office decided that that was a contentious and controversial proposition and would not authorise it.
The Earl of Lauderdale: My Lords, has peace become a contentious subject? Surely it is the opposite.
Lord Trefgarne: My Lords, like my noble friend, I am mystified at the Post Office's view; but the Post Office, not Ministers, made the decision in this matter.
Lord Irving of Dartford: My Lords, some of us may not be surprised that at least some people believe the statement to be contentious. Would it not be a more appropriate way to recognise the anniversary
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if the Government were to end their preoccupation with increasing our nuclear forces, either by Trident or free-fall bombs from aircraft, and to engage in deeper and new thinking on defence and disarmament and encourage and help NATO to bring forward more initiatives in response to those made by Mr. Gorbachev over the past two years?
Lord Trefgarne: My Lords, I am certain that if we had followed the policies proposed by noble Lords opposite, or even by Mr. Gorbachev, those 40 years of peace would not have prevailed.
Lord Grimond: My Lords, as a recognition of the improved atmosphere in international relations, will the Government consider asking the Soviet fleet to pay us an official visit?
Lord Trefgarne: My Lords, I am not sure that that question arises from the Question on the Order Paper; but it is fair to say that the 40 years of peace which have been of so much benefit to the members of NATO have been of equal benefit to the people of the Soviet Union.

Companies Bill [H.L.]
11.27 a.m.
Lord Strathclyde: My Lords, I beg to move that the Bill be now further considered on Report.
Moved, That the Bill be further considered on Report. — (Lord Strathclyde.)
On Question, Motion agreed to.
Clause 128 [Listed money market institutions] (continued):
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(64):
Page 125, line 40, leave out from ("contracts") to ("as") in line 42 and insert ("of any specified description in relation to which settlement arrangements are provided—

(a) by a person for the time being included in a list maintained by the Bank of England for the purposes of this section (a "listed institution"), or

(b) by the Bank of England itself,").

The noble Lord said: My Lords, Amendment No. 148M(64) does two things. First, it makes it clearer that the clause is concerned with contracts where settlement arrangements are provided by a person on a list kept by the bank. That was not immediately apparent from the earlier wording, which made no reference to settlement arrangements. Secondly, it extends the scope of the clause to contracts in relation to which settlement arrangements are provided by the Bank of England itself. The arrangements for the Central Money Markets Office, currently under development, will be of that kind. The amendment is therefore necessary to ensure that it will be possible to make regulations under the clause in connection with the Central Money Market

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Office and any other arrangements which the bank might operate in the future, if that is thought appropriate. I beg to move.
Lord Williams of Elvel: My Lords, I wonder whether the Minister will answer the questions that he was unable to answer yesterday evening? Who will be on that list? What are the criteria for getting on the list? Will the Government bring forward amendments spelling out the criteria?
Lord Strathclyde: My Lords, I was unaware that I had not answered a question yesterday. Perhaps I may give the noble Lord a more specific answer now. He asked whether the Government intended to bring forward a new amendment in respect of the criteria for admitting settlement arrangements to the list. The clause provides for the Bank of England to draw up those criteria, subject to approval by the Treasury. That approach is similar to that in Section 43 of the Financial Services Act, which concerns the wholesale money markets. Those are the markets with which the clause is primarily concerned. They are supervised by the bank. We do not propose to amend that approach to set any criteria. However, the clause will apply only if the Secretary of State exercises his discretion to make regulations. We are contemplating an amendment on how he might exercise his discretion so that he would have regard to whether it was appropriate that the bank would supervise settlement arrrangements in the market concerned.
As for who will be on the list, the only system currently under development will be operated by the bank itself. So we have no specific person in mind to be put on the list. However, in the future a system operator may come forward with suitable proposals and we wish to provide for that possibility.
11.30 a.m.
Lord Williams of Elvel: My Lords, before the noble Lord sits down, can he tell us whether the same criteria as are in the Financial Services Act, which stipulates a cut-off in terms of size for a listed institution, will operate here?
Lord Strathclyde: My Lords, first perhaps I may say why the criteria cannot in fact be specified in the Bill. It is because the clause is concerned with systems which do not yet exist. I think it is important to get this point across. We do not know what systems may be devised in the future and it is therefore not possible to specify at this stage what criteria will be appropriate. However, the grey book, the regulation of the wholesale markets in sterling foreign exchange and bullion, sets out the criteria for admitting institutions to the list kept under Section 43 of the Financial Services Act. To the extent that a system is concerned with the wholesale money markets, the grey book gives some indication of the ground the system would cover.
When it comes to the criterion itself, it has not yet been decided which criterion will apply. The Section 35 criterion might be relevant but we cannot yet say for certain.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(65) to 148M(67):
Page 125, line 43, after ("or") insert ("recognised").
Page 126, line 18, leave out paragraph (b) and insert—
("(b) provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.").
Page 126, line 21, leave out subsection (6).
The noble Lord said: My Lords, I beg to move Amendments Nos. 148M(65) to 148M(67) en bloc.
On Question, amendments agreed. to.
Clause 129 [Market charges]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(68):
Page 126, line 25, leave out ("to 132") and insert ("and 131").
The noble Lord said: My Lords, with the leave of the House I should like to speak also to Amendments Nos. 148M(70), 148M(83), 148M(93) and 148M(95). The key amendment in the group is Amendment No. 148M(93), which substitutes for the old Clause 132 (which is deleted by Amendment No. 148M(83)) a new clause dealing with proceedings against market property by unsecured creditors. Amendments Nos. 148M(68), 148M(70) and 148M(95) make consequential changes to cross-references.
The new clause is an amended version of the old Clause 132 concerning property subject to a market charge. The main differences are, first, that its application has been extended to property put up as cover for margin. Secondly, the wording has been clarified to make it plainer that the proceedings restricted by the clause are those relating to the enforcement of a judgment or order. This was not entirely clear from the wording of the original clause. Thirdly, the clause provides that injunctions or other remedies granted in connection with such a judgment or order do not apply to property protected by the clause.
The purpose of the clause is to ensure that the effective enforcement of a market charge and the prompt and effective realisation of property provided as cover for margin are not disrupted by proceedings by a third party seeking to enforce a judgment or order against the person granting the charge or providing the property in question as cover for margin. The Insolvency Act contains provisions with similar effect in respect of proceedings against the property of an insolvent person without the prior leave of the court. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(69):
Page 126, line 37, leave out ("with the payments") and insert ("therewith").
The noble Lord said: My Lords, with the leave of the House, in speaking to this amendment I should also like to speak to Amendments Nos. 148M(71), 148M(72), 148M(73), 148M(74), 148M(76), 148M(77), 148M(78), 148M(79), 148M(80), 148M(84), 148M(85), 148M(86), 148M(87),

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148M(89), 148M(90), 148M(104), 148M(106) and 148M(108). This group of amendments makes mostly minor technical and drafting amendments to Clauses 129, 130 and 133 which deal with market charges. In particular, we have sought to make it clearer than it was before how the regulation-making powers in these three clauses interact. Noble Lords may recall my explaining at Committee stage that it was proposed to use the regulation-making powers in these clauses to define more closely than it is possible to do on the face of the Bill just which assets may be subject to a market charge and just what obligations may be secured by such a charge. I hope the amendments make it easier to see how this will work. I beg to move.
Lord Williams of Elvel: My Lords, the amendments make it easier to understand what the Government's intentions are. I am afraid that they do nothing to allay our worry about market charges as a concept. The problem of what a market charge really is—because it is a new kind of instrument—still remains. I very much hope that as the Bill goes through further stages and through another place the Government will think hard about the clause.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(70) to 148M(75):
Page 126. line 41, leave out ("to 132) and insert ("and 131").
Page 126, line 44, leave out from ("In") to end of line 46 and insert ("subsection (1)(c)").
Page 127, line 3, at end insert ("; and
"transfer", in relation to any such securities or right, means a transfer of the beneficial interest.").
Page 127, line 5, leave out from ("charges") to ("and") and insert ("granted in favour of any such person as is mentioned in subsection (1)(a), (b) or (c) which are to be treated as "market charges" for the purposes of sections 130 and 131").
Page 127, line 7, at end insert—
("(4A) Regulations under this section in relation to charges granted in favour of a body within subsection (1)(c) shall not be made without the concurrence of the Bank of England; and before making any such regulations the Secretary of State shall consult the Treasury.").
Page 127, line 8, leave out subsection (5).
On Question, amendments agreed to.
Clause 130 [Modifications of the law of insolvency]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(76) to 148M(80):
Page 127, line 12, leave out ("following provisions of this Part") and insert ("provisions of section 131").
Page 127, line 15, leave out from ("insolvency") to end of line.
Page 127, line 17, leave out from second ("the") to end of line 20 and insert ("provisions mentioned in subsection (1), and any other provision of this Part as it applies for the purposes of those provisions or provide that those provisions have effect with such exceptions, additions or adaptations as are specified in the regulations.").
Page 127, line 21, leave out from ("may") to end of line 27 and insert ("make different provision for cases defined by reference to the nature of the charge, the nature of the property subject to it, the circumstances, nature or extent of the obligations secured by it or any other relevant factor.").
Page 127, line 27, at end insert—
("( ) Regulations under this section in relation to charges granted in favour of a body within section 129(1)(c) shall not be made without the concurrence of the Bank of England; and before making any such regulations the Secretary of State shall consult the Treasury.").
On Question, amendments agreed to.
Clause 131 [Administration orders, &c]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(81) and 148M(82):
Page 128, line 4, leave out ("has the same") and insert ("ranks for").
Page 128, leave out line 6 and insert ("immediately before preferential debts").
On Question, amendments agreed to.
Clause 132 [Proceedings against property subject to a market charge]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(83):
Leave out Clause 132.
On Question, amendment agreed to.
Clause 133 [Power to make provision about certain other charges]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(84) to 148M(90):
Page 128, line 27, leave out from ("specified") to end of line 28 and insert ("are those granted in favour of—").
Page 128, leave out line 29.
Page 128, line 35, at end insert ("for the purpose of securing debts or liabilities arising in connection with or as a result of the settlement of contracts or the transfer of any asset, right or interest on any financial market.
Where a charge is granted partly for that purpose and partly for other purposes, the power conferred by this section is exercisable in relation to the charge so far as it has effect for that purpose.").
Page 128, line 38, leave out ("this Part") and insert ("sections 130 and 131").
Page 128, line 40, leave out paragraph (b) and insert—
("(b) apply any of those provisions with such exceptions, additions or adaptations as are specified in the regulations.").
Page 129, line 1, leave out subsection (4) and insert—
("(4) Regulations under this section relating to charges in favour of a body falling within subsection (2)(c) shall not be made without the concurrence of the Bank of England; and before making any such regulations the Secretary of State shall consult the Treasury.").
Page 129, line 7, leave out subsections (5) and (6) and insert—
("( ) Regulations under this section may make different provision for cases defined by reference to the nature of the charge, the nature of the property subject to it, the circumstances, nature or extent of the obligations secured by it or any other relevant factor.").
The noble Lord said: My Lords, I beg to move Amendments Nos. 148M(81) to 148M(90) also en bloc.
On Question, amendments agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(91):
After Clause 133, insert the following new clause:
"Application of margin not affected by subsequent interest.
Where property has been provided in accordance with the rules of a recognised investment exchange or recognised clearing house as cover for margin in relation to market contracts, no right or remedy arising by virtue of any subsequent act of the person so providing it may be enforced so as to prevent or interfere with the application of the property in accordance with the rules of the exchange or clearing house, and any person to whom the exchange or clearing house disposes of the property in accordance with its rules shall take free of any such right or remedy."
The noble Lord said: My Lords, Amendment No. 148M(91) introduces a new clause designed to ensure that an exchange or clearing house's ability to realise property provided as cover for margin in relation to market contracts cannot be frustrated in the event that the person who has provided the property as cover for margin subsequently acts in such a way as to confer a right over, or remedy against, the property on another person. The clause provides that such a right or remedy may not be enforced so as to prevent or interfere with the application of the property in accordance with the rules of the exchange or clearing house. It also provides that any person to whom the exchange or clearing house disposes of the property in accordance with its rules shall take the property free of any such right or remedy.
The margin system is designed to operate so that once property has been handed to an exchange or clearing house as margin, it should be available to protect that body. The body has in effect taken over the liabilities of the member to his counterparty in the market. The system cannot operate effectively if there is uncertainty about the body's right to use the property. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(92):
After Clause 133, insert the following new clause:
("Priority of market charge over unpaid vendor's liens
. Where property subject to an unpaid vendor's lien becomes subject to a market charge, the charge has priority over the lien unless the chargee had actual notice of the lien at the time the property became subject to the charge.").
The noble Lord said: My Lords, some concern has been expressed that the effectiveness of some market charges may be threatened by the possibility of action to enforce an unpaid vendor's lien over property subject to the charge in circumstances in which the taker of the charge was not aware of the lien. The issue which has arisen in connection with the Central Gilts Office System is rather complicated, though I can expand on it if noble Lords wish me to. It relates essentially to the possibility that an unpaid vendor's lien over stock bought from a non-member and introduced into the system might remain enforceable against a subsequent purchaser without notice of the lien until the subsequent purchase was reflected on the gilts register several days later. In the meantime the subsequent purchaser's settlement bank's security over the stock in respect of its assured payment with the system might be at risk.
The precise position in law is slightly uncertain, but the Government accept that there is sufficient doubt to warrant a provision to remove the uncertainty altogether. The clause accordingly provides that where property subject to an unpaid vendor's lien becomes subject to a market charge, the charge has priority over the lien unless the chargee had actual notice of the lien at the time this property became subject to the charge. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(93) and 148M(94):
After Clause 133, insert the following new clause:
("Proceedings against market property by unsecured creditors
.—Where property has been provided as cover for margin in relation to market contracts or is subject to a market charge, no execution or other legal process for the enforcement of a judgement or order may be commenced or continued, and no distress may be levied, against the properly by a person not seeking to enforce any interest in or security over the property, except with the consent of—

(a) in the case of property provided as cover for margin, the investment exchange or clearing house in question, or

(b) in the case of property subject to a market charge, the person in whose favour the charge was granted.

(2) Where consent is given the proceedings may be commenced or continued notwithstanding any provision of the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985.

(3) Where by virtue of this section a person would not be entitled to enforce a judgement or order against any property, any injunction or other remedy granted with a view to facilitating the enforcement of any such judgement or order shall not extend to that property.

(4) In the application of this section to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.").

After Clause 133, insert the following new clause:
("Power to apply provisions to other cases
.—(1) The power of the Secretary of State to make provision by regulations under—

(a) section 127 or 128 (contracts connected with certain overseas exchanges and clearing houses or listed institutions), or

(b) section 133 (charges given in favour of certain institutions in connection with operation of financial market),

includes power to apply sections (Application of margin not affected by subsequent interests), (Priority of market charge over unpaid vendor's lien) and (Proceedings against market property by unsecured creditor) to any description of property provided as cover for margin in relation to contracts in relation to which the power is exercised or, as the case may be, property subject to charges in relation to which the power is exercised.
(2) The regulations may provide that these sections apply with such exceptions, additions and adaptations as may be specified in the regulations.").
On Question, amendments agreed to.
Clause 134 [Powers of court in relation to certain proceedings begun before commencement]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(95):
Page 130, leave out line 22 and insert—
(section 131,
section (Proceedings against market property by unsecured creditor), so far as it relates to property subject to a market charge,").
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(96):
After Clause 134, insert the following new clause:
("Insolvency proceedings in other jurisdictions
.—(1) The references to insolvency law in section 426 of the Insolvency Act 1986 (co-operation with courts exercising insolvency jurisdiction in other jurisdictions) include, in relation to a part of the United Kingdom, the provisions made by or under this Part and, in relation to a relevant country or territory within the meaning of that section, so much of the law of that country or territory as corresponds to any provisions made by or under this Part.
(2) A court shall not, in pursuance of that section or any other enactment or rule of law, recognise or give effect to—

(a) any order of a court exercising jurisdiction in relation to insolvency law in a country or territory outside the United Kingdom, or

