Lords Sitting of 23 March 1989

Preamble
The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack:
Prayers—Read by the Lord Chancellor.

Wastes: Imports Policy
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they propose to prohibit the import of wastes which are destined for disposal by direct landfill, without assessment or treatment.
The Minister of State, Department of the Environment (The Earl of Caithness): Yes, my Lords.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply, which is very welcome. Unless waste is coming specially for treatment in this country we can do without it. We have enough of our own to dispose of, in any case. Can my noble friend tell me whether legislation is required, or can prohibition be put into effect straight away?
The Earl of Caithness: My Lords, legislation is required. A new Bill will have to be placed before Parliament, and we hope to introduce it in the next Session.
Lord Gainford: My Lords, can the Minister tell the House what happened in Basle?
The Earl of Caithness: My Lords, considerable progress was made, but it was not until the final minutes that any kind of agreement that could form a convention was reached. There were last-minute negotiations in which the United Kingdom played a very active part. As with many countries, although we have been unable to sign the convention because of last-minute changes of wording it was a first step on the road to getting a better policy for waste in general. These developments arose in the last 24 hours. Because other member state Ministers were there I took the opportunity to stress the importance of tackling all wastes and not just the hazardous ones.
Lord Dean of Beswick: My Lords, as regards the announcement made by the Minister concerning the introduction of a Bill to deal with this problem, can he say whether the time-scale in another place and in your Lordships' House rates the Bill with a high priority? To supplement the point raised by the noble Lord who introduced the Question, surely we already produce enough of our own waste because of our industrial base. We should limit ourselves to dealing with that and exclude waste from other people. Can the Minister tell us whether the Bill will have a high priority in the Government's legislative programme?
The Earl of Caithness: My Lords, of course we treat this matter as having top priority. That is why
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for the past three years we have been considering the whole of the waste law. We have carried out three consultation exercises, the last of which has just finished. That referred to the question of who should be the responsible body for the disposal of waste. The noble Lord will recall that the Government have come down firmly on the side of supporting the existing waste disposal authorities.
Lord Dean of Beswick: My Lords, can the Minister say whether we can expect a Bill in the next Session of Parliament?
The Earl of Caithness: My Lords, I hope that we shall be able to legislate within the life of this Parliament and I very much hope that it will be in the next Session.
Lord Campbell of Croy: My Lords, is my noble friend aware that while the Basle conference from which he has recently returned dealt with toxic wastes, my Question is mainly concerned with those that are supposed not to be toxic? The early action that he has indicated will be widely appreciated because there is always a risk that waste that is supposed to be not dangerous and which comes into this country without inspection will contain hazardous substances.
The Earl of Caithness: My Lords, my noble friend is absolutely right. I shall go a stage further than him by saying that any waste, if it is not dealt with properly, can be hazardous, and that includes domestic waste. That is why it is important to look at all the waste and not just concentrate on one category. I am grateful to my noble friend for the debate that he initiated the other day in your Lordships' House and for this Question in order to make the position clear.

Brown Bread and Cereals: Radio Report
11.11 a.m.
Lord Molloy Lord Molloy asked Her Majesty's Government:
Whether they are aware of a health risk from brown bread and other cereal products, as reported on BBC Radio 4 on 13th March.
The Parliamentary Under-Secretary of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): No, my Lords.
Lord Molloy: My Lords, I can understand that perhaps the noble Baroness did not hear the report on the BBC that has given grave concern to millions of families. I hope that the noble Baroness will take note of that. It was a report from the Ministry of Agriculture which stated that brown bread, crisps and many other items were affected by a pesticide in which the toxic chemicals were above the limit. The Ministry is concerned about that. This subject was taken up by numerous newspapers. The Ministry's working party said that there is no serious or grave danger, but it is something that we should take note of. I hope that the noble Baroness will accept that.
Baroness Trumpington: My Lords, the Radio 4 programme to which the noble Lord refers was picking up points made in a Guardian article as regards bran residues in grain. That was also inaccurate. The programme was broadcast before our report went out. The report of the working party on pesticide residues which was published on 13th March shows that residue levels in food in the United Kingdom are within safe limits in almost every instance.