(b) any act of a person appointed in such a country or territory to discharge any functions under insolvency law,

which in the case of a court in the United Kingdom or a relevant office holder would be prohibited by provisions made by or under this Part.").
The noble Lord said: My Lords, there is no United Kingdom-wide code of insolvency law itself: different provisions exist as between England and Wales, Scotland and Northern Ireland. Section 426 of the Insolvency Act 1986 therefore provides for a court exercising insolvency jurisdiction in one part of the United Kingdom to be able to enforce an order made in another part of the United Kingdom. It also provides for courts exercising insolvency jurisdiction in the United Kingdom to assist certain foreign courts in exercising their own insolvency legislation, and vice versa. This clause ensures that such co-operation both in the United Kingdom and in relation to certain foreign jurisdictions shall extend to orders made under the special provisions made in Part VII in relation to the financial markets by ensuring that proceedings under Part VII of the Bill are included within the scope of Section 426 of the Insolvency Act 1986.
However, the purpose of Part VII is to achieve certainty in the settlement of contracts. Given the international nature of financial markets and their operations, we do not want to allow Part VII to be ignored by a United Kingdom court where it is asked to assist in the enforcement of foreign insolvency proceedings. Subsection (2) of the new clause therefore specifically prevents this from occurring.
This new clause is desirable to ensure the successful operation of Part VII, and to take account of the United Kingdom-wide and international aspects of insolvency law. I beg to move.
On Question, amendment agreed to.
Clause 135 [Indemnity for certain acts, &c]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(97) and 148M(98):
Page 131, line 11, after ("or") insert ("recognised").
Page 131, leave out lines 33 to 36 and insert—
('5) No person exercising any functions by virtue of arrangements made pursuant to paragraph 5 or 14 of Schedule 16 (delegation of functions in connection with default procedures), nor any officer or servant of such a person, shall be liable in damages for anything done or omitted in the discharge or purported discharge of those functions unless the act or omission is shown to have been in bad faith.").
On Question, amendments agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(99):
After Clause 135, insert the following new clause:
("Supplementary provisions as to regulations.
(1) Regulations under this Part may make different provision for different cases and; may contain such incidental, transitional and other supplementary provisions as appear to the Secretary of State to be necessary or expedient.
(2) Regulations under this Part shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
On Question, amendment agreed to.
Clause 136 [Meaning of "default rules" and related expressions]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(100):
Page 131, line 37, leave out from ("means") to end of line 41 and insert ("rules of a recognised investment exchange or recognised clearing house which provide procedures for dealing with the consequences of a person being unable, or likely to become unable, to meet his obligations in respect of one or more market contracts connected with the exchange or clearing house").
On Question, amendment agreed to.
Clause 137 [Meaning of "relevant office-holder"]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(101) to 148M(103):
Page 132, line 7, leave out ("a deceased debtor") and insert ("any debtor within the meaning of the Bankruptcy (Scotland) Act 1985").
Page 132, line 13, leave out subsection (2).
Page 132, line 20, leave out ("a company") and insert ("any entity").
On Question, amendments agreed to.
Clause 138 [Minor definitions]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(104) and 148M(105):
Page 132, line 25, at end insert—
(" "charge" means any form of security, including a mortgage and, in Scotland, a heritable security,").
Page 132, line 42, at end insert—
("(4) References in this Part to the law of insolvency include references to every provision made by or under the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985.").
On Question, amendments agreed to.
Clause 139 [Index of defined expressions]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(106) to 148M(108):
Page 133, line 1, column 2, leave out ("129(3)") and insert ("138(1)").
Page 133, line 5, at end insert—
("insolvency law (and section 138(4)") similar expressions).
Page 133, leave out line 15.
On Question, amendments agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(109):
After Clause 140, insert the following new clause:
("Directions to secure compliance with international obligations
In the Financial Services Act 1986, for section 192 (international obligations) substitute—
"International obligations.
192.— (1) If it appears to the Secretary of State—

(a) that such action proposed to be taken by an authority or body to which this section applies would be incompatible with Community obligations or any other international obligations of the United Kingdom, or

(b) that any action which that authority or body has power to take is required for the purpose of implementing any such obligation,

he may direct the authority or body not to take or, as the case may be, to take the action in question.
(2) The authorities and bodies to which this section applies are the following—

(a) a recognised self-regulating organisation,

(b) a recognised investment exchange (other than an overseas investment exchange),

(c) a recognised clearing house (other than an overseas clearing house),

(d) a designated agency,

(e) a transferee body,

(f) a competent authority.

(3) this section also applies to an approved exchange within the meaning of Part V of this Act in respect of any action which it proposes to take or has power to take in respect of rules applying to a prospectus by virtue of a direction under section 162(3) above.
(4) A direction under this section may include such supplementary or incidental requirements as the Secretary of State thinks necessary or expedient.
(5) Where the function of making or revoking a recognition order in respect of an authority or body to which this section applies is exercisable by a designated agency, any direction in respect of that authority or body shall be a direction requiring the agency to give the authority or body such a direction as is specified in the direction given by the Secretary of State.
(6) A direction under this section is enforceable, on the application of the person who gave it, by injunction or, in Scotland, by an order under section 45 of the Court of Sessions Act 1988".").
The noble Lord said: My Lords, there is, if I may say so, rather less to government Amendment No. 148M(109) than meets the eye. Although it deletes and replaces a complete section of the Financial Services Act, its substantive effect is rather limited.
Section 192 of the Financial Services Act permits the Secretary of State to give a direction to any of the bodies listed when it appears to him that, in order to comply with the UK's international obligations, it is necessary for that body either to take, or to desist from taking, any action which the body has the power to take.
Part VII of this Bill gives new functions to RIEs and RCHs, some of which might, in certain circumstances, have implications for international obligations.
11.45 a.m.
Lord Williams of Elvel: My Lords, I am sorry to interrupt the noble Lord, but is he also speaking to Amendment No. 148M(110)?
Lord Strathclyde: My Lords, Amendment No. 148M(110) is grouped with Amendment No. 148M(109), so, yes, I am speaking to it.
It is thought necessary that the Secretary of State should only be able to give directions in this connection. The only substantive effect of the amendment is to add RIEs and RCHs to the list already in Section 192. However, the opportunity has also been taken to re-order the section so as to avoid an excessively long list in subsection (1).
Amendment No. 148M(110) in the name of the noble Lord, Lord Lloyd of Kilgerran, would put an obligation on the Secretary of State to give a direction in the circumstances specified. Now I do not think that there is any difference of substance between us and the noble Lord on the importance of ensuring that action by the regulatory authorities does not cut across the UK's international oblibations. But, in the main, we would expect to be able to secure this without having to give formal enforceable directions. The power to give such a direction should, in our view, be one to be kept in reserve, only to be used if persuasion fails. For that reason we think it preferable that it should be a discretionary power, as in the Government amendment, rather than a mandatory power, as the noble Lord proposes. I hope that the noble Lord will feel able, with that explanation, not to move his amendment. I beg to move.
Lord Tordoff Lord Tordoff moved, as an amendment to Amendment No. 148M(109), Amendment No. 148M(110):
In the proposed new section 192(1), line 10, leave out ("may") and insert ("shall").
The noble Lord said: My Lords, I must apologise for the absence of my noble friend Lord Lloyd of Kilgerran. In the unusual circumstances of last night with the House collapsing beneath our feet—I see that today the electricity is collapsing over our heads—he was unable to re-order his programme to be here and move the amendment.
I listened to what the noble Lord, Lord Strathclyde, said in relation to this amendment. However, although I cannot move it with the eloquence or the experience which my noble friend Lord Lloyd of Kilgerran would bring to it, it seems to me that if one is saying that in certain circumtances it is possible for the Secretary of State to direct an authority or body not to take, or, as the case may be, to take, action there is no alternative between those two options. The Secretary of State cannot take action, and therefore it seems to me quite clear, in terms of simple English apart from anything else, that in these circumstances he either has to direct the body to take action., or not to take action. Therefore, the word should be "shall" and not "may". I beg to move.
Lord Williams of Elvel: My Lords, I support the amendment for two reasons, first, because it shows to the outside world, if it is accepted, that we are absolutely clear that we are going, to meet our international obligations. It is not a question of the Secretary of State "may" do this, he shall do this, and Parliament has decided that is what he is to do.

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Secondly, I do not quite understand the argument used by the noble Lord, Lord Strathclyde, that there may be virtue in persuasion. If regulatory bodies are going to do things, they will do them as a result of the powers that Parliament has given them, either directly or indirectly. Therefore, persuading them not to use those powers seems to me a rather odd concept. I support the amendment.
Lord Strathclyde: My Lords, I, too, am sorry that the noble Lord, Lord Lloyd of Kilgerran, is not here. However, the noble Lord, Lord Tordoff, explained his intentions admirably. I hope that he did not misunderstand what I said. I think I made it clear that the point is that it is preferable that we should have a discretionary power. In much of this part of the Bill flexibility is required. That is why we have created the amendment in this way.
The power is to direct the body and to take action if it is necessary that action be taken. It is also to desist if action would be contrary to the United Kingdom's obligations. The objection, as I understand it, to "shall" is simply to avoid the implication that direction is necessary in every single case.
Lord Tordoff: My Lords, I listened to that explanation with some astonishment because it seems to me that if there is to be persuasion, it will take place before we get to the point at which direction would be necessary, unless, presumably, as the noble Lord, Lord Williams, has said, there comes a point where our international obligations are not being met. At that stage, the Secretary of State surely must make his mind up whether he wants to direct or does not want to direct a certain action to be taken or not to be taken.
I am quite staggered that the word "may" is still being left in. Frankly, it would be of no great help to divide the House on this occasion. I shall ask my noble friend to read what has been said and perhaps come back at a later stage on this matter. I beg leave to withdraw the amendment.
Amendment to the amendment, by leave, withdrawn.
On Question, Amendment No. 148M(109) agreed to.
Lord Hacking Lord Hacking moved Amendment No. 149:
After Clause 142, insert the following new clause:
("Offers of securities on admission to approved exchange
In section 159 of the Financial Services Act 1986 (offers of securities on admission to approved exchange), after subsection (2) insert—
"(3) Subsection (1) above does not apply to an advertisement issued or caused to be issued in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the securities." ").
The noble Lord said: My Lords, during the passage of the Financial Services Bill the noble Lords, Lord Williams of Elvel and Lord Morton of Shuna, many other noble Lords as well as myself, did our best to offer guidance to the Government and to the noble Lord, Lord Lucas of Chilworth, who seems to have suddenly left the Chamber, on the drafting of the
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provisions of the Financial Services Bill. One of the areas of the Bill where the noble Lord, Lord Williams of Elvel, myself and other noble Lords did our best to offer guidance to the Government, concerned Part V. Although it is now nearly three years since this guidance was offered to the Government, the provisions of Part V have not been brought into force. I understand the present plan is that they are not to be brought into force any earlier than January of next year. The purpose of this amendment is, therefore, to offer further guidance and help to the Government before those provisions have been brought into force and tested in the market place.
Part V of the Financial Services Act, as it now is, deals with offers of unlisted securities and in particular with the circumstances in which prospectuses are required to be filed with the Registrar of Companies. The equivalent provisions are currently contained in Sections 64 onwards of the Companies Act 1985. In Section 56(3) of the Companies Act there is an exemption concerning underwriters. That exemption is not contained in Part V of the Financial Services Act. The purpose of the amendment is to bring in that exemption under Section 159.
Let me try to explain the problem. The usual procedure in relation to an issue of securities is that shortly before the issue is offered to the general public (or in the case of a rights issue to the company's shareholders) the issue is underwritten. In those circumstances the underwriters agree to take up the issue if members of the public (or in the case of a rights issue the shareholders) do not do so. The underwriters are sent an "underwriting proof" of the prospectus which will have been almost finalised but which may contain blanks relating to such questions as the price at which the securities are to be offered.
Because of the exemption in the Companies Act, to which I have referred, it is not necessary to file the "underwriting proof" of the prospectus before the offer is made to the underwriters. The prospectus is required to be filed only in its final form before the offer is made to the public. The result of not having in Section 159 the exemption to which I have drawn your Lordships' attention is that invitations cannot be made to underwriters to participate in the underwriting without a prospectus first being filed. A further prospectus then has to be filed before the offer is made to the public.
This creates a number of practical difficulties. I therefore ask the Government if they would be kind enough to accept the amendment. If they cannot accept the terms of the amendment perhaps they would accept the purport of the amendment in principle. I beg to move.
Lord Williams of Elvel: My Lords, this seems to us to be a perfectly sensible amendment. I remember the noble Lord, Lord Hacking, and I and my noble friend—as he then was—Lord Morton of Shuna dwelling on the point three years ago when we considered the Financial Services Bill.
In answering, perhaps the noble Lord, Lord Strathclyde, will take the opportunity to tell the

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House how far the Government have got with their general amendments to the Financial Services Act as a result of the consultation that has taken place.
Lord Lloyd of Kilgerran: My Lords, I should like to support the amendment of the noble Lord, Lord Hacking. I have here a long brief on the matter but I shall not read it. I shall merely apologise for not being in my place at the right time this morning after last night's debacle. I had anticipated having a day off and I heard nothing about this debate until half past ten this morning. I was going to make some complaints about the usual channels, but I understand that I was wholly in the wrong. I ought to have known that it is constitutional procedure that when anything curious happens, such as happened last night, and the House is adjourned the business continues immediately the next time the House meets. I was not aware of that and I apologise for not being in my place.
Lord Strathclyde: My Lords, it is very nice to see the noble lord, Lord Lloyd of Kilgerran, in his place. I hope that he will not regret missing a day off, but I am sure there will be plenty of other opportunities.
Turning to the amendment, I am grateful to the noble Lord, Lord Hacking, for the clarity with which he spoke to the amendment, I can be brief. If Section 159(1) of the Financial Services Act—which I might remind your Lordships is not yet in force—has the effect implied by the noble Lord's amendment, those acting for a company over a new issue would be unable to solicit potential underwriters, or obtain binding commitments from them, before a prospectus had been prepared, approved and delivered to a registrar of companies. This would be intolerable, for, in the normal course, the preparation of a prospectus would not even be set in hand without firm underwriting commitments. Section 159(1) was not intended to have that effect, and one can argue that it does not. But I have to agree with the noble Lord, Lord Hacking, but that the matter is best put beyond doubt to the effect envisaged by the noble Lord.
Accordingly, I can accept the noble Lord's amendment, but only in principle because I shall need to consider the actual drafting more closely. The problem identified by the noble Lord may go wider than underwriting and a wider exemption may be desirable in order to cover existing marketing techniques and to allow for new developments. I hope, therefore, that the noble Lord will be satisfied with an assurance that the Government will bring forward an amendment at a later stage to deal with his point and will not press his amendment.
The noble Lord, Lord Williams of Elvel, asked me about the other amendments to the Financial Services Act. I cannot at the moment say any more than has already been said at other stages of the Bill. The replies to the consultation process are being actively considered. In any case, the question does not arise in relation to this amendment. However, I hope that that sets the scene as to where we are in relation to the other Financial Services Act amendments.
Lord Williams of Elvel: My Lords, before the noble Lord sits down, can he say whether that means that the amendments will not come to this House but will be tabled in another place?
Lord Strathclyde: My Lords, consultation is still taking place. We shall have to wait and see whether or not we are able to bring forward any amendments at Third Reading, but it appears unlikely that we shall be able to do so. However, we shall make every effort, as we have done with so many other amendments, to bring them forward to your Lordships' House.
Lord Hacking: My Lords, I have heard what the Minister has said. In the circumstances, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
12 noon
Lord Hacking Lord Hacking moved Amendment No. 149A:
After Clause 142, insert the following new clause:
("Proprietary interest and debt
(". A person ("the first person") may create in favour of another ("the second person") a proprietary interest by way of security over all or part of the property of the first person in a debt of other thing in action claimable by him from the second person and such creation shall not have the effect that the proprietary interest so created merges with the debt or thing in action or that the debt or thing in action is extinguished or released.").
The noble Lord said: My Lords, in speaking to the amendment I wish to bring good cheer to your Lordships, particularly to the noble Lord, Lord Williams. The thesis behind the amendment is that bankers are good people. Bankers lend us money for buying nice chattels like our houses. Bankers lend us money (and I am referring to professional men) when clients do not pay our professional fees. Bankers support our industry on a massive scale. In my submission to your Lordships, it is therefore not unreasonable that bankers should have the opportunity to have security over chattels and credit balances in return for the massive help which they give us personally, professionally and commercially.
It has always been understood by bankers that it was wholly appropriate and right to take a charge over a customer's credit balance with them. That form of security was easy and inexpensive to arrange. It also had a number of advantages, like the advantages associated with charges over land. First, the deposit was not available to a liquidator until the liabilities had been charged; secondly, the asset charge, if in the currency of the liability, would not fluctuate in value and was under the control of the bank; thirdly, it was unimpeachable against subsequent assignees of the debt or judgment creditors seeking to garnish it; fourthly, the deposit could be used as security where there was no covenant to pay. That type of transaction is everyday business and provides everyday support to industry in particular.
All was well until upon that tranquil and sensible scene the voice of a learned judge broke. The voice of the learned judge was heard in 1986 in the Charge Card Services case, and the voice was that of Mr.

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Justice Millett. In that case, the learned judge said—and I should point out obiter dicta—that a charge taken by a bank over a customer's credit balance was "conceptionally impossible". Since then, there has been considerable uncertainty over the right of banks to place a charge over a customer's credit balance. As I have indicated, that practice is widely used and there are omnibus letters of set-off to enable—when, for example, a company wishes to obtain a large overdraft facility from the bank on a group basis—arrangements to be made so that the individual credit balances of the individual companies can have a charge over them and the company can therefore benefit—that is the word to emphasise—from the large support that the bank gives the company.
The purpose of the amendment is therefore to clarify the law following the decision of the Charge Card Services case. The transaction of a creditor creating a security over a debt owed to him back in favour of the debtor is, as I have explained, extremely common in commercial and financial affairs. A typical example is where a policy holder mortgages the benefit of his policy back to the insurance company in order to secure a loan. Moreover, this transaction is widely used in order to give a party security in circumstances where there would be no set-off.
Even in England, where the mandatory set-off under English insolvency law is one of the widest in the world, there are cases where set-off is not available or is hazardous; for example, where a customer places a deposit with a bank as cover for a reimbursement liability of the customer to the bank in circumstances where the bank has issued a guarantee, performance bond or letter of credit on behalf of the customer. Because of the technicalities of the rule against double proof—I shall not explain that now; I have the learned textbook here and, if any noble Lords wish to borrow it, it will explain the problems about double proof—I am told that the bank's right of set-off on the insolvency of a customer could be defeated. I am also told, as I have already indicated, that large sums of money are tied up in these arrangements.
Further, this transaction—the charge back—can be used to prove the priority of the security against assignees, attaching creditors and the like. Another significant aspect is that voluntary arrangements newly introduced by the Insolvency Act can prejudice legitimate set-offs, but not valid security. More importantly, insolvency set-off is highly restricted in a significant bloc of commercial jurisdictions, such as France, Luxembourg, Belgium, Spain and certain other states whose law is based upon the Napoleonic Code. Because of the international nature of many commercial and financial transactions centred in London, it was considered helpful that an alternative to set-off should be available. English law, of all systems, is not an island.
Prior to the 1986 decision in the Charge Card Services case, there were a number of English decisions which tended to support the availability of that transaction and, in other senior common law,
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Napoleonic and Germanic jurisdictions, there is no objection to the creation of security by that method. There can be no policy objections to the creation of a security over an asset of a party in order to secure his liability. It would therefore seem a pity that one of the most mature and important legal systems of the world should fall behind in that respect.
I am told that charge-backs are used in a variety of transactions. At retail level, it has been used for tenants' caution money and, as I have already indicated, insurance policies. It has also been of important use to banking transactions, in the reinsurance industry and in relation to the financial securities, commodities and money markets where it may be desired to create security over margin deposits.
I cannot overemphasise the importance of the efficacy of the security in order to maintain the integrity of the financial system. As explained earlier, the tabled amendment, which has been settled by leading counsel, is intended to clarify the law and to confirm that there is no objection to a creditor creating security over his debt back to the debtor. As such, the amendment is not intended to define how the security should be created but merely to confirm its availability and to leave it to case law to develop the consequences of the security. There is considerable support for the amendment, for example, in the report of the review committee under the chairmanship of Professor Jack. Having identified the problem and its various aspects, the committee concluded:
"Our conclusion, then, is that, as the issues raised are important and the problems are in need of urgent resolution, the Government should be invited to institute a process of consultation canvassing possible solutions to the problems mentioned, with a view to initiating (possibly in the Companies Bill which has just been presented to Parliament) any necessary amending legislation".
I understand that the consultation period for the Jack Committee's proposals is due to expire at the end of the month, so we are close to the end of the consultation period. I therefore assume that the Government have now had an opportunity to undertake sufficient consultation to deal with this difficult matter.
The amendment also has the support of the Law Society in its memorandum of January 1989, copies of which several noble Lords have received and know to be carefully and closely argued document. In this regard, the memorandum states:
"We request that urgent consideration be given to legislation to permit such changes".
I would have had support this morning from noble Lords who are members of the Judicial Committee. I have had letters from the noble and learned Lords, Lord Oliver of Aylmerton and Lord Templeman, indicating their support. The noble and learned Lords, Lord Oliver of Aylmerton and Lord Goff of Chieveley, would have been present in the House last night but for a Grand Night Dinner at Lincoln's Inn. As far as I know, that Grand Night Dinner has now been completed, but the noble and learned Lords have judicial business this morning which prevents them from attending the House. I hope that the Government will accept that the amendment has

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their support and that they would have been in the House to support it.
Therefore, within my theme that bankers are good people who deserve this support, I commend the amendment to the House. I beg to move.
Lord Williams of Elvel: My Lords, I suppose that I should respond on behalf of the banking community to thank the noble Lord for his kind remarks. There is undoubtedly a problem here. There is some confusion in the law and the thrust of the amendment certainly has the support of bankers, and certainly makes sense. I believe that the Government would do well to pay attention to the words of Professor Jack and adopt the amendment.
The Earl of Selkirk: My Lords, it is my knowledge that bankers, both in Scotland and in England, very strongly support what has been said.
Lord Lloyd of Kilgerran: My Lords, I should like to support the amendment which was moved so comprehensively by the noble Lord, Lord Hacking. It may be of interest to noble Lords to know that the amendment has the support of the Committee of London and Scottish Bankers. I have before me an indication from Mr. Whittle of the TSB group supporting this amendment most strongly. I believe that it would be useful to put on record the fact that the amendment has been drafted by leading counsel, Mr. Richard Sykes, QC.
Lord Strathclyde: My Lords, Professor Robert Jack's report, to which reference has been made, contains 83 recommendations covering a broad range of issues concerning banking law and practice. One of the recommendations addressed the question of set-off, with the review committee recommending that:
"the Government should institute a process of consultation with a view to introducing legislation to clarify the right of set-off, and the validity of a charge over a credit balance in favour of the person with whom the balance is held".
My honourable friend in another place, in announcing the publication of the review committee's report, said:
"the Government welcome the committee's report. In considering their response to the recommendations, they will wish to take account of the views of those who will be affected by the proposals, and will consider carefully the implications for bankers, their customers and the general public interest".—[Official Report, Commons, 23/2/89; col. 784.]
The Treasury has asked for comments on the recommendations contained in the review committee's report by the end of April.
The amendment today seeks to pre-empt that consultation period and offer a solution to the uncertainties highlighted by one part of the Charge Card Services case before all interested parties have had an opportunity to make representations to the Treasury on these uncertainties and what, if any, remedy they favour.
The case for amending legislation on this particular point has yet to be proved. Full consultation with interested parties has not yet taken place and they should be given the opportunity to offer
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a detailed response on the issue. As the review committee's report pointed out, any consideration of this question needs to be,
"in the context of the overall scheme of priorities between secured and unsecured creditors".
Although this amendment is permissive, if made use of it would undoubtedly affect the interests of persons other than the lenders concerned. For that reason the Government believe that more widespread and considered consultation is required. I should also mention that, although the judgment was handed down in 1986, we are not aware of any specific measurable damage that it has subsequently caused to the banking community.
Furthermore, this is not a new issue. There has been for many years considerable academic discussion about whether it is or is not possible to take a charge over a credit balance. Since the judgement of Mr. Justice Millett, the debate has persisted, with articles appearing in legal journals supporting both points of view. That is why we believe that it would be premature to accept the amendment until further consideration has been given to whether or not amending legislation is required, and if so what it should say.
I hope that the noble Lord, Lord Hacking, will recognise these difficulties and will feel able to withdraw his amendment.
Lord Hacking:My Lords, before the noble Lord sits down I wonder whether he can help me on a few matters. The noble Lord said that what was required was "more widespread and considered consultation" and he also spoke of "interested parties". Will he indicate the interested parties that the Government need to consult and say how widespread those consultation processes should be? Will he further indicate whether it is proposed to have an extension to the consultation period of the Jack Committee? There are only nine days to go before the end of this consultation period. It would be most helpful if the noble Lord could assist on those points.
Lord Strathclyde:Certainly, my Lords. First, perhaps I should say what we intend to do after consultation. If it becomes clear that legislation is desirable we would seek the earliest opportunity to introduce such measures. In a more general sense I believe that it would be quite wrong to reach conclusions on an issue on which consultation has taken place before the consultation period has finished. I know that noble Lords are aware that the issue goes far wider than Professor Jack's review.
As to an extension of the consultation period, at the moment there is no question of extending it further than the date already mentioned. The Government believe that that is sufficient for as full a consultation process as possible to take place.
Lord Hacking:My Lords, I hope that I am not straining the patience of the House too much. However, the noble Lord said that the Government would take the earliest opportunity after consultation to do something about this problem if they judged that action needed to be taken. Is he able to say whether the Government would be prepared to

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use this Bill as a vehicle during its progress through another place?
Lord Strathclyde: Very briefly, my Lords, I am sure the noble Lord, Lord Hacking, will understand that it is not possible to give any particular commitment that action would be taken in the context of the Companies Bill.
Lord Hacking: My Lords, I am not wholly happy, but in the circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
12.15 p.m.
Clause 144 [Building societies: miscellaneous amendments]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 149B:
Leave out Clause 144.
The noble Lord said: My Lords, in moving this amendment I should like to speak also to Amendments Nos. 149C and 152B. The existing Clause 144 applies to building societies and their directors and officers, the restrictions on unqualified persons acting as liquidators etc., and the provisions on disqualification of directors contained in insolvency legislation.
Clause 144(2) as it stands excludes shadow directors of building societies from the provisions of the Company Directors Disqualification Act 1986. Certain provisions of the companies winding-up legislation are applied to building societies by virtue of Schedule 15 to the Building Societies Act 1986 but not in so far as they relate to shadow directors.
It is desirable that building societies and companies legislation should be consistent on this point. Clause 144 has therefore been redrafted so that, in addition to the provisions in the existing clause, it applies the relevant provisions of the Insolvency Act 1986 and the Company Directors Disqualification Act 1986 to shadow directors of building societies.
Amendment No. 152B is a consequential amendment which makes a minor addition to the extent of the repeals of the Building Societies Act 1986 in Schedule 17. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 149C:
After Clause 144, insert the following new clause:
("Building Societies: Miscellaneous amendments.
.—(1) In Schedule 15 to the Building Societies Act 1986 (application of companies winding-up legislation)—

(a) in paragraph 1(a) (provisions of Insolvency Act 1986 applied) for "and XII" substitute ", XII and XIII";

(b) in paragraph 3(2)(b) (adaptations: references to be omitted), omit ", a shadow director".

(2) In the Company Directors Disqualification Act 1986, after section 22 insert:
"Application of Act to building societies.
22A.—(1) This Act applies to building societies as it applies to companies.
(2) References in this Act to a company, or to a director or an officer of a company include, respectively, references to a building society within the meaning of the Building Societies Act 1986 or to a director or officer, within the meaning of that Act, of a building society.
(3) In relation to a building society the definition of "shadow director" in section 22(5) applies with the substitution of "building society" for "company".
(4) In the application of Schedule 1 to the directors of a building society, references to provisions of the Insolvency Act or the Companies Act include references to the corresponding provisions of the Building Societies Act 1986.".").
On Question, amendment agreed to.
Clause 147 [Commencement and transitional provisions]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 149D:
Page 137, line 15, leave out from ("(1)") to ("provisions") in line 17 and insert ("The").
The noble Lord said: My Lords, as presently drafted Clause 147 provides for Part VII to come into force on Royal Assent. The amendment provides for the part to be brought into force by a commencement order in the same way as the other parts of the Bill. I beg to move.
On Question, amendment agreed to.
Schedule 17 [Repeals]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 149E:
Page 214, line 41, marked as line 33, column 3, at beginning insert—

("Section 36(4) In section 41, the words from "and need not" to the end.".

The noble Lord said: My Lords, this amendment makes a small consequential change to Section 41 of the Companies Act 1985 on company seals. I spoke to the substantive changes on Amendment No. C55 to Part V of the Bill. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 150:
Page 215, leave out line 33.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 151:
Page 215, line 46, column 3, at end insert ("In section 460(1), the words "(inspection of company's books and papers)" and "under section 440".").
The noble Lord said: My Lords, in moving this amendment I should like to speak also to Amendment No. 153. These are minor technical amendments. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 151A:
Page 215, line 55, column 3, at end insert ("In section 651(1), the words "at any time within 2 years of the date of the dissolution".").
The noble Lord said: My Lords, these amendments arise and are consequential upon the Amendment No. C73 to Section 651 of the Companies Act 1985 which was debated in Committee on recommittal of

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Part V and was accepted by this Chamber. The new Amendment No. C73 to Section 651 achieves in a better way the aim of the earlier provision and these amendments arise and are consequential upon that new amendment. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 152 to 153:
Page 215, line 55, column 3, at end insert ('In section 733(3), the words from "then" to "216(3)".").
Page 216. line 29. at end insert—
("1985 c. 65. Insolvency Act 1985. In Schedule 6, paragraph 45.").
Page 216, line 21, column 3, at beginning insert ("In Schedule 15, in paragraph 3(2)(b), the words ", a shadow director".").
Page 216, line 47, column 3, at end insert ("In section 199(9), the words from "and, in relation" to the end.").
On Question, amendments agreed to.

Agricultural and Food Research: Select Committee Reports
12.20 p.m.
Lord Butterworth Lord Butterworth rose to move, That this House takes note of the Reports of the Select Committee on Science and Technology on Agricultural and Food Research (1st Report, 1988–89, HL Paper 13 and 4th Report, 1987–88, HL Paper 104).
The noble Lord said: My Lords, I beg leave to introduce this debate on the Reports of the Select Committee on Science and Technology into the future of agricultural and food research, including its links with other biological sciences. In October last year the committee published an interim report on the possible reorganisation of the research councils concerned with the biological sciences. That report becomes of course an integral part of the main report. The investigation was carried out by Sub-Committee I, and I should like to express my thanks to its hard-working members, its specialist advisers—Professor Harley and Dr. Anthony James—and the committee's excellent clerk, Mary De Groose. I should also like to thank all witnesses, who were extremely helpful and made this report possible.
The reference to the biological sciences in our terms of reference proved to be timely, for biology and biotechnology could well introduce changes in many fields so great as to amount to a scientific revolution, in particular in medicine, food and agriculture. Scientific revolutions take time to develop and we may not be able to gauge the extent of this revolution, depending as it does on genetic engineering, until the end of this century, or even the first decades of the next century. However, so great is the potential, especially in agriculture and food research, that the committee is convinced that after the severe reduction in funding that has recently taken place it would be dangerous to allow the research base to be further eroded. A period of at least level funding in real terms is now badly needed.
In the shadow of this scientific revolution, research is essential if we are to maintain our competitive position and efficiency. Agricultural surpluses are
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irrelevant for they are not a consequence of research but of economic and structural policies.
Before turning to particular issues, perhaps I may mention one general trend which lies behind so much of the evidence that we heard. At whatever point in time one investigates the total amount being spent on food, the cost of products coming from the farm is always a decreasing proportion, whereas the contribution of industry in the preparation, processing and presentation of food and indeed its manufacture is a constantly increasing one. The substitution of margarine for butter is, I suppose, one of the first major examples. But now the consumers' choice is increasingly decisive in the food market, and consumers' concern about so many of the products that come through the farm gate—not merely sensitivity about eggs, or a preference of margarine for butter, but a decline in the popularity of red meat, and a wariness of too much farinaceous material—is all part of a trend which may have increasingly important consequences.
The continuous increase in the contribution made by industry to our food is not likely to stop with myco protein pies. Those elements in our diet which come from the farm cannot now be kept separate from the contribution of industry. For these reasons the so-called food chain from farmer to processor, to retailer to consumer, must be seen as continuous. This has extremely important consequences in the management of research. It may incidentally also be a reason for keeping agriculture and food under the same ministry.
After the massive reduction recently in agricultural and food research, one might have expected that the agencies for such research would be rationalised and simplified. They are a forbidding list. First, MAFF spends over £100 million a year on research and development. Then there is the AFRC. Your committee was impressed with the council's operation. Firmly and uncompromisingly based upon fundamental long-term research, the council has responded courageously and well to the difficult circumstances which have confronted it in recent years.
Then there is NERC, and the biotechnology directorate of the SERC which since its inception has earned for itself the respect of industry. Again, the DTI operates increasingly in this field. It has created a close relationship with the directorate and brought together industry, university departments and research institutes in remarkable and productive operations. In addition to the biotechnology directorate the SERC has two further functions in our field of interests. First, it is primarily responsible for the training of scientists, although your committee was pleased to see that both the AFRC and NERC have recently increased the number of their training awards. Secondly, SERC is the only research council responsible for the basic health of all sciences, as all the other research councils are mission oriented.
The committee was pressed to commend the creation of a new research council for biology and for the research missions to which biology would make an important contribution. However, one of

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the strongest reasons for charging one research council, such as SERC, with the basic health of all our sciences is that no one can foretell where in the whole spectrum of science the next important development may occur.
Returning in this field of research, we next have ADAS, a part of MAFF, offering an advisory service with its own laboratories and research. When the subject matter is forestry, a prime responsibility for research rests upon the Forestry Commission; and when the subject is nutrition the Medical Research Council has an especial concern for the influences of nutrition upon disease.
In Scotland, there is a wholly separate range of institutions—the Department of Agriculture and Fisheries for Scotland (DAFS), the Scottish agricultural colleges, and the Scottish agricultural research institutes—which some witnesses consider to be more efficient with better co-ordinated research funding and management than their English counter-parts.
The universities, and to a lesser extent the polytechnics, play an increasing role in agricultural and food research. Research councils, such as AFRC, as a matter of policy are increasing their relationship with university departments.
Industry also undertakes research. Agrochemical industries spend about £200 million a year. In 1986 the food and drink industry spent about £104 million. However, as that was out of a turnover of £56 billion, it represents an outlay of only 2 per cent. It is therefore not surprising that the food and drink industry should be expected to fund more near-market research.
So much for the agencies undertaking agricultural and food research. I must now briefly draw attention to some of our recommendations. Returning to MAFF, the committee re-endorsed the Rothschild principle that government departments should be able to commission research on the customer-contractor basis both to influence the formation of policy and in support of public good. But the committee was not satisfied with the way in which MAFF has carried out its role in commissioning research. It considered that most of the funds spent by MAFF on research could be more productively spent as part of the AFRC budget. The research funds originally handed over to MAFF under the Rothschild principle were at that time about £10 million. Now, because of inflation, the fund must be of the order of £36 million. The committee therefore recommend that about £27 million, or about 75 per cent. of the fund, should be returned to the research council for basic and strategic research, so important in the run-up to the biological revolution.
Although the relationship between AFRC and MAFF is close, we consider that the return of this money should be coupled with an obligation on the research council to consult the agricultural departments and, most important, we recommend an annual stocktaking of research programmes on the lines of the stocktaking of health research. MAFF will be left with approximately £10 million to apply in accordance with Rothschild.
The committee also re-endorsed the second part of the Rothschild principle that customer departments should add to their commissions a surcharge of an average of about 10 per cent. to enable contractor laboratories on their own initiative to undertake work not immediately related to any of their specific programmes.
The committee approved the general principle enunciated by government that more near-market research should be undertaken by industry. It is beyond dispute that agriculture and the food industry should increase its financial commitment to research. The committee was, however, disturbed at the speed with which the transition is proposed. To prevent valuable work being lost, it would be preferable to see the transition spread over five years instead of three. The committee was troubled that the Government's definition of what was meant by near-market has never been published. We considered the lists which government has drawn up of research to be classified as near-market and thought that there were too many items which contained elements of public good and some items which are of such public interest that if the Government were wholly to withdraw, leaving the research to interested industrial parties, public confidence would evaporate.
Our interim report recommended an important rationalisation; namely, that AFRC and NERC should be amalgamated to form a Natural Resources Research Council. These two research councils frequently consider different aspects of the same subject matter. One will be considering domesticated animals, the other wild animals. One will be concerned with cultivated land, the other with set aside. AFRC will be considering trees as a product of the farm and NERC the environmental aspects of trees. If our recommendation is accepted, different aspects of the same subject matter will successfully be brought together. However, a single council for the whole of biology would in some respects go too far and in other respects be doomed to failure. Everyone seems to be agreed that biology under the Medical Research Council should continue its separate existence and therefore the unity of the biological sciences is not presently attainable.
Changes in near-market funding make inevitable a review of the relationship between AFRC and ADAS. Do we need two parallel research networks in the public sector, especially if much of the work of ADAS will be hit by the new policy for funding near-market research?
Moreover, the character of ADAS may well change because it is now charging for so many of its advisory services and could easily become more of an independent agency. A changed relationship between ADAS and AFRC is inevitable. The new excellent joint research programmes in horticulture between these two agencies should be commended as a possible precedent for other areas of research. Such moves may well precede a gradual move towards a single research-based service based on the AFRC or, we hope, the new Natural Resources Research Council, while recognising all the time that the interests of the extension work of ADAS can