Lord Renton: My Lords, is my noble friend aware that many of us where brought up to believe that white bread was not very beneficial to health but that wholemeal bread was the best? Is that a view that is accepted by her department?
Baroness Trumpington:My Lords, all kinds of bread are entirely safe. Residue levels in the bran tend to be higher than in the rest of the grain. Therefore, it can be expected that residue levels in wholemeal bread and flour may be higher than those in white bread and flour. However, residue levels in wholemeal products were found to be below the MRLs.
Lord Mellish: My Lords, is the Minister aware that her Answer was very refreshing because it was so different from the replies of Mrs. Edwina Currie? The noble Baroness had the courage to say "No". In other words, she said that food is all right. I am sure that I speak for most housewives when I say that we are ever so grateful.
Baroness Trumpington: I have referred to myself as the poor man's Edwina.
Lord Leatherland: My Lords, may I ask a staight question? Is it safe for us to continue eating brown bread?
Baroness Trumpington: My Lords, it is indeed. We are talking about maximum residue levels known as MRLs. They are widely misunderstood. They are not safety limits. Their primary aim is to ensure that good agricultural practice in the use of pesticides is being followed. Just because an MRL is occasionally exceeded does not necessarily mean there is a risk to the consumer.
Lord Gallacher: My Lords, is there not a case for the Ministry of Agriculture asking the media to take a more balanced approach when commenting on food matters? One sometimes finds within the same newspaper advice to do and not to do, and within the same broadcasts similar information is coming across. Is this not confusing and bewildering to consumers? Would it not be appropriate for both the Minsitry of Health and the Ministry of Agriculture to use their best endeavours to ask the media to be more balanced in their comments?
Baroness Trumpington: My Lords, I agree with the noble Lord, but it is a free press, as everybody knows. However, it is a reason why the Department of Health and the Ministry of Agriculture, Fisheries and Food continually publish leaflets which endeavour to
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give a balanced and correct view of the safety of food and indeed of all matters pertaining to those two departments.
Lord Chelwood: My Lords, am I right in thinking that white bread no longer contains agene which drives dogs mad and possibly noble Lords as well? Is my noble friend aware that, while I believe in eating and drinking everything in moderation, there is a good deal of public anxiety about this subject? Will the Government consider publishing a White Paper setting out what can be drunk or eaten with comparative safety? It would not take more than one paragraph, would it?
Baroness Trumpington: My Lords, I take note of all my noble friend's remarks.
Lord Bottomely: My Lords, is the noble Baroness aware that today is the birthday of my noble friend Lord Jay?
Noble Lords: Hear, hear.
Lord Bottomley: My Lords, is she further aware that for more than three score years both he and I have consumed brown bread? I do not think that we look as though we have been harmed by doing so. I am sorry to disappoint my noble friend Lord Molloy.
Baroness Trumpington: My Lords, I should like to congratulate both noble Lords on their extremely healthy appearances.
Lord Molloy: My Lords, I thank the noble Baroness for her later replies. This concern arises from a report by the Ministry of Agriculture. I submit that it is a serious report. One can be jocular about things but when alarm is caused the jocularity has to stop and seriousness must take over. Is the noble Baroness aware that there is also a report from the Home Grown Cereals Authority on the interaction between pesticides and cereal grains? Will she see to it that both these reports, which are of great importance to the country, are examined? Could not some of the scaremongering be stopped by quoting from those offical reports?
Baroness Trumpington: My Lords, the Government regularly monitor bread and cereal products as well as a wide range of other foods. The results of that monitoring were published. The report gives no evidence to suggest that there is any risk to consumers. Indeed, it finds that residue levels in food in the United Kingdom are generally low.

Pensioners: Abolition of the Earnings Rule
11.17 a.m.
The Earl of Shrewsbury The Earl of Shrewsbury asked Her Majesty's Government:
What is the effect on working pensioners of the abolition of the earnings rule.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Skelmersdale): My Lords, the abolition of the earnings rule is good

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news for pensioners. From 1st October not only will they be able to receive their full state pension but they will also be able to have unlimited earnings. The new system will give more choice and flexibiliity for older people who want to carry on working.