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only flourish if it maintains the closest connection with research.
I shall briefly mention two other matters of importance. The first concerns nutrition. Nutrition has fallen between the AFRC and the MRC. The public has become increasingly interested in diet and nutrition and needs sound, sensible, disinterested information. But little information based upon research is being produced. This is an excellent example of research needing to be publicly funded; if funded solely by commerce, it may be open to accusations of bias. The committee therefore recommends that existing centres where good nutritional research is being undertaken must be adequately funded and encouraged to increase the application of new biological techniques. In this field we should like to see the Health Education Authority being accorded an enhanced role.
Finally, set aside. Potentially, set aside is one of the most politically explosive issues of the future. The department of land economy at Cambridge estimates that approximately 6 million acres of agricultural land may be taken out of production by the end of this century. By 2015 it could have risen to 12 million acres, or one-quarter of the total land at present under cultivation. There could not be a subject more in need of research.
In considering the alternatives to set aside, it was your committee's view that trees are a prime candidate. At present we produce £500 million worth of wood products per year but import £4.5 billion worth of wood. We know that our consumption of wood will rise dramatically—some say by 92 per cent. by 2025—and we know that there will be a world shortage of timber. More research on trees is desperately needed, especially on broad leaved varieties, making them capable of being planted profitably on good quality land. It is a firm challenge for biological research. The formation of a Natural Resources Research Council, bringing together the two research councils responsible for trees, will provide a new focus for research. The committee wishes to see the appointment of a chief scientist for forestry. Success cannot be achieved until trees are recognised unreservedly as being an important product of the farm.
I hope that the debate will be informative and further illuminate our report. I beg to move.
Moved, That this House takes note of the Reports of the Select Committee on Science and Technology on Agricultural and Food Research (1st Report, 1988–89, HL Paper 13 and 4th Report, 1987–88, HL Paper 104). — (Lord Butterworth.)
12.40 p.m.
Lord Shackleton: My Lords, it is not often that a noble Lord begins a speech by complaining that he has been listed too early in the debate. However, I do so and I blame the Government. I and other speakers have important engagements and I share strongly the official view that it is discourteous to the House to leave before the end of the debate. However, on this occasion I have no option. I had asked to be listed late so that, if necessary, I could remove my name from the list. As it is, I shall make
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a short speech but I must complain about the way in which the Government handle their business.
It is intolerable that we have not received a public apology from the Leader of the House or the Chief Whip for their failure to keep a House last night. It is unfortunate that this has happened. It is bad enough that a debate on such an important subject has been set for a Friday, but it is really too much to have it mutilated by a debate which was extended from the previous day. It confirms my early belief that the sooner the noble Baroness, Lady Trumpington, becomes Leader of the House the better. I have made that suggestion on other occasions because I believe that she would make a delightful but firm leader. I shall not stay to the end of the debate so she need not comment on my remarks, as is the custom.
I should like to congratulate the noble Lord, Lord Butterworth, not only on his speech but on the report. I believe that noble Lords who have never served on Select Committees are unaware of the enormous quantity of printed paper which members must read. I speak as chairman of the Select Committee on Science and Technology. The real work is done by the chairmen of the sub-committees. A large amount of paperwork must be read by the chairmen, aided by the some very able clerks.
Much of the reputation of your Lordships' House, particularly in Europe, depends on the work of the Select Committees. Only two days ago I was in Paris for the 25th anniversary of the founding of the European Space Agency. The director general, who understandably failed to compliment Her Majesty's Government, singled out for appreciation the work of the Select Committee on Science and Technology. I believe that, instead of being irritated by criticisms, the Government should recognise the fact that the work is well worthwhile.
The noble Lord, Lord Butterworth, has covered all the main points. I had intended to discuss forestry but I shall now strike that subject from my notes. However, I should like to make one comment. The forests in tropical areas, particularly in Brazil and Borneo, are being destroyed. There is a further duty for us to increase our efforts in forestry, and that is well brought out in the report. There is need for more research, as there is on the question of set aside. I shall spend no more time en the subject because I am sure that the Government will note the points that have been made. I hope that action will be taken on the recommendations.
I have a few criticisms to make. The report was rightly critical about several issues which have been delicately referred to by the noble Lord, Lord Butterworth. We on Select Committees do not seek to criticise government. In party political terms we seek to be as non-partisan as possible. However, when we are faced with criticisms as serious as those given in evidence, we have no option but to criticise. There has been a serious and heavy degree of criticism in relation to the handling of customer/ contractor relationships.
Sir Ralph Riley is well known to everyone involved in agriculture. He is a distinguished and intelligent man and I should like to quote from his written

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evidence. He stated that the Ministry of Agriculture, Food and Fisheries had failed to give broad guidance for R&D:
"because commissioning was overwhelmingly of small, short-term and relatively pedestrian projects. The Council did not receive from its customer" —
which is what is supposed to happen—
"any guidance about the prospects for agriculture, so work was rarely commissioned that could prepare farming for its future".
The consequence of the Rothschild principle has been disastrous for the AFRC. Similar comments were made by other witnesses. I do not wish to comment further but should like to point out that the Natural Environmental Research Council was also unhappy with the system of departmental commissioning. We have recommended that a large proportion of the government funds should be transferred to that council. We welcome the extra funds which have been made available.
I should like to comment briefly on a number of other criticisms concerning the Civil Service. It was argued in the report that the AFRC had 30 staff on short-term appointments; that was 1 per cent. of the total complement. By 1988–89 the number had risen to 561. The projection is for 850 staff on period appointments; that is 20 per cent. of the total complement. While the AFRC welcomes the increased use of short-term appointments as introducing new blood into the research team, it does not necessarily welcome it as a general principle. Other reasons it gives in favour of the trend beg many questions. It says that the increase in short-term appointments has offset the loss of permanent posts. That loss is damning, dangerous and bad for morale.
I fear that that is a consequence of the shortage of funds now available and the general cutting down of the public service, particularly of scientists. It is depressing to see the rigid way in which government departments feel compelled to lower the status and pay of scientists. That is most noticeable in respect of chief scientists. We have always complained that there have been three chief scientists. The Government have claimed that three chief scientists are better than one, but we should like one at a high level. However, the same is beginning to happen in other departments.
I shall not go into the further comments and criticisms. Others will speak about the damaging consequences of the adoption of the so-called near-market research. However, I support the strong recommendations of the interim report that the Natural Environment Research Council and the Agricultural and Food Research Council should integrate. That was well argued in the previous report which we published earlier in the year.
In his opening remarks, the noble Lord, Lord Butterworth, referred to the difficulties with regard to biology. I believe that he is right when he says that as regards merging that is as far as we can go for the moment. I make the point that simply transferring all biology into one department would lead to a very dangerous cutting into well integrated activities. I can give many examples in which biologists and other scientists have worked together.
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I have recently seen one example in Australia, in the Kimberleys, where a joint Royal Geographical Society and a Linnean Society worked together and one finds the geomorphologists and the biologists looking at the same rocks and working together. In the marine field the oceanographers need the same ships as the marine biologists. Therefore, one argument is that any change which is going to be made in order to strengthen the position by having a biological research council means a complete reorganization of the whole of our system of scientific support.
I am not criticising the Government on this. As well I know, that is a problem which afflicts every country as to how it is to be organised. However, I hope that the Government will take this recommendation seriously. We may hear a different solution from the AFRC. However, I believe that my noble friend Lord Butterworth is quite right to let this appear as a major recommendation.
12.52 p.m.
Lord Mackie of Benshie: My Lords, I too should like to congratulate the committee and the chairman on the production of an excellent report which draws together the deep unease felt in the industry generally about the position of research and development. I should particularly like to congratulate the chairman on his exposition of the report, which came forth with a clarity that I trust was felt on the Front Bench opposite.
Of course, throughout its length the report deplores the cuts, and I must congratulate the author on the mildness of his language when he says:
"The Committee therefore recommend that the research base in agriculture and food should not be further reduced".
As I say, that is putting it extremely mildly because enormous damage has been done already. I searched the evidence to see whether a favourable view was taken by any of the witnesses. Apart from the slightly different expression of approval from MAFF, the witnesses were solidly critical of the state of R&D in the industry.
When one sets the total value of the product at £5,436 million against research costs of £180 million, which is the total with everything considered, I believe that that is not a great deal and is certainly not too much. So far as one can obtain accurate figures—because the way in which they are kept on the Continent varies—it appears that while the proportion is falling in this country a number of countries on the Continent are putting more money into research, particularly France. However, the comparison is extremely difficult.
I should like to take up one or two points, particularly that concerning set aside and the devastating figures given by the Cambridge economist of 6 million acres by the end of the century and 12 million acres 15 years later. I do not know that I altogether agree that there will be an automatic increase all the time, because one certainly hits snags and different factors will combine against an automatic increase. It appears to me as a farmer that there is always an equal and opposite reaction. Nevertheless, at the moment we have 3 or 4 million acres of land considered to be surplus to requirements for the

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production of food as it is today. That is extremely serious socially and in other respects and is an area in which research is absolutely vital.
One can look at past systems and one can see how the land could be utilised by extensification. I believe that there is a strong case for that because, although the industry is geared to the production of cheap food for the mass of people—and the noble Lord referred to a contribution from industry, although I should prefer to say that it is a contribution to industry—that contribution is two-thirds of the cost as against one-third to agriculture. The supply of cheap food produced by modern methods is there and is almost guaranteed. However, an enormous proportion of people in Europe would rather buy much better food, natural food and food with flavour. There is a strong demand for that expressed every day, and it is rising. In that sphere there must be room for a great deal of research and there is a great need for it.
Furthermore, research is very much needed into the question of additives, pesticides and so on to satisfy the constant complaints and fears expressed by the public with regard to the use of pesticides of all sorts in agriculture.
The other sphere—and again that was touched on by the chairman of the sub-committee—is that of industrial products from agriculture, particularly in the form of wood. One of the biggest consumers of wood is the paper industry. We use enormous and increasing amounts of paper. I should have thought that the case for seeing whether one can grow the cellulose more quickly and more cheaply as a different form of crop on the surplus land is very strong. During the war paper makers used straw to make paper. They did not like that and said that it made bad paper but surely, if it can be done at all, then an improved form of crop should be looked for and that would be a reasonable subject for research.
The whole question of extensification by using more surplus land with less input is surely a sensible one to look at. However, again, it needs a great deal of research. There is the old system of ley farming practised in Scotland for many generations as a basis, but it needs bringing up to date and much work needs to be done on the subject.
Areas for research are legion and are all mentioned in the report. However, I believe that the Government really must take account of the plea in the report that cuts should be stopped. Morale has been very badly hit and I should like to hear the noble Baroness reiterate her pledge, which is mentioned in the report, that all funds withdrawn from near-market agricultural R&D will be used to provide increased support for the basic and strategic sciences. That is a very important point and I hope that she can reiterate that promise, because much harm is being done in the universities and colleges. Certainly, I was rather pleased, though shocked to find it necessary, that Dundee University is working extremely hard to replace the grants which it had for research by obtaining research funds direct from industry and is being very successful in that. On the other hand, of course, the university has had to appoint a fund raiser with a department in order to raise the money and it does appear to me that that
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money would have been far better spent on actual research.
The Scots colleges have also been mentioned by the chairman in his speech. They are an example of an absolutely first class method of obtaining information, doing the research and getting it over to industry. The advisory services were run by the colleges in the different areas of Scotland, which meant that the contact was close both with the research being done and with the dissemination of knowledge. I should think that morale in the Scots colleges is at rock bottom at present because a great many of the best people have left and those who remain are now concerned with sending out bills and trying to collect money for the work that they do.
Due to the low level of income in agriculture, the amount of information available for the industry has gone down. It is a serious situation and I hope that the Minister can tell the House that the cuts have ended, that we have a base and that the people remaining can look forward to a career in their chosen field. If the Minister can give those assurances, the report will have done a great deal of good. I look forward to hearing her do so.
1.1 p.m.
Lord Adrian: My Lords, I must first apologise if I am not in my place for some of the debate because I have a commitment in Cambridge in the late afternoon.
I am sure that I speak for us all when I say that we are grateful to the noble Lord, Lord Butterworth, for the report we are debating and for the lucid speech he made in introducing it. It was a pleasure to be a member of the Select Committee which he so ably chaired. As the noble Lord said, the committee's remit was a broad one, touching, as it did, on the organisation of biological sciences in this country. However, while our deliberations seem to stimulate others also to look at this very wide issue, our initial recommendation was relatively modest and we resisted the temptation of suggesting sweeping changes. I believe that a single research council for biology would be a sweeping change and it is not a proposal which I support.
To join the Agricultural and Food Research Council and the Natural Environment Research Council into a body responsible for research in the field of natural resources is surely a sensible move at a time when government and the public are becoming more and more aware of environmental issues. Such a large part of the environment of this country is subject to the operations of agriculturalists that it is only logical that there should be one body to promote work on what now appears to be two aspects of virtually the same issue.
However, there is another question dealt with in the report in sections 4.23 to 4.26 and 5.16 to 5.20. I believe that it is a problem that will become of increasing importance and urgency. It has an importance that is wider than just the biological sciences. I refer, as did the noble Lords, Lord Shackleton and Lord Mackie of Benshie, to manpower and training. Noble Lords have already mentioned the research that needs to be done, but who in the future will be able to do it? The ABRC

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in its report A Strategy for the Science Base which was published about 18 months ago said that it would like to see the research councils developing policies for the management of research manpower in the universities. The report pointed out that in 1984 there were over 10,000 research scientists on temporary appointments—an increase of 70 per cent. in the decade since 1974. That decade was one of more or less level funding for science as a whole in real terms. The increase in junior scientists in temporary appointments funded in universities by the research councils has continued.
In 1985, in Cambridge, the number was 800. Today it is 1,000 in round figures, and that compares to established faculty posts in the universities in all subjects, science and arts, of about 1,600. The same change is happening in the AFRC staff. As has already been mentioned, in 1984 there were 30 staff on period appointments and today there are 560. Of course, that is not without some benefits, but basically short-term appointments have offset the loss of permanent posts which are due to cuts in funding. The replacement of senior and, therefore, relatively expensive scientists—though, Heaven knows, scientists are not expensive when one compares their salaries with almost any other comparably qualified professionals—by temporary juniors simply cannot go on indefinitely, because if the temporarily employed juniors can see no prospect of continuing a career in biological science, or for that matter in any other science, they are going to look to greener fields, and they do not have to look very far.
The committee received evidence that shortages in some biological staffs are already developing. If we are not careful we shall make a career in science so unattractive and ill-rewarded that the brightest and best of our science graduates will no longer be around to fill the more senior posts in their turn. Who will then train the next generation of scientists? Scientists do not grow on trees; they learn their craft from experienced seniors and, if they are lucky, in a laboratory which has an established tradition. This can happen only if funding is relatively stable. If the ABRC, in recommending management of research manpower, inadvertently encourages the movement to temporary junior staff I believe that it will have made a bad situation worse. If it meant, as I believe it did, to warn of the situation now facing us I should have hoped to see a greater sense of urgency in the research councils' responses.
However, one must recognise that the AFRC is not unaware of this problem. It is doing its best in difficult circumstances. Nevertheless, I think there is perhaps confusion in its aims. It both welcomes the increased use of short-term appointments and states that it is giving active consideration to improving the career development of staff. Such dual aims will need careful balancing, especially since it accepts that compulsory redundancies are unavoidable.
I do not underestimate the constraints under which the AFRC labours and the difficulties imposed by the uncertainties inherent in commissioned research. I have seen some of them at first hand as
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chairman of the governing body of one of its institutes. I know that the financial stringency of the past years has been compelling. My concern is that it has compelled policies in manpower for short-term reasons which have already sown the seeds of long-term damage.
1.9 p.m.
Lord Walston: My Lords, I have had the privilege of being a member of a great many of your Lordships' Select Committees and sub-committees but I can say with complete honesty that my membership of this particular sub-committee has been by far the most stimulating and invigorating experience that I have had in this field. The quality of the witnesses who came before us, of my fellow members of the committee and of the professional and expert advisers, in addition to that of the chairman, was outstanding. Not only was it a pleasure and a privilege to sit on that committee but I believe that the results of its work are of considerable significance. It would not be right to touch on all the points that have been raised because the chairman has already dealt with many of them in a most admirable way.
I shall confine myself to a relatively small number. I wish to take up the point that the noble Lord, Lord Adrian, raised with so much force: that is, the future prospects for good agricultural and basic research scientists in this country. Deservedly we have a very high reputation throughout the whole world. Our scientists are absolutely first class and the work that they do is magnificent. But if we continue as we are at present it is a wasting asset. Many witnesses pointed that out to the committee. For example, at page 20 of the report, paragraph 3.24, we are told that:
"AFRC has lost about 2,000 staff in the last three or four years, 600 of these have been by compulsory redundancies. We have a workforce who know that more cuts are probably on the way. They do not know when they are going to hit, they do not know where they are going to hit. So how do you keep up the morale of scientists in our institutes under these circumstances?
Sir Hans Kornberg said that the potential shortage of biologists, because students were not attracted to biological studies, could only be rectified by 'providing hope that somebody who has had training in research work can come back here to pursue his subject through research in the context of academic or industrial life. At the moment that hope is lacking' ".
Much other evidence that came before us supported that view. That is a stupendously important matter where we are in danger of frittering away, through neglect and parsimony, the magnificent heritage which has been built up over decades and even centuries.
Having dealt very shortly with that subject, because of time but not because of its importance, I turn to a matter which the noble Lord, Lord Butterworth, also mentioned—the need for more nutritional research. It is all very well for us to make sure that our food is produced efficiently and hygienically and that it is of good quality. We need to know far more about nutrition than we do at present, particularly with the increasing public awareness—in some cases over-awareness—of the dangers of eating certain kinds of food. We need authoritative guidance on these matters and it should not be left to near market research or the large food