The Earl of Shrewsbury: My Lords, I thank my noble friend for that most encouraging Answer which fulfils yet another commitment in the Conservative Party's 1979 manifesto. How many pensioners will benefit from this excellent and most welcome move?
Lord Skelmersdale: My Lords, this is indeed a very welcome move and, as my noble friend said, has fulfilled a longstanding manifesto commitment. It will be for individual earning pensioners to consider whether they will be better off deferring their pension for up to five years. Currently 200,000 pensioners earn over £75 a week. That includes wives who claim a pension on their husband's contributions. Indeed, 2,500 people will benefit immediately because their pension is currently reduced because of earnings of more than £75 a week. We also estimate that there are currently 200,000 earning less than £75 a week who may choose to earn more. And of course there are all those future pensioners who may want to continue to earn.
Lord Mishcon: My Lords, can the Minister say whether planted Questions are dangerous to eat?
Lord Skelmersdale: My Lords, as a horticulturalist, I am very fond of plants.
Lord Boyd-Carpenter: My Lords, can my noble friend assure the House that in the publicity which his department handles in this matter the alternative of deferring retirement and thereby earning an incremented pension will be clearly put before those to whom this concession would otherwise apply so that they are not excited by it into doing what might not be in their case in their best interests?
Lord Skelmersdale: My Lords, my noble friend is of course quite right; indeed he has long expereince in such matters. That is why I prefaced my last answer by saying that it will be for individual earning pensioners to consider whether they will be better off deferring their pension for up to five years. The department cannot tell them what to do but their financial advisers can. Deferment is most valuable; for example, if it is a full five-year deferment it enhances the value of the pension by 37·5 per cent.
Lord Peston: My Lords, perhaps the Minister can clarify one aspect of the change which has taken place. Am I right in assuming that the earnings of pensioners, should they choose to work, will simply be subject to taxation in the normal way? Further, will it be the case that their pension will be added to taxable income and will also be taxed, or will it be free of all tax?
Lord Skelmersdale: My Lords, pensions have always been taxable. Therefore the answer to the noble Lord's question on both counts is yes.
Lord Monson: My Lords, will the Minister agree that to the extent that state retirement pensions are actuarially funded by national insurance contributions, the abolition of the earnings rule is entirely to be welcomed? However, will he further agree that, to the extent that such pensions are funded not by contributions but out of current taxation, a somewhat different reaction may be in order? For example, why should young couples struggling to bring up a family and to pay off a mortgage be expected to subsidise from their taxes physically fit, economically active and increasingly prosperous men of 65 and women of 60?
Lord Skelmersdale: My Lords, I think that I need a little notice for a question of such complexity. However, I can say that the noble Lord is only half right. A pension is a contributory benefit and if full contributions are not paid, the pension is reduced. But I agree with him in that today's contributors pay for today's pensions.
Lord Campbell of Alloway: My Lords, if one is an OAP like myself, can one now defer one's pension up to the age of 75 because of the tax implications? At the moment one can defer it up to the age of 70.
Lord Skelmersdale: No, my Lords, the rules on deferment will stay exactly the same as they have been heretofore. One is only allowed to defer a pension for five years.
Lord Morris: My Lords, will my noble friend comment upon the suggestion made by the noble Lord, Lord Mishcon, that the value of the Question is somehow diminished because it happens to give credit to our party?
Lord Skelmersdale: My Lords, it never ceases to amaze me how rarely good news is welcomed by those on the Benches opposite.
Lord Lucas of Chilworth: My Lords, can my noble friend tell the House how many old-age pensioners who may be able to take advantage of this arrangement do in fact have financial advisers? Does he not think that it would be more helpful to them if guidance were available through leaflets published by the department?
Lord Skelmersdale: No, my Lords. Of course I cannot say how many pensioners have financial advisers. However, what I can say is that we plan to write to all the individuals concerned.
Viscount St. Davids: My Lords, has my noble friend noticed that as a result of this change a rush has already started of pensioners who are able and intelligent and who want work taking part-time work behind the counters of major stores, where there has been a marked shortage of workers because of the present levels of employment?
Lord Skelmersdale: My Lords, I think that that trend started rather before my right honourable friend's Budget last week. However, I take the point that this change is also good for the labour market.

Nitrate Pollution in Drinking Water
11.23 a.m.
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
What is their policy towards the latest EC draft directive aimed at toughening nitrate pollution standards in drinking water (COM(88)708,4136/89).
The Earl of Caithness: My Lords, there is no new draft directive aimed at toughening nitrate pollution standards in drinking water. However, the Government broadly support the recent proposal from the European Commission for a directive which puts forward a range of measures designed to protect surface and groundwaters and coastal waters from pollution by nitrate.
Lord Hatch of Lusby: My Lords, is it not the case, as has been reported, that the Brussels Commission is considering taking legal action to enforce the higher standards which the rest of the EC insist upon for drinking water? Does that not have a direct effect on the Water Bill now going through Parliament? Will clauses in the Bill have to be changed? Moreover, is the Minister aware that only yesterday his right honourable friend stated that it would take something like £2·5 billion to put our drinking water into the cateogry which is insisted upon by the EC?
The Earl of Caithness: My Lords, I do not think that any of the supplementary questions which the noble Lord asks me relate to the Question on the Order Paper, which is about the new draft directive. However, he is mistaken in thinking that there is a discrepancy between the rest of the Community and ourselves; indeed, we all insist upon the same standards.
Lord Hatch of Lusby: My Lords, surely the EC has set higher standards than those which are at present being insisted upon by the British Government? Is that not the case? If it is not, there have been many false reports emanating from Brussels as to the action which the EC intends to take to insist that our water suppplies, so far as both nitrates and pesticides are concerned, are brought up to its standards.
The Earl of Caithness: My Lords, the standards are consistent throughout Europe; every country has difficulties in meeting the standards of the existing directive both for drinking waters and for bathing waters. Indeed, I saw that there was a case in Germany only 24 hours ago where the authorities had to stop pumping up the water supply because of excess nitrates in that particular area. As I said, every country is facing problems in meeting the levels set by the directive.
Lord Nugent of Guildford: My Lords, is my noble friend aware that the slant of the Question gives the impression that the drinking water supply in this country has been defective in the past? Is he also aware that it has conformed with the World Health Organisation's standards, which have always been thought to be perfectly adequate? However, now that
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the European Commission has insisted upon a higher standard, naturally we must conform with it. Is he further aware that, so far as I am concerned, I would drink water with every confidence in any part of this country, while there are very few countries in Europe in which I would do so?
The Earl of Caithness: My Lords, my noble friend is absolutely right. The drinking water in this country is perfectly safe to drink. Indeed, we have more connections to the mains than any other country in Europe. Moreover, I do not think that there is any other country in Europe where one can be totally confident when drinking water out of a tap.
Lord Monson: My Lords, important though the reduction in the nitrate level of our drinking water undoubtedly is—here I must disagree somewhat with the noble Lord, Lord Nugent of Guildford—does the noble Earl agree that this is purely an internal British matter which has nothing to do with facilitating the free flow of goods and services between the member states of the EC?
The Earl of Caithness: No, my Lords; I do not agree. If we have signed a directive in Europe, we shall honour it, and other countries will also do so. As my noble friend Lord Nugent said, we must now improve our already good standards.
Lord John-Mackie: My Lords, as agriculture has been blamed for the nitrates in water, can the Minister say whether any costings have been done to see if it would be cheaper to clean up the water or buy in foreign wheat?
The Earl of Caithness: My Lords, there are a number of areas at which we are looking in respect of the nitrate problem, as the noble Lord knows. My right honourable friend the Minister for Agriculture, Fisheries and Food made a recent Statement in another place on the matter.
Lord Renton: My Lords, is this not a matter in which prevention is better than cure?
The Earl of Caithness: My Lords, I think that prevention is always better than cure. However, we face a problem at present and we must deal with it.
Lord Addington: My Lords, if our water is so safe, why do we have an unpleasantly high increase in bottled water sales? Further, are not people—not in my native area of Norfolk—quite right to be worried about the levels of nitrates in their water, which have been on numerous occasions well above the 50 milligram limit?