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processing and distributing organisations. Admirable though they are, they cannot be regarded by the public as completely unbiased in their views.
Between the wars when I was a very young scientist at Cambridge, there was a fine nutritional research laboratory there under the direction of L. J. Harris. But today we are not leaders in the world of nutrition. We have some good places and good work, but we have nothing like enough of those things. We should expand and devote more money to this very important aspect of research. I refer to page 24 of the report, paragraph 3.55:
"The British Nutrition Foundation said that insufficient funds and organisation had been devoted to human nutrition research, so that there were only 'very unsatisfactory data on which to base public health policies on diet and disease'. The 'lack of basic research in food and nutrition probably means that the strategic and applied research is wrongly directed'. There is 'a shortage of high quality research scientists in nutrition science and this deficit is likely to get worse' ".
That is another aspect where I hope that the Government will take to heart what has been said and will devote more funds to this very important part of research.
There is another lack that appeared to us in the planning of agricultural research; that is the absence of any long-term planning. By that I mean looking ahead 10 or 15 years. There should be a small group somewhere whose job it is to look ahead to see what the situation is likely to be by the end of this century. It should try to ascertain what the needs of the country, agriculture and nutrition will be and to help guide research into those areas. With the benefit of hindsight, if 10 or 15 years ago there had been official realisation of the results of the overproduction of food—there was among some people—how much better placed we should be to cope with the problems that now confront us.
What would have happened if set aside had come in, as the noble Lord, Lord Butterworth, mentioned, and should forestry have been encouraged, and so on. What a difference there would be in our research today. That lack of long-term vision was demonstrated by several witnesses. The British Veterinary Association said:
"without a clear understanding of government policy for agriculture, and the rural economy generally, it is very difficult to set realistic policies for agricultural research and development".
Sir Ralph Riley criticised MAFF's failure to plan future policy in the light of scientific and technological developments. Paragraph 3.67 states:
"The Royal Society considered that insufficient research had been done on how to set aside land and what the effects would be. Sir Ralph Riley said that current knowledge in relation to set-aside was 'inadequate to inform the farmer as to what are appropriate options to take in the totally new circumstances' ".
Paragraph 3.68 says:
"The Minister of Agriculture described set-aside as 'a very recent policy of development' and admitted that 'there has not been adequate research into all the applications of the set-aside scheme' ".
It is good to get that admission but it would be better still to get an undertaking that in future the Government, the industry and the country will not be caught unawares by the kind of developments that are likely to take place.
There is no need for me to remind your Lordships that research of all kinds is a very long-term process.
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If one decides today to begin working on a particular problem it is very unlikely that the results of that research, even with the greatest degree of skill and luck, will actually be shown in the fields or factories within 10 years; it is far more likely to be 15 to 20 years.
In that context, although it is not dealt with very specifically in the report, I urge the Government to think again about the future of the veterinary industry and that of veterinary education. Of course, we are not officially discussing the Riley Report on the future of veterinary colleges. However, many of us view with the greatest apprehension the suggestion —I hope it is no more than that—that the veterinary colleges in Cambridge and Glasgow are under threat. We are already short of many veterinary officers and even today we have to recruit some of them from overseas. I have no objection to that. But how much better it would be, when we already have people who wish to learn to become vets and when we have good and established colleges with great reputations, if we were able to go on training those willing volunteers. I say that because we shall undoubtedly need them in the years ahead.
My final point concerns an argument which has been put forward by many people. When we have these food mountains and so much extra food which we do not know what to do with, what is the point of spending money on research in order to produce still more? The report deals with that aspect in its early paragraphs in a very wise and sensible manner. Research into food and agriculture does not solely result in increased production; it results in more efficient production and a production of healthier and more desirable types of food. But, quite apart from that fact, I remind noble Lords—if indeed they need reminding—that we are today, and have been for some time and will be for the foreseeable future, under threat of a balance of payments deficit rising to nearly unmanageable proportions. We must not lost sight of the fact that British agriculture is a very substantial contributor to preventing that adverse balance of payments becoming even worse than it is today.
I shall not weary your Lordships with statistics, but between the years 1974 and 1988—that is, in 14 years—the imports of agricultural produce fell from £7,541 million to £7,347 million. That was an improvement of approximately £200 million which was largely due to the benefits of agricultural research. During the same period our exports increased by £1,440 million. When one is talking in terms of billions the mention of just one million, or a few hundred million, does not seem so important. However, I suggest to your Lordships that if we were to continue with the rundown of agricultural research, as appears to be the danger now, our balance of payments figures—quite apart from any other considerations—would undoubtedly suffer more and be even more unsatisfactory than they are today.
Therefore I hope that the noble Baroness, when she replies, will give encouragement to all of us who are concerned with those aspects of agricultural research. I also hope that she will assure us that her department and the Government are fully aware of

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the absolute necessity of maintaining the highest possible standards as regards the scientists working in this field.
1.24 p.m.
Lord Elliott of Morpeth: My Lords, I must begin by apologising for the fact that an evening engagement in Newcastle upon Tyne means that I cannot stay for the full debate. I apologise most sincerely for that. I should like very much to congratulate my noble friend Lord Butterworth on his presentation of the report. I thought it masterly and comprehensive. I should also like to congratulate my noble friend on his chairmanship—masterly and courteous at all times—of the sub-committee during its long deliberations.
I was a co-opted member of the sub-committee. I think that I was co-opted for two reasons. First, as a practical farmer I am on the receiving end of research and development in agriculture. Secondly, and perhaps more importantly, in another place I was chairman of the Select Committee on Agriculture, Fisheries and Food. During that period I chaired an inquiry into the cost-effectiveness of agricultural research. Our terms of reference were not all that different to those of this recent inquiry. However, I thought that we conducted our recent deliberations in very different circumstances in terms of the agricultural situation generally compared to those which existed 10 years ago.
Paragraph 2.9 of the report states:
"Major policy changes have from time to time been introduced at short notice, with too little thought given in advance to their consequences".
The report gives as an illustration milk quotas. It was the Select Committee of another place which I had the privilege of chairing which strongly recommended the introduction of milk quotas. Indeed, nine years ago that seemed to be the only answer when an excess of milk production in Europe was a general worry throughout the Community. Of course we have had enormous increases in milk, grain and grass, not least because of previous basic agricultural research. Sir Kenneth Blaxter told us:
"Research and development has been outstandingly [so] successful in providing the technical and scientific base for the enormous increase in food production … hat farming and its related industries [have been converted] from craft activities to science-based ones".
How true that is. I took my noble friend's point when he referred to food mountains having been brought into being by political decision rather than by reasons of research and development. But research and development have had an enormous amount to do with regard to great increases in stocks. If, as a practical farmer, someone had told me not so many years ago that it would be possible to produce four tonnes of wheat from one acre of good land, I would have thought that he was talking utter madness. However, that is now possible. Moreover, a great deal of research has gone into making that a possibility. The same applies to the milk cow which gives a remarkably increased quantity of milk during each period of lactation compared to not very many years ago. All that is due to some highly efficient and successful research and development.
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We have had the food mountains. However, it is perhaps salutary to note that at present the situation—albeit temporary—is somewhat the reverse. According to recent figures, world grain stocks, at eight weeks, are at their lowest since the mid-1970s; wheat prices are 50 per cent. higher; and soya and maize are 20 per cent. and 30 per cent. up in price. The Food and Agriculture Organisation has called for a 13 per cent. increase in grain production in 1989. All this, although temporary, has come about because of the drought in 1988 in North America. It goes to show that we should never take enormous food mountains of any kind totally for granted. We should never think that it is possible for them to be there all the time. There are certain periods in respect of which we should be extremely thankful that research and development has been such that we can very quickly make up for a disastrous farming summer such as North America had last year.
The committee was told several times during its deliberations that there was a danger of confusing overproduction with efficient production. That was rightly emphasised by a number of our witnesses. While talking about sufficiency, which we did on several occasions, we became wholly convinced that excessive production should in no way indicate that there should be any reduction in basic agricultural research.
When my right honourable friend the Minister was before the committee, he said that research on products in surplus had been cut back and replaced by what he called work on public good aspects. That broad aim of improving research on anything relating to the environment is much appreciated by the farming industry. Those in farming agree that there is urgent need for further research, as already stated today, into the development, for instance, of environmentally acceptable methods of weed control. There is urgent need too for research into the effect of nitrogen run-off from land and into effluent loss from the rapidly increasing number of grass silos.
The committee was extremely grateful to the Nature Conservancy Council for its evidence in that context. Those involved in farming seek to emphasise that there is a need for much more research into alternative methods of production. I am aware that that has been said today. Our report stresses that point. My noble friend stressed it in his presentation.
To those engaged in the industry, set aside seems to have come upon the industry suddenly. Again, it is the possible enormous increase in yields that has brought it into being almost as a matter of urgency. A great deal of immediate extra research on set aside is needed.
Farm forestry is currently of great interest to the lowland farmer. As several noble Lords have said, we import an enormous amount of timber. I am a member of the Port of Tyne Authority; I receive its weekly figures. Each month, under the heading "Forestry Imports", I note that the figure is steadily rising. That is good for the business of the Port of Tyne, which I am happy to report is flourishing to a greater degree than it has for many years. We

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are importing a great deal of timber. But greater quantities will be needed. There is a world shortage. I know that lowland farmers are interested in the posssible introduction of small plantations on good land.
Our thinking on timber in the past has always been that it should be on the higher ground, on land which could not grow corn or graze cattle or sheep. That thinking no longer exists. If we have more knowledge through research, there is a possibility of introducing fast-growing strains and using of broadleaved timber for industrial purposes.
Sir Ralph Riley told the committee that there has as yet been no study into the production of timber on good land. All engaged in livestock farming will be concerned by the evidence given by the Royal College of Veterinary Surgeons. Its message was distinct: any further reduction in research could lead to a serious problem of disease control in some emergencies. The Royal College also expressed its concern, as did several other professional bodies, about the great difficulty it is experiencing in recruiting the right type of people to conduct research. That is something that the Government should fully recognise.
Professor Spedding, of Reading University, who was so helpful when I was the chairman of a Select Committee in another place, stressed in his evidence the need for research and development to focus on the food chain as a whole. That is right. Again, I emphasise that those engaged in farming recognise that there is a great need for extra thought to be given to the food chain as a whole. I can assure your Lordships that those engaged in farming would happily accept recommendations designed to bring about improvement in that sphere. There is a considerable scope for adjusting agricultural production to the consumers' present day demands.
I have no doubt that when my noble friend answers the debate she will have already noted the National Farmers' Union concern about what is meant by near-market research. That point has been raised several times and I shall not dwell on it. The recommendation in our report that the government list of near-market projects should be clearly stated is one that those engaged in farming would welcome. As my noble friend said when he opened the debate, five years rather than three should be accepted for the transfer of projects to industry.
I conclude by summarising my view of the report. It stresses strongly the need for continued and extended agricultural research. It states, again strongly, the need for the restoration of confidence in their future of those involved in agricultural research. It emphasises the need for greatly improved co-operation among research councils, the industry and the universities. Lastly, and above all, it stresses the need for a stable, long-term land use policy.
1.35 p.m.
Lord Rea: My Lords, I found this to be a most excellent report. It maintains the high standard that we expect from our Select Committee on Science and Technology. I feel unqualified to enter the debate as I was not a member of the committee. I cannot begin
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to deal with the subject in such depth as does the report and its two volumes of evidence. My qualification is that I have been interested in nutrition for about 25 years and, for even longer, in human health, real or imagined departures from which I deal with daily.
Like many other noble Lords, I shall have to apologise. Due to the interjection of the Companies Bill before we started the debate, I may not be able to stay. I hope that the Minister will be able to take up some of the points that I make. They have been made by other speakers, in particular the noble Lord, Lord Butterworth. I am glad that the committee took a broad view of the subject and looked into the effects of food on the consumer as well as its production.
Many of those who gave evidence, however, seemed to forget about the ends and were concerned only with the means. Professor David Conning, who spoke for the British Nutrition Foundation, has been quoted by the noble Lord, Lord Walston. Another of the professor's quotes was:
"but most importantly there is a need for underpinning research into human nutrition".
In a further paragraph he stated:
"It cannot be overemphasised that current knowledge of human nutrition is inadequate, particularly concerning" —
and he put this in his usual rather acid style—
"the putative adverse effects of over-indulgence".
Research into human nutrition until the Second World War was related largely to deficiency states in the United Kingdom. Good application during that war almost eliminated nutritional deficiency disease in this country. The need for such research continues with possible applications for third world problems.
After the war, in the United Kingdom, with relative nutritional sufficiency, interest fell somewhat. It is only recently that the role of nutrition in the cause of some of the most prevalent diseases has been recognised. The United States was about 20 years ahead of us in this. There was one publication in 1963, 25 years ago, entitled, Fat Boy Go Unsaturated. It would have meant nothing to us then but will be fully understood now.
In Volume II, at page 90, Professor Philip James of the Rowett Institute at Aberdeen, said:
"Yet the prevailing nutrition in Britain is row linked to the commonest causes of premature death such as heart disease, and cancers, as well as to debilitating and prevalent problems such as diabetes, gallstones, blood disorders and dementia of the elderly".
The committee recognises the need to build up the strength of nutrition research and makes useful suggestions about how that should be done. Some of the phrases describing the prerequisites of the build up of research expertise sounded very familiar to me, having served on your Lordships' Select Committee on Priorities in Medical Research, the report of which was published about a year ago. It mentioned, for example, the need for,
"a period of stability and adequate funding enabling [the Agricultural and Food Research Council] to plan for the future and to reverse the damaging trend towards too many short-term appointments".
That is almost completely echoing the speech of the noble Lord, Lord Adrian, who made the point so much more clearly than I.

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Similar statements were made again and again with regard to the future health of medical research when we were gathering evidence for that report. I therefore very much welcome Recommendation 5.19, which has already been quoted by the noble Lord, Lord Butterworth, recommending that nutritional research should be given greater priority.
Another area mentioned by the noble Lord concerns the dissemination of sound nutritional information to the public. Here I am repeating some of the noble Lord's speech. Paragraph 4.29 says:
"Research funded by commercial interests is bound to be open to accusations of bias in an area as senstive as diet and nutritional value. Advice in the media is often based on shaky scientific foundations. The public would benefit from a disinterested source of information".
The committee recommends that the Health Education Authority should take greater responsibility for that. The Health Education Authority, in turn, welcomes the recommendation and said in a letter to the noble Lord, Lord Butterworth:
"The HEA is ideally placed to meet the need for scientifically based, authoratitive and comprehensible information for the public … It is part of the National Health Service and is both objective and disinterested".
The recognised role of the HEA needs to be publicly acknowledged by the Government and research councils as the main source of health education and information on diet and nutrition for the public.
Two previous bodies—both rather short-lived—were set up to fulfil that function. NACNE—that is, the National Advisory Council on Nutritional Education—was the first. Its report in 1982 on current nutritional thinking met with such fierce opposition from the food industry that it was partially suppressed for nearly two years. Following that, we had JACNE, the Joint Advisory Council on Nutritional Education, which was commissioned to interpret the recommendations of the COMA report on Diet and Cardio-Vascular Disease in 1984. However, I regret that that also came to a sticky end.
The Health Education Authority, by default, now has the role of nutritional educator to the nation. But no special resources have been given to it to undertake the function. It has only two staff at its headquarters handling nutrition. What it has done in such straitened circumstances is commendable, advising the Look After Your Heart campaign in its nutritional aspects and distributing some 2 million copies of its Guide to Healthy Eating as well as some other activities. There is a real need for a much expanded nutrition section of the Health Education Authority so that not only the public directly but also health journalists, catering colleges and health professionals can become better informed.
A more discriminating and better educated public will provide the market pressures which are needed to get farmers and food manufacturers to provide the right products. Of course there is much more to be done as well to change national eating habits. To name only two activities, both of which very much concern the EC, they are: first, getting an adequate and well understood nutritional labelling policy on the map; secondly, dealing with the problems of the common agricultural policy which act against the
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best interests of human nutrition so that its intervention policies might be adjusted to price out food we do not want to encourage—if I dare mention it, I include dairy products and fat meat, fat carcases—and price in what we want; that is, oilseed and whole grain products, lean meat, fruit and vegetables. An informed public and health profession will mount pressure for the appropriate changes in legislation.
Health professionals—nurses and doctors, for example—are at present very poorly informed about nutrition. They do not give consistent nutritional advice. Professor James said at page 98 of Volume II:
"If you ask [the public] which group they believe most, then they believe their doctors more than the others, but unfortunately they are the least knowledgeable".
He then went to suggest how medical schools should improve undergraduate nutritional education first by teaching the teachers.
Finally, I should like briefly to echo some of the remarks other noble Lords have made about near-market research, a much discussed topic. I found some of the report rather worrying here. The committee considered that some of the research identified as appropriate for industrial support includes elements of public good research, which has been mentioned particularly by the noble Lord, Lord Butterworth. Some of the examples are weed control and growth regulation systems which are extremely environmentally sensitive, as is the assessment or forecast of plant pests. Perhaps more relevant to human health is control of a range of animal diseases, some of which can be transferred to man; for example, leptospirosis, otherwise known as Weil's disease, and campylobacteriosis, which is almost as prevalent now as salmonellosis and enteritis which includes salmonellosis itself. Some of the mechanisms of transfer from animals to man are not—
The Parliamentary Under-Secretary of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, I wonder whether in the interests of speed I might say that leptospirosis has been removed from the near market list and is on the public good list, as is also the second item mentioned by the noble Lord.
Lord Rea: My Lords, I am delighted to hear it and I think that the kind of remarks that have gone into the report may have accelerated that process. Some of the mechanisms of transfer from animals to man of the diseases which still remain on the list are not fully understood and badly need more research. Therefore, I fully support Recommendation No. 512, which states:
"The Government should reassess their list of projects identified as 'near market' ".
I know the noble Baroness has said the Government are already doing so, but perhaps more thought should be given to it. Some of the projects listed are public good research, which must be continued.
I very much hope that the noble Baroness, having previously and very successfully worn a health hat, will ensure that research on these topics of great

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public concern will not be denied public funding. Will she please press her right honourable friend the Secretary of State for Health on the issue that I mentioned previously—additional finance for the Health Education Authority for it to assume properly its nutrition education function? That is a very necessary and overdue step.
1.51 p.m.
The Earl of Selborne: My Lords, I must immediately declare an interest because I am chairman of the Agricultural and Food Research Council. I hope the previous speaker will not mind if I do not follow him in speaking on the role of nutrition and nutritional research, as clearly I have only a short time to speak.
I read the report with great relief and a feeling of great thanks to those who served on the committee, particularly to my noble friend Lord Butterworth. Over the past five or six years there is no doubt that agricultural research has had a very rough time. It has had a rough time because, I believe, its role has not been clearly understood, and the opportunities, which this report sets out so clearly, have not been perceived by the Government.
The report starts off with a very firm case which I hope will be widely read within the Government. I am sure the report's recommendations have long since been accepted by Ministers within the Ministry of Agriculture. The report states that the industry is going through a rapid period of change. The research services of the industry are, equally, evolving extremely fast. The biological industries are rapidly turning to what my noble friend called the scientific revolution, in order to be underpinned in future.
The industry has very exciting prospects. Therefore, it is ironic that over the past few years so much of the biological research which comes within the portfolio of agriculture and food has really had a difficult time. That applies to the research councils, the Ministry of Agriculture itself and elsewhere. To be fair, I think the Government have adopted, quite recently, a perfectly clear policy on agricultural and food research, and indeed on biological research as a whole. I am sure my noble friend on the Front Bench will correct me later if I am wrong, but, as I understand it, with the very welcome increase in science Vote funds which has materialised in the past few months there has been a clear commitment to increase public funding towards basic and strategic research.
Furthermore, at the same time there has been a policy of persuading industry to contribute more towards applied research as part of the policy of the near market about which we have heard so much already. If that was the only implication of that policy, many people would accept that was a very sensible basis on which to operate. After all, industry will not fund basic and strategic research. We recognise that there are enormous scientific opportunities. It is clearly right that the public should contribute more than they have in the past, and that these opportunities should be exploited.
I remember that in many debates in your Lordships' House we pointed out that in agriculture,
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and indeed in the food sector, industries had not always subscribed as generously as we had hoped. Much more could still be contributed from industry. We compare poorly with many of our competitors as regards private sector research funding. That has to be said time and time again. I welcome the commitment by the Government to increase the science Vote funding. I believe the implications are only just being understood, not just by the research councils themselves, which I hope are responding through their corporate plans and through some very quick changes in their structure. I hope also that the implications are understood within the Ministry of Agriculture itself. However, in the latter case I am slightly less confident.
I shall only deal with two specific points. First, I shall discuss the report's recommendations that there should be a fairly large transfer—I believe the sum mentioned was £27 million — from MAFF funds used for commissioning research, back to the research councils, or rather to the science Vote. The second area I wish to refer to is the implications of the near-market research policy.
Until the last science Vote announcement, we had had five years of cuts and, what is probably more damaging, there had been a fear of cuts throughout that time. Neither scientists nor industry were able to perceive any rationale or policy behind those cuts, except perhaps a frustration on the part of the Government at a common agricultural. policy which they have been unable to control. If national policy for agricultural support is exceeding predetermined budgets, it is clearly inevitable that the national expenditure, particularly on research, development, advice and other such matters, will be subjected to great scrutiny.
I have no doubt also that many members of the Government have not listened to successive Ministers of Agriculture when they pointed out that the fact that there are food mountains does not mean that research should be cut back. I shall not go into that argument because it is so well presented in the report. However, I believe there has been an abysmal lack of understanding of this essential. point within government. I know the report will be of great help to Ministers in pointing out the fallacy of that argument.
With this new strategy of increasing funding for basic and strategic research, so comes the need for a more closely integrated publicly funded research sector. The commissioned research has, by its nature, tended to be short-term applied research and there is no certainty that research contractors will have their commissions renewed at the end of the period. There must, therefore, be a justification for bringing the publicly funded research more closely together and making sure there is a common form of assessment, monitoring and evaluation. When Rothschild put forward the principle of customer/contractor policy, there was a very different situation as regards agriculture. That was mentioned earlier in the debate. That situation occurred at about the time of the White Paper entitled Food From Our Own Resources. That was a time when the Ministry of Agriculture was seen to be a vicarious customer on behalf of farmers. The near-market policy now

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has just the opposite aim. It wishes to encourage farmers and other sectors of industry to take on this responsibility themselves.
I hope that the Government will look carefully at whether there could be simplifications in the public funding of research, if the report's recommendation on transferring this sum of money back to the science Vote is implemented. The suggestions of my noble friend Lord Butterworth that there should be close integration between the research councils and the AFRC, and that there should be an annual stocktaking, are very sensible. I have no doubt there would be much advantage to be gained from that, and from a recognition of the fact that if the Ministry is going to use its commissioned funds to move more and more into the strategic area there is bound to be duplication with research councils.
Incidentally, I believe this will help to meet the point made by the noble Lord, Lord Adrian, that there is clearly concern among scientists as regards short-term appointments. If there could be greater certainty as regards funding — that will happen if there is less reliance on short-term commissions —clearly there will be long-term appointments.
I shall move on to my concern about the implementation of near-market research. I preface my remarks by reminding my noble friend on the Front Bench that I entirely understand, agree with and support the concept of increasing the funding from industry. I am sure that is correct, but it will take time. The time-scale of three years which is being implemented is unrealistic and damaging. My noble friend has had a difficult time on the process of consultation because of the wide-ranging consultations which are required. But the amount of consultation that has taken place is not realistic if changes on this scale, and the responsibilities which the industry is being asked to accept, are to be taken up.
The report known as the Barnes Report has not been published. The noble Lord, Lord Butterworth, referred to that. I believe that that is a great mistake. Industry has to be brought in as a partner, not just in respect of funding but also in respect of the philosophy behind the concept. We need a responsible and informed dialogue. The attitude that there is some information which industry can have and some which it cannot is outdated and mistaken.
I agree that there is a lack of understanding as to what is meant by near-market research. The NFU referred to that point in its evidence, and other speakers have also mentioned it. My noble friend has just told us that some work has been taken out of this sector. But until there can be a much better informed discussion as to what would come into the category of near-market it is difficult to have a sensible dialogue as to where the boundaries should be drawn. I believe that the widespread concern which has been expressed about the implementation, not necessarily the philosophy, of the near-market research policy is well founded.
It is very important that the transition is accomplished as smoothly as possible. The agricultural research services, both in the ministry and in
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the research councils, are a national resource which we cannot allow to be lost. As I understand it, it is not the Government's policy that there should be no applied research but rather that there should be a greater contribution from industry and from third parties towards funding that applied research. What is happening because of the unrealistic timescale and rather poorly handled procedure is that within the research services, and no doubt within the ministry and elsewhere, we are having to make decisions at a speed which does not allow others to pick up the resources which otherwise will be lost forever. I believe that that is bad business. If one has a resource of such high repute, as many speakers from all sides of the Chamber have mentioned, one does not lightly allow it to be run down if it is one's policy to ensure that the agriculture and food, and other biological, industries are to be underpinned in the future.
Another point, which is reflected by the observations of my noble friend Lord Elliott of Morpeth about butter mountains and grain mountains, is that in the international scene it is very quickly being perceived that the problems over the next 10 years will not be of mountains and surpluses but could be the sustainability of yields, particularly in the third world. There is already evidence that it can be very difficult to sustain yields throughout the world without ever-increasing inputs, which we understand for many reasons will not be available.
I hope that the Government understand the implications of the principles which they enunciate. We cannot reduce this national resource piecemeal. We must allow a timetable which is realistic, and we must accept that the present timetable, which is frantic and fast, is not sensible.
I hope that the Government study very carefully what I believe is a very important report. Particularly if there is to be — and I am sure that there can be — a great contribution to this country from agriculture and food research towards not just the agriculture and food industries but to other biologically based industries, we need a period of stability. The great cuts and changes and the lack of strategic thinking have to end.
2.4 p.m.
Lord John-Mackie: My Lords, before I speak on the business in hand I should like one piece of research to be carried out. That is, why, when this House empties on a cold day, instead of the Chamber being heated we have nothing but a cold, air-conditioned draught coming up around our feet and legs, making waiting to speak very uncomfortable. I am sorry that there is no official present, other than the noble Baroness, to take note of that complaint, but I hope it will be raised in the proper quarters.
Like previous speakers, I should like to compliment the noble Lord, Lord Butterworth, and his committee on a very good report and on the way in which they have put the information on paper. One can see from the list of witnesses, who totalled 333 for the two reports, 35 of them giving oral evidence, that it must have been a colossal job to sift all the evidence and get it down on paper so well.

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In addition the noble Lord, Lord Butterworth, has given an excellent introduction to the report in the House today.
On the general theme of research in agriculture and food, I should just like to say that in 62 years in farming I have benefited tremendously from research. I have benefited particularly from the work of some of the research institutes in my own country, notably the Rowett Research Institute in Aberdeen. I am sure that we are all sorry to learn that one of the institute's best known directors, Sir David Cuthbertson, died the other day. He did a tremendous job in the agricultural field and in animal nutrition. He also did a tremendous job, after his retirement, in medical research at Glasgow University. He was a great friend of all of my family.
There are some 240,000 farmers in this country. They farm anything from 20 acres to 20,000 acres and they grow different crops. Some manage to grow only one or two but others grow a tremendous diversity of crops. The same applies to stock — beef, dairy, sheep, pigs, and poultry. It is a very diversified industry. If the Government now wish farmers to pay for research which has helped them tremendously in the past, it should be done in some other way. Rather than the elusive near-market research there should be one overall levy. It might be levied on any basis which is as fair as possible, probably per acre and possibly varied according to grade of land. Money should be raised in that way to supplement Government grants. The AFRC should distribute the levy together with the Government grants — I am sure that the noble Earl, Lord Selborne, will be delighted with that point.
A few weeks ago I received a notice asking me to vote on a proposal that there should be a levy of 50p per tonne on oil seed rape for research. Imagine that principle being extended. There might be another levy of £1 per tonne for wheat, and so it would go on. A plethora of levies on those lines would overlap and would result in a considerable amount of wasted effort. I believe that, if the Government insist on obtaining so much money from the farmers, it should be a straightforward levy, which is probably fair enough in any case.
That is all I want to say about the broad basis of the research and the way to fund it. However, I should like to turn for a moment to the question of forestry research. The total tree area in the United Kingdom is just short of 5 million acres. I am sorry if I do not use the term "hectares". I am too old to think in hectares, so I shall always use the word "acres". That figure is about 8 per cent. of our land area. That is the lowest figure in the European Economic Community, apart from Ireland, and we must do something about it. The noble Lord, Lord Elliott of Morpeth, mentioned the fact that we import over £4,500 million-worth of wood and wood products per year, which is an enormous figure. If the figures in paragraph 4.31 of the report reflect the figures that we shall need in the future, we should make a strong effort, as I have advocated ever since I was in the Forestry Commission, to double our acreage up to about 10 million. As some earlier speakers have said, if we are to do that, we shall
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need research in order to be able to continue in one way or another in forestry.
I believe that it was in 1981 or 1982 that the committee of the noble Lord, Lord Sherfield, recommended the appointment of a chief scientist for forestry research. However, the Government did not accept that recommendation and appointed a co-ordination committee made up of representatives of various research bodies. As far as I know, it has done a good job. I cannot see what the appointment of a chief scientist, as the report recommends, can do that will make any difference. There is no question that there has been antipathy between farmers and forestry in the past, but that has been removed to some extent. I am sure that it would be much better to fund the co-ordinating body. Paragraph 34 of the report appears to cancel out paragraph 33. I am not sure whether the noble Lord, Lord Butterworth, agrees with me, but, if he reads it carefully, he will see that it makes a strong case for the co-ordinating committee. I cannot see much need for both the co-ordinating committee and the chief scientist in forestry.
Perhaps I may make a suggestion about where forestry should go in the future. The noble Lord, Lord Elliott of Morpeth, referred to the food situation. I note that Sir Kenneth Blaxter gave evidence, although I do not believe that he touched on this point. He wrote a well documented article in The Lancet about a year and a half ago on the population situation in the future. He said that populaton control had failed and that he would not use the word "if", but the word "when". He said that, by the year 2030, the population of the world would be about 7,500 million. He also said that to feed that population would require every unit of agricultural production to produce two and half times more than it does today. If that is the figure to which we must look, short-term worries about surpluses should be banished from our minds. I admit that a government who fund surpluses must take a short-term view to solve that problem in some way and I hope that set aside is a very short-term effort to do that.
I simply do not believe that we should give any thought to converting a great deal of good land in the lowlands to forestry and hardwood trees. I do not believe that we need much research into that matter. We all know that good land grows good hardwood trees. We should concentrate on research into how to grow hardwood trees on higher land. That would be a much better proposition. Such land could be taken out of agriculture without making a great difference to production. We could grow, or breed, hardwood trees. It takes a king time to research the breeding of trees, although there is a system in respect of conifers in which one can tell within seven years whether a new tree will be a success, but that is not the case with hardwoods.
I appeal to the Government to think 'very carefully indeed about pushing forestry on to good land in the lowlands. I do not know where we shall obtain the extra acreage needed to double production. I do not understand why the proposition was made that there should be no more forestry in areas of Derbyshire and the hilly areas of Cumberland in England. I am