The Earl of Caithness: My Lords, the water is perfectly safe to drink. Indeed, I have been to Norfolk on many occasions and have drunk water there quite happily. We do conform to the standards required. What the EC has done is to set even tighter standards and therefore we must improve, as must other countries. Whether to buy bottled water is entirely a choice for the consumer.
Lord Dean of Beswick: My Lords, have not some areas of the country had the benefit of the supply of good quality water in the world, although some other parts are not so well served and are below that standard? Would it not be better for the Government to strive for equalisation of the quality of water supply to the best that we have?
The Earl of Caithness: My Lords, that is our policy.
Lord Hatch of Lusby: My Lords, following the question put by the noble Lord, Lord Addington, regarding Norfolk, is the Minister aware that last week water supplies to Norwich were declared not to be up to EC standards: His honourable friend Mr. Howard went to Norwich to inspect the water. It was categorically stated by an official that the water in Norwich was not up to EC standards and was being affected by nitrates and fertilisers. A statement was made that nothing could be done about the fertiliser element until there was a national policy. When are the Government going to observe a national policy in the light of the EC directives?
The Earl of Caithness: My Lords, it is well known that a number of water supplies in this country do not meet EC standards. There has been a great deal of expenditure to meet them. But that does not mean what the noble noble Lord implies—that the water is unsafe to drink.

Business
Lord Denham: My Lords, with the leave of the House, it may be for the convenience of your Lordships to know that on Friday, 7th April the House will sit at 9.30 a.m. and not at the customary time of 11 a.m. The reason for this earlier start is that some 47 speakers have expressed a wish to speak in the debate on the Green Paper of my noble and learned friend the Lord Chancellor on the legal profession and legal services. Starred Questions will be taken at the beginning of business as usual.

Transport (Scotland) Bill
11.32 a.m.
The Minister of State, Scottish Office (Lord Sanderson of Bowden): My Lords, I beg to move that the Bill be now read a second time. It has been the subject of much debate and scrutiny in another place and I am sure that it will be the subject of useful debate here. The purpose of the Bill is to make provision for the privatisation of the Scottish Bus Group, to transfer the ownership of Caledonian MacBrayne to the Secretary of State and to provide for the Scottish Transport Group to be dissolved. The three parts of the Bill deal with those three aspects.
In privatising the Scottish Bus Group the Government have a number of important objectives. First, we wish to promote sustained and fair competition in the bus industry. Competition will encourage efficiency and responsiveness to the
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consumer. Secondly, we are seeking to widen share ownership, and in particular we shall be encouraging management and employees to acquire a controlling interest in the firms for which they work. Thirdly, we wish to establish independent, locally based companies which will be responsive to the interests of bus users and in touch with their local markets.
The privatisation will complete the process, begun with deregulation, of freeing the bus market of the restrictions of regulation and public ownership under which it has operated for many years. Deregulation has been a success. Far from leading to a decline in bus services generally, which some predicted, deregulation has led to an increase in the number of vehicle miles operated. New operators have emerged and there has been innovation in the types of bus service provided. Local authorities have not been slow to use their subsidy powers to ensure the provision of socially necessary services—often at lower subsidy cost than before—and the network of rural services remains largely intact. Now that deregulation is complete, and in particular that fears over rural bus service provision in Scotland have proved groundless, there is no reason for the Scottish Bus Group not to take the next step of privatisation. The decision to privatise it in 11 units—that is, nine bus operating subsidiaries, together with the coaching firm Scottish Citylink and SBG Engineering—will create 11 independent companies in place of a single large, dominant nationalised concern. That will be to the advantage of the bus user who can expect the new companies to play a more vigorous role in stimulating competition and improving bus services along with the many private sector operators already established.
I have mentioned that we wish to encourage management employee buy-outs, and my right honourable friend the Secretary of State for Scotland has made clear the basis on whch that will be done. First of all, we shall be giving financial assistance to one management employee team per company to help with the cost of the professional advice necessary to mount a bid. Secondly, the Scottish Transport Group