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aware of the opinion of environmentalists, ramblers and such people but it has always been done in Scotland. We may have made mistakes in the past but the landscaping of trees into the hills is done there now by the Forestry Commission and by private firms as well. One has only to go to places such as Eskdale or Grizedale or the Kielder area, where the lake and the new water reservoir are, to see that it can be done. I think that it is a huge mistake to forbid the planting of trees in those areas of England.
One aspect of research in forestry is the fertilising of trees. The noble Lord, Lord Kimball, is not present today or he would be off like a shot on hearing my words. The fertilising of conifers of course arouses his worries about forest fishing and such things. But only research into fertilising will show the way to increase production along with an increase in acreages. When I was in the commission, the conservator in South-West Scotland was very keen on fertilising trees and did a lot of work on that subject. He had a stand at the Highland Show—indeed, each conservator had a different stand every year—and he made the theme of his exhibit the fertilising of trees. The Princess Royal, who was then the Princess Anne, was a visitor to that show and I showed her around it. The conservator had, I think, overdone it somewhat by putting four or five durable spruce trees in one position and then four or five scrubby little trees beside them with two notices: "Fertilised" and "Non-fertilised". I showed that to the Princess Anne, who looked at it and then turned to me and asked "Do you expect me to believe that?" That rather put me on the spot for the moment.
However, there is much to be done in research in forestry in many ways and I hope that the Government will take note of the need but leave action to the co-ordinating committee. I think it would be a waste to appoint a scientist to the Forestry Commission itself.
2.16 p.m.
Baroness White: My Lords, perhaps I should begin by announcing to the noble Baroness that I shall be staying to the end of the debate. I have already collected apologies from several noble Lords who will not be able to hear either of us. Of course, the difficulty has arisen very largely, as my noble friend Lord Shackleton, pointed out, because of the failure to look after government business competently last evening, for which no apology has yet been made publicly to the House from the Government Front Bench.
Last summer I had the pleasure of holidaying in Austria. I was able to listen to Haydn's "Farewell Symphony" played in the Esterhaza Palace. Devotees of Haydn like myself will recall that in that symphony one by one the orchestral players leave the stage until no one is left except the two first violins. Today there may remain a couple of second violins and perhaps even a cello in the person of the noble Lord, Lord Butterworth. However, I sympathise with the noble Baroness who has been extremely patient and who has listened to the whole
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debate. I am sure that she will give us a very competent response.
I should also like to add my thanks for, and recognition of, the excellent chairmanship of the sub-committee by the noble Lord, Lord Butterworth. I have a long experience of Select Committees — in fact, I am a connoisseur of committees. Undoubtedly, he is one of the better chairmen under whom I have served. I have only one bone to pick with him. In his otherwise excellent presentation of our report today he did not mention the indignation felt by a number of members of the Select Committee in that we were not permitted to see the Barnes Report, on which a great many of the matters that the committee had to discuss were based. It seemed to me that a Select Committee of your Lordships' House should be entitled to see a report which I understand was discussed with various interests by the noble Baroness herself. However, we were precluded from studying it. Apart from that lapse, I can only reiterate our thanks and our recognition of the work of the noble Lord, Lord Butterworth.
Noble Lords will have realised that we are discussing both the interim report and the final report of the Select Committee. The noble Lord, Lord Butterworth, has already indicated the mental processes whereby we reach the views expressed in the interim report which was published last October. He and the noble Lord, Lord Adrian, were particularly well placed to judge these matters. However, others of us on the committee have some experience of trying to organise academic research and we all attempted to assess the possible options at research council level in relation to dealing with food and agriculture in particular. I believe that we found it somewhat frustrating to engage in the research council exercise when it was known that those with a more direct interest and authority were conducting a similar exercise pari passu.
Our interim report was completed and deliberately issued in advance of the main report in the expectation that the review group of the ABRC, looking into the relationships of the research councils one to the other, might find it helpful. It may take longer than we expected for the considered view of the ABRC to be made manifest. The indications are that a single research council, with suitable divisions but with much stronger powers at the centre than the current advisory body enjoys, is a probable outcome. Rumours vary, however, as to the degree of consensus which has so far been obtained.
Our committee's recommendation was to hasten slowly. The proposed merging of NERC and AFRC seemed to us a natural first step. I remain convinced that it would be well worth while.
However, since we completed consideration of this matter, there have been changes, including changes of personnel. The NERC at least seems rather more reluctant than we had expected. Professor Knill has, I believe, emphasised that of an NERC expenditure of some £ 150 million, only about £ 10 million could be reckoned to be on work having a direct interface with the interests of AFRC, while the latter has no direct connection with the major engagements of NERC in oceanography, climatology and other important areas of science.

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The great upsurge in recent years in biological science—which a number of noble Lords have already mentioned — has greatly increased the problem posed by the interrelationships of scientific endeavour. Biotechnology seems to be all-pervasive. In agriculture itself there is a strongly increasing emphasis on a biological, rather than a chemical, approach to pest control and the like. It has to be recognised that neither science can afford to ignore the other.
As a committee perhaps we should frankly admit that we dodged the problem of where medical research fits in. We simply agreed that the MRC had its own responsibilities for human research, that the medical profession was a law unto itself, that the MRC had been more skilful in keeping government funding under its own control than had either the AFRC or the NERC, and that it was better to leave the MRC alone. This was practical sense for the immediate future. However, it ignores the increasing complexities, for example, of the relationship between animal genetic research and human nutrition and human health, although these sometimes conflicting or overlapping interests will have an increasing effect upon our research organisations.
If the review group recommends a single research council, this radical change would subsume our more modest proposals. Nevertheless, I believe that in spite of certain clear difficulties, AFRC and NERC would be well advised to take seriously the suggestions put forward by the committee's report. Last autumn when our interim report was issued we felt that the plight of agricultural research was so dire and that the two research councils in question had been so feebly and inadequately supported by their respective departments in the face of expenditure pressures and through the misuse of Rothschild principles, that something more immediate was called for. I hope therefore that this aspect of our report will be taken very seriously.
It is true that the two new chairmen of the respective councils, Professor Knill and Professor Stewart, have struck a vigorous and optimistic note in their public pronouncements. But let us not be deceived. Certain major threats remain. The noble Baroness, Lady Trumpington, is continuing, I understand, her almost Elizabethan progress in the cause of commercialising near-market research as rapidly as possible. I understand that on 10th May next she will be descending upon the Farmers Union of Wales; not to be confused with the National Farmers Union. Its annual meeting is to be held in Aberystwyth. I am sure she will meet with a most courteous reception. Her great energy and dedication are indeed commendable. However, what she is doing does not remove the strongly held opinion of our committee that the Government have shown a most unstatesmanlike impatience and have caused much additional professional and personal misery by the speed at which they are trying to push through their near-market proposals, I was very pleased to hear the noble Earl, Lord Selborne, emphasise the dissatisfaction of AFRC not necessarily with the basic policy but with the timescale on which it is being operated.
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The three years mentioned as the chosen timescale is in practice, I am assured by some of those concerned, often much less—two and a half years or even less. That is quite inadequate for most establishments and sections of the farming industry to comply with. Where large scale organisation has predominated, as in horticulture, it may make good sense. But farming and, as we have just been reminded by our Scottish colleagues, fisheries, which are a concern of MAFF, are mainly small scale and disparate. To find research resources to replace government funding which is being withdrawn—given the current problems of adjustment and the falling incomes in many sections of the farming world—is an organisational feat which cannot be expected to succeed before many research efforts have been disrupted or abandoned and research teams have been broken up.
I hope that the noble Baroness will indicate that these apprehensions are being taken seriously by her department. I should like to quote from a most experienced academic in agricultural research. Unfortunately I cannot name him because he is abroad and I have not received his consent. He has written to me; I should like to read a few of the comments he made in answer to queries that I addressed to him. After acknowledging the recent decision to increase to 30 per cent. the allocation of the AFRC science budget to higher education over the next five years as highly commendable, he makes certain detailed comments. He, like my correspondents in the University of Wales, is concerned about the short-term contracts which have become the custom in agricultural research and the very serious effect that this is having upon younger scientists, in particular, who cannot see career prospects.
For example, I was told that in the Welsh scene:
Four years ago we could expect 30 or 40 applications for each new post advertised. Now we struggle to get three or four of acceptable quality".
The situation is extremely serious. There have been the strongest possible complaints that MAFF, which used to regard a four-year contract as being reasonable for a young scientific worker, is now issuing one or two-year contracts. And no one knows what will happen to the workers at the end. It is difficult to concentrate on research when one does not know what one will be doing six months hence. I hope that the department recognises that this is a serious matter; it has been graphically described by other noble Lords.
My correspondent urges that a greater proportion of the total research allocation to the higher education institutes should be spent on post-doctoral research. At present too many people are receiving expensive training in research to PhD level and are then denied funds just at a time when they are likely to be most productive. I hope that notice will be taken of that point.
My correspondent, in a comment on near-market research, says:
"Unqualified application of free-market principles to near-market research in agriculture will tend to attract an increasing proportion of funds from wealthy companies seeking a commercial advantage over their competitors. This is not necessarily in the interests of the consumer or the farmer. One of

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the most depressing consequences of the insistence that AFRC seek more funds from industry has been the increase in the quantity of bad or fatuously repetitive research being carried out in institutes. This research is confidential to the company (the scientists are not permitted to communicate with each other and so advance knowledge) and has been largely designed to measure once again what we know already".
I cannot with authority confirm those remarks, but they come from a good source and should be taken into account.
There is also the question of the desirability of research into extensification or set aside. My correspondent says that,
"there is considerable scope for both strategic research and development into problems relating to extensification policies. These include health and welfare issues related respectively to reduced dependence on antibiotics and pesticides and free-range husbandry systems. Whereas much strategic research can be done in HEI and AFRC Institutes, the Experimental Husbandry Farms of MAFF remain excellent sites for examining the broader environmental and welfare issues. Liscombe Experimental Husbandry Farm on Exmoor, whose closure has been announced is uniquely well suited to consider problems of agriculture in environmentally-sensitive areas".
Can the noble Baroness say whether that aspect was considered when the closure decision was made?
I am encouraged to emphasise the point as a result of notes which various noble Lords will have received from the National Farmers Union. They refer specifically to the Liscombe experimental husbandry farm.
Perhaps I may quote from the NFU brief which states that the,
"decision was taken before the industry had been consulted in spite of assurances that consultation would take place first. The industry has been given just over two months to raise over £250,000 if Liscombe is to be saved. We have asked for details of the stations likely to close in the next two financial years (i.e. the remainder of the Barnes cuts) so that the industry has time in which to make sensible decisions and raise money if it considers it appropriate to save one or more stations; this information has been refused. It is impossible for us to plan a coherent response to the Government's proposals without sufficient and timely information".
It goes on to stress the need for a strategy review group.
That is another clear indication that the haste with which the Government are trying to implement their policies, leaving ideology aside altogether, and the method which they are adopting is proving extremely difficult and is causing much concern and dissatisfaction to those affected by it.
The most recent blow over near-market research has been felt by ADAS, where many of the cuts will take effect before 1991. Noble Lords may have seen the letter sent on 21st March by the Permanent Secretary at MAFF to ADAS's research staff. He refers to a new unit set up,
"to market ADAS research capability".
However, the new unit has not yet been given time to operate. The Permanent Secretary goes on to say in straight terms:
"Industry is unlikely to fund fully the costs of all near-market research currently being undertaken and we shall, as a consequence, have to close a number of facilities".
He makes it perfectly clear in his letter that decisions will be based on financial response, and that at a time of agricultural depression; not on evaluating
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the merits of the research itself or its importance for the future. That cannot be a satisfactory state of affairs.
Our own committee whose report we are considering today advances the arguments for a more reasonable timetable. But our opinions seem to have fallen on deaf ears. The Government are bashing on regardless.
I shall not detain the House longer to discuss food and nutrition research, as I should like. However, that has been dealt with very competently by my noble friend Lord Rea. I hope that on the matters which we have been able to discuss we shall receive an adequate response from the noble Baroness.
2.37 p.m.
Lord Carter: My Lords, I should like to thank the noble Lord, Lord Butterworth, and his committee for producing a truly first class report. It is thoroughly researched, makes substantial recommendations and I am sure that we are all looking forward to learning the Government's response to the report from the Minister when she replies to the debate.
Any government has to set priorities. An agriculture and food and research and development budget cannot be exempt from that process. Such a budget must be subject to ideological and value judgments by all programmes of all governments. What we are debating and what the Select Committee report addresses with great clarity is, in the terms of reference of the report, the future of agricultural and food research. The Select Committee concludes that there is a need for a firm commitment to agriculture and food research, and that cannot be too strongly emphasised. It goes on to say:
"The Committee therefore recommend that the research base for agriculture and food should not be further reduced. … The research service must be strong enough to maintain an integrated R&D programme with a spread of basic, strategic and applied work".
The whole question of the future of agriculture and food R&D is thrown into sharp relief by the concept of near-market research and development and I propose to concentrate mainly on that aspect of the Select Committee's report, because that has the most immediate impact and importance for the agricultural industry and the R&D sector.
As a number of noble Lords have pointed out, we still await a clear definition of what "near market" means. The Select Committee is extremely polite. Paragraph 4.15 states:
"The Committee are troubled by the fact that the Government's definition of near-market research has not been made public".
Perhaps the Ministry is foreshadowing the new Official Secrets Bill.
The Minister has already set out with her usual joie de vivre her analysis of the concept: "If you want it, you'll pay for it—if you won't pay for it, you don't want it". I venture to say that this definition, while long on ideological machismo, is perhaps a little lacking in intellectual rigour. However, the concept of near-market research and development is not necessarily wrong. Indeed, a Select Committee report from this House on civil research and

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development pointed out that, in general, industry should not rely on the public sector to do what any forward-looking company should be doing for itself. The report went on to say:
"Just because research is near the market, the public interest does not necessarily cease. There is 'near-market' research which the Government must continue to fund in support of the public good. The transition from public to industrial funding must also be sensitively handled. This means in particular giving enough time for the transition. If industry is told to take on all the funding of near-market research in a disorderly rush, there will inevitably be a hiatus in some areas".
The difficulty in agriculture arises because the industry does not consist of forward-looking and, by implication, large companies but, as one Select Committee report on agricultural research and development points out, the industry is made up of a number of many small businesses in both food production and food processing and it is highly optimistic to expect that these small businesses can combine for voluntary funding on the scale required.
The problem is further compounded by the "grocery list" approach that the Government have adopted by sending an official rushing around the agricultural and food R&D centre to put money numbers on a great raft of research projects which fit, or are made to fit, the near-market concept. The result is, as a number of speakers have said, that morale in the R&D sector is at an all time low and uncertainty is at an all time high.
I warned the Minister before the debate that I should be asking a specific question. I believe it has already been referred to by the noble Lord, Lord Mackie of Benshie, who said that he thought the cuts might be ended. We are told that the industry must raise £30 million by 1990 –91. We have had the announcement by the Minister on 21st March of the cuts and closures in ADAS. We are told that more will follow later in the year. How many more are to come? What further research projects are under threat in the absence of funding from industry? Perhaps when the Minister replies she will bear in mind the advice that I am told Lloyd George gave to his Cabinet colleagues when they were tempted to defer a difficult decision: "It is unwise to attempt to cross a chasm in two leaps".
The biggest problem is that hazy boundary between research that is for the public good and that which is near market. I illustrate this by giving three practical examples. I should be delighted if the Minister could intervene, as she did with my noble friend Lord Rea, and confirm that these projects have been moved from the near-market list to the public good. The first concerns nitrates. Your Lordships will be aware that there is now a draft directive from the Community concerning the level of nitrates in water with proposals for exclusion zones of agricultural land. Sub-Committee D of the Select Committee on the European Communities is looking at this matter.
I quote from Ministry notes on arable crops. This is a list which the Ministry and DAFS defined as research which is near to the market and thus appropriate for industry funding. It includes:
"spring barley and effects of nitrogen; nitrogen inputs and rotational interactions in relation to …winter wheat …and production systems for barley for malting".
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The notes continue:
"Optimising fertiliser inputs in cereal production by defining the best time, method and rate of application thus making the most efficient use of inputs and minimising pollution risk".
That has been defined by the Government as near market. We have recently had the concern over the residues of pesticides in top fruit. I again quote from the Minister's own notes that were prepared for each of the sector meetings defining the research that is considered near to the market and thus appropriate for industry funding:
"Development of nutrition …programmes to increase quality and productivity; development of effective control methods for weeds, pests and diseases"—
all these matters involve pesticide residues —
"improve post-harvest handling and storage performance" —
that is how the pesticides may get on to the fruit —
"development of methods of predicting tolerance of fruit crops to new treatments of herbicides".
That is another example of what the Government have defined as near market, but I believe the rest of us would define it as public good. At the moment there is work in progress at the Luddington and Brogdale experimental horticultural stations on these matters. These stations are for closure and one is entitled to know the intention for the future direction of that work.
The third example —it is only one of many —concerns the advent of 1992. That means the free movement of livestock and livestock products throughout the Community. We know that foot and mouth disease is endemic on mainland Europe and that there vaccination is the standard method of control of foot and mouth disease. In this country we have a slaughter policy. I again quote from the Minister's own notes on the livestock sector that includes as near market:
"vaccine development for foot and mouth virus".
Those are just three examples out of many. Can the Minister say whether work that is defined as for the public good will be transferred from those experimental husbandry farms and experimental horticultural stations that are to close? Will the work be transferred to other research stations? If it is, presumably the projected savings will be reduced. Will this reduction mean that other projects at other research stations will have to be cut in order to meet the required funding target?
I also ask the Minister whether she can be specific about the possible job losses from the various cuts and closures, both those that we know about and those that are in train. In the past she has said that the number of job losses in 1989 –1990 will be up to 290. Does the Minister agree that the eventual total of job losses from the cuts already announced could exceeed 600, which is about 16 per cent. of the total number of posts in the relevant grades? It follows a loss of about 10 per cent. of posts in the same grades between April 1986 and October 1988. In turn that was on top of all the jobs losses arising from the cuts in R&D between 1979–1986.
With all those factors in mind, perhaps the Minister can tell the House whether all this squares with her statement on 4th April 1987 in reply to an

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Unstarred Question that I tabled on this subject. At col. 1072 of the Official Report, the Minister stated:
"there is no specific plan to reduce the number of staff engaged in R&D or advisory work, the emphasis is rather on the balance of funding as between the public and private sectors and the priorities we should adopt".
Her noble friend Lord Ferrers, who was on the Back Benches at the time, intervened to ask:
"may I interrupt my noble friend for a moment because she made quite an important statement? I want to get it absolutely clear. Did my noble friend say that the Government did not wish to see any reduction in the amount of work done by research and development and the amount of personnel involved?".
The noble Baroness replied:
"I said that there is no specific plan to reduce the number of staff engaged in R&D or advisory work".
I know that a week in politics is a long time and that that was about 15 or 16 months ago, but it seems that the job losses we have experienced and that we are still to have, do not sit easily with the statement that the noble Baroness made in November 1987. One also remembers the Prime Minister's remark in the now famous speech to the Royal Society, when she said:
"Everyone here, and no one more than myself, will support Whitehead's statements that a nation which does not value trained intelligence is doomed".
There have been a number of contributions to the debate that I wish to comment upon but I know that time is pressing. I wish to say something about the number of references made to set aside by noble Lords. A figure of 12 million acres of agricultural land was quoted in this connection. It was said that that land would eventually be surplus to requirements. Perhaps I may repeat a point which I have made before in this House. There is no such thing as surplus land; there is only surplus food. Low input farming would still use the land, but would reduce the production of food. I make that point to emphasise that this is a very important area for research work; indeed it is the kind of research which, as my noble friend Lady White said, is presently being undertaken at the Liscombe Experimental Husbandry Farm. We must be assured that all the research work into low input farming will be included on the list of research projects which are for the public good, and that it will not be regarded as near market.
There is an interesting sidelight in connection with this matter. A short while ago I wanted to organise a seminar on low input farming. I asked ADAS if it would join in the seminar by sending someone to speak. The organisation said it would not do so if we retained the title of "Low Input Farming"; it would join in only if we altered the title to "Lower Input Farming". That may seem like a connoisseur's distinction, but it is very revealing as to the ADAS ethos of only a few years ago.
There is so much more that I could say, but, as I have said, time does not permit me to do so. Perhaps I may suggest to the Government that they could not do better than to accept the eminently sensible recommendation which is set out in the Select Committee's report in paragraph 4.8. It reads:
"For these reasons the Committee recommend that the Government should make a strong public commitment to agricultural
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and food research, undertaking to provide at least level funding in real terms for a period".
A statement from the Government along those lines would do more than anything else to give some hope to the farming industry and to the agricultural and food research sector.
In conclusion, I should like to emphasise and agree with remarks made by many noble Lords concerning the supply and morale of scientific manpower. This is one of our scarcest and most important national resources. I ask the Minister: if she were now a young and bright science graduate who was deciding upon her future career and upon which discipline to follow, would she dream of going anywhere near agricultural research and development in view of what has happened in recent years? I suspect that the answer to that question—which, I emphasise, is entirely rhetorical—is no. That is perhaps the most serious criticism which can be levelled at the Government.
If the recommendations contained in the report do something to improve the situation and thereby encourage more of our scientific manpower, and womanpower, towards agricultural and food research and development, then the report will indeed have fulfilled a very important function.
2.54 p.m.
Baroness Trumpington: My Lords, I should like first to assure your Lordships that the noble Lord, Lord Shackleton, is not my PR agent. Secondly, I must say that I greatly appreciate the stamina which the noble Baroness, Lady White, has shown by staying until the end of the debate. I also appreciate her extremely courteous remarks to me. Thirdly, I should like to add my own congratulations to those of earlier speakers to my noble friend Lord Butterworth on his committee's thoughtful and thought-provoking report.
The Government are giving careful consideration to the many complex issues which the report raises. I regret that it has not been possible to provide a written response before the debate. However, I shall do my best to clarify as many points as I can to this crowded Chamber, which has actually swelled in number over the past few minutes with unwitting listeners who are waiting for the next debate. The Government will of course provide a memorandum as soon as possible and letters following the debate will be written if so desired.
My noble friend Lord Butterworth, the noble Lord, Lord Shackleton, and the noble Baroness, Lady White, referred to the major recommendation in the committee's interim report for the merger of the AFRC and the NERC to form a new natural resources research council. That recommendation has been reiterated in the committee's final report and will be considered most carefully by the Government.
My right honourable friend the Secretary of State for Education and Science is also expecting advice in the next month or so from the advisory board for the research councils regarding the future disposition of responsibilities for the biological sciences between the four research councils

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concerned. The Government intend to consider the committee's recommendation alongside that advice from the ABRC.
I am sure that your Lordships will appreciate that the Government's overall spending plans are subject to review every year in the public expenditure survey and that I cannot give assurances about the precise level of future expenditure in particular areas. However, I must reassure my noble friend Lord Butterworth and the noble Lords, Lord Mackie of Benshie and Lord Carter, that the Government will understand the need to avoid sudden disruption of research programmes and I want to make clear our commitment to R&D.
First, the Government are committed to maintaining a strong science base. My right honourable friend the Chancellor of the Exchequer announced in the autumn that the science budget for 1989–90 would be £120 million a year more than last year, representing a 10 per cent. increase in real terms. That increase has allowed the AFRC funding from the science base to be increased from £62 million last year to £75 million this year. The Natural Environment Research Council also received increased funding for relevant research. Those decisions reflect the importance that the Government attach to basic and strategic research in the universities and research councils.
Secondly, the money released from withdrawal from near-market research is being redeployed within the Government's R&D base. It is not being taken away from science.
Thirdly, as the agriculture departments withdraw from funding near-market research, increasing emphasis will be given in their programmes to research aimed at public good work in support of statutory functions and policy requirements. I include in that work areas such as conservation, animal welfare, diversification of agricultural production, food safety and nutrition. A new programme of work on salmonella was announced last month.
We recognise in relation to public good and near-market projects that there are borderline cases. There always are in any categorisation. However, we must be clear on this matter. The best way to do so is to illustrate with a few examples. Nitrate work on nitrate leaching is a public good. Work to reduce farmers' expenditure on fertiliser is near market. Slaughter work on stunning and animal welfare is public good. Work on the influences of slaughter practices on meat quality is near market. Programmes on public good may need to be restructured to continue that work in the light of industry's responses on the funding of near-market research; but every effort will be made where possible to transfer work to other sites, and the intention is to maintain projects in the public interest.
In response to the noble Lords, Lord Carter and Lord Mackie of Benshie, perhaps I may set out the programme designed to achieve our goal. The decisions announced following last year's PES included a reduction in funding for near-market R&D of £5 million in 1989–90, rising to £15 million in 1990–91 and to a total of £24 million in 1991–92.
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That is equivalent to £30 million at full economic cost. The announcement also contained an increase in funding of £2 million in 1990-–1, rising to £5 million in 1991–92, for additional research by the agricultural departments in areas such as environmental protection and North Sea pollution.
The noble Lord, Lord Carter, quoted my earlier statements about cuts. What I said then was correct, but he knows as well as I do that the public expenditure survey is an annual process. Reductions in expenditure were announced in last year's Autumn Statement. We have to meet those reductions. That is why I have announced proposals to close establishments. We are now discussing these with industry. I naturally hope that there will be a good response and that industry will take over the funding of work from which government are withdrawing.
Incidentally as regards nitrates and pesticides, the economic effects are near market. Leaching is public good. We are considering relocation of such work at Luddington and Brogdale. In 1989–90 reductions in R&D funding will result in the loss of about 230 jobs in ADAS. The need to achieve ADAS targets for chargeable advice and to increase efficiency will result in a further loss of about 60 jobs. Of course the number of jobs is not the same as the number of people, and every effort will be made to redeploy staff and to save jobs through industry funding of R&D. Thus there is no confusion over the figure of 290. The internal notice to staff quoted in some reports gave some indication of losses in future years, but this will depend on the outcome of consultations with industry.
The committee has suggested that some of the work reviewed by my department and classified as near market should be regarded as for the public good. I think that there may be some misunderstanding here. There were bound to be mixed projects of this kind as long as nearly all research was funded by government. There is no intention in these cases that industry should be asked to bear the cost of the public good parts of the work. The departments' programmes are continually evolving, as some projects are completed and new ones started. The intention is that by 1991–92 these programmes will have been restructured, with all the near-market work phased out if it has not been taken up by industry.
Baroness White: My Lords, perhaps I may ask the noble Baroness whether the department is considering employing a mediaeval theologian. Otherwise I cannot see how it will make all the distinctions it hopes to make before 1992.
Baroness Trumpington: My Lords. I think that to reply would take me even longer than the time the noble Baroness spoke for. Therefore I had better continue my speech and I shall write to her.
With regard to consultations, we consulted industry, sector by sector, on the detail last summer. We are now embarking on a further round at official level. I have a final round of meetings next month. I must assure my noble friend Lord Selborne and the noble Baroness, Lady White, that much information

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has been made available in great detail to all the sectors. The Barnes Report is confidential because it contains advice to Ministers. That is the usual convention. We must complete the transfer to industry funding by 1991–92 so that the benefits of change can be realised as soon as reasonably possible.
My noble friend Lord Elliott of Morpeth mentioned that more research was needed on environmental issues. The Government agree with the importance that the committee attaches to research on agriculture and the environment. Indeed it already supports major programmes of work through departments and the research councils where a new joint programme has recently been announced by the advisory board for the research councils. The need for further developments will be kept under review by departments and the ABRC, taking account of the committee's views.
My noble friend Lord Butterworth spoke about human health and nutrition and the role of the Health Education Authority. The Medical Research Council is conducting a review of research into human nutrition, and earlier this year the Ministry of Agriculture, Fisheries and Food and the Department of Health set up a new liaison committee to co-ordinate their activities in nutrition research and education. Both departments are helping the Health Education Authority in a consideration of how to intensify and expand the authority's work in education about diet and health. I say to the noble Lord, Lord Rea, that meanwhile the nutrition component of the "Look After Your Heart" campaign, run jointly by the Department of Health and the Health Education Authority is being revised and given even greater prominence.
My noble friend Lord Butterworth referred to set aside and emphasised the need for more research on trees, especially broadleaved species. On the matter of set aside, MAFF has in hand a series of five-year experiments on its farms to evaluate different methods of establishing and maintaining set aside of rotational fallows on non-productive green crops. We are also funding research on alternative crops. The noble Lord, Lord Walston, said that my right honourable friend the Minister remarked that not enough R&D was being devoted to set aside. However, my right honourable friend explained to the committee that sometimes decisions have to be taken before all scientific evaluation can be carried out.
I now turn to forestry research. We recognise that trees are an important part of farming. My right honourable friend indicated to the committee last October that total spending by agriculture departments on farm forestry was planned to rise from £0.6 million in 1987–88 to £2.4 million in 1988–89. The bulk of this new research will concern genetic improvement, with special emphasis on broadleaved species, nursery stock, tree protection, nutrition and hydrology of farm woodlands.
Your Lordships' committee was aware of the large number of sponsors of forestry research. This reflects the wide range of interests in trees and woodlands and means that a chief scientist located in one
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department, such as the Forestry Commission, could have only limited influence.
The Government have reconsidered the arrangements in the light of the committee's report and believe that the achievements of the Forestry Research Co-ordination Committee confirm their earlier view of the way in which research needs should be assessed, co-ordinated and implemented. However they recognise that the chairman of the committee may need to discharge some chief scientist-type functions in order to ensure adequate representation of the wide-range research interests in forestry. I am so glad that the noble Lord, Lord John-Mackie, agrees with the Government's view about the appointment of a chief scientist for forestry.
The Government welcome the committee's renewed endorsement of the principle of the customer/contractor relationship, which was reaffirmed by the government response in 1987 to the committee's report on civil R&D. We welcome the committee's recognition of the importance of science to policy-making in my department. However, it also made some critical comments about the way in which my department has operated the customer/contractor principle. I read these with care. The committee has raised a number of important points which the Government need to consider further before a full response can be provided. In the meantime, I am sure noble Lords will not be surprised to learn that I have some initial observations of my own on some of the committee's findings as they relate to MAFF.
I have to say that I am concerned that the committee has gained the impression that some of our contractors are discontented. My department's contacts with our main contractors at the working level do not suggest this. The work we commission may not always be the work that the research councils would have wished to do themselves for purely scientific reasons, but that is precisely why the Rothschild principle was introduced. I would, however, like to reassure your Lordships that we are re-examining our commissioning procedures in the light of the withdrawal of support for near-market research and the changing emphasis in our overall programmes. The main contractors, including the research councils, have been consulted in this major review. The committee's comments will of course be taken into account.
The committee has suggested a redistribution of funding between MAFF and the AFRC. This is an important issue. The allocation of funds between departments is kept under review as part of the normal machinery of government. I have already referred to the alteration in the balance of public support in favour of the science base announced following last year's PES. I cannot go further than this today.
The Government accept that, where appropriate, a surcharge should be paid on government research contracts for the reasons advanced by the noble Lord, Lord Rothschild. However, we remain of the view that flexibility is needed in applying this principle. The MAFF commissions with AFRC do

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not contain a formal surcharge. However, they reflect the long-term nature of the work generally placed with AFRC. They are thus drawn up in consultation with research institutes in a way which, together with funding from the science vote, enables each to undertake a balanced programme.
The committee suggested that changing circumstances now call for a review of the relationship between AFRC and ADAS, leading to an integrated research service based on AFRC. That point was enlarged upon by my noble friend Lord Selborne.
The committee drew attention to the changes in public funding, the introduction of an integrated AFRC/ADAS research programme in horticulture and the possibility of agency status for ADAS. We have followed up the integrated programme in horticulture by a joint study of the scope for reorganisation and rationalisation of facilities in this area and are now studying the conclusions. We shall consider the situation in other sectors in the light of the consultations to which I have referred. We shall take account of the committee's views, but we must also bear in mind the fundamental difference in nature between AFRC and ADAS. ADAS is not solely a research organisation but has other functions closely integrated with those of MAFF. The Government would also be concerned at any distortion of the primary role of the AFRC which a merger with ADAS would entail.
This is British Food and Farming Year. It celebrates the honourable past and present of these vital links in the food chain. Today's debate has been concerned with science which underpins the future of the agriculture and food industries. Agricultural and food science has made and continues to make a major contribution to our society. Major scientific advances have had a dramatic impact on food production and diet. Exciting new techniques are continuing to emerge. The challenge for government is to provide the framework within which these developments can be nurtured and harnessed. I welcome the contribution that our discussion today has made to this continuing debate.
Lord Mackie of Benshie: My Lords, before the noble Baroness sits down—I moved obediently back in to my seat earlier when I wanted to intervene—I wonder whether she can reassure me on the assurance she gave in respect of the money saved on near-market research. She said that it would be applied in the Government's R&D programme. I presume that she meant in the Government's agricultural R&D programme.
Baroness Trumpington: My Lords, the answer is yes.
Lord Butterworth: My Lords, I should like to thank all those who have contributed to the debate today. In introducing the debate I expressed the hope that it would be informative and further illuminate the report. We have not been disappointed. We have heard a most interesting and wide range of views. I trust that my noble friend the Minister and the departments concerned will find what has been said today helpful when they come finally to settle the
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Government's reply. I commend the House to take note of the report.
On Question, Motion agreed to.

Building Societies (Money Transmission Services) Order 1989
3.14 p.m.
Lord Strathclyde Lord Strathclyde rose to move, That the draft order laid before the House on 22nd March be approved [14th Report from the Joint Committee].
The noble Lord said: My Lords, the order before the House is quite technical.
Building societies have a general power to provide money transmission services, in the course of which the account of a customer may from time to time become overdrawn. Although building societies have power to provide overdraft facilities to individuals, they have no equivalent power to provide overdrafts to companies, and this has prevented them from competing fully for this service.
Allowing this service to be provided to companies may also help societies to meet the volume criteria required for membership of the clearing systems. I should point out that it has the full support of the Building Societies Association.
This order will not allow continuing unsecured lending by a building society to a company in the form of a permanent overdraft. The Government believe that societies should continue to be limited to making unsecured loans only to individuals. The order does not represent a departure from that policy. I commend the order to the House. I beg to move.
Moved, That the draft order laid before the House on 22nd March be approved [14th Report from the Joint Committee].— (Lord Strathclyde.)
Lord Bruce of Donington: My Lords, we on this side of the House rarely find ourselves in any kind of accord with policies emanating from Her Majesty's Treasury, nor, for that matter, from Her Majesty's Department of Trade and Industry. So it is rather a unique occasion for us to be able to give our general support to a comparatively minor matter of this kind. I trust that the noble Lord will not take our assent to the order as reflecting any degree of softening in our implacable resistance to most of the policies that emanate from the Government in the financial and monetary field, but we do not see any particular harm in this measure.
There is just one small question that I must ask the noble Lord before giving the House our formal expression of approval. Why is there a limit in paragraph 7(c) of the order, which deals with Class 3 asset limits? It states:
"where a facility account holder holds other accounts with the society, the value of any shares or deposits in those other accounts shall not be taken into account".
I can understand why shares should not be taken into account, but what is the reason for not permitting offset of any other balances before arriving at the conclusion?

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A similar observation applies to paragraph 6(b). Once again, one can understand that shares should not be taken into account, but why is there no offset in respect of deposits? I am quite sure that the noble Lord has the answers at his fingertips. If he could answer that small point, for our part we are happy to facilitate the order.
Lord Strathclyde: My Lords, I am extremely grateful for the general welcome that the noble Lord, Lord Bruce of Donington, has given to the order. However, I must also say that I know that his implacable resistance to the Government's policy towards financial matters will remain totally undiminished.
The noble Lord asked a specific question about the order concerning Class 3 asset limits. Perhaps I may briefly explain what I mean by class assets. Class 1 assets are advances secured on residential land, Class 2 assets are generally advances secured on other land and Class 3 assets are generally other loans, residential land itself and interests in bodies corporate. We have included deposits because a deposit is just as much a debt in itself as a share account. If the noble Lord requires any further clarification, perhaps I may write to him.
Lord Bruce of Donington: My Lords, I am obliged to the noble Lord.
On Question, Motion agreed to.
House adjourned at nineteen minutes past three o'clock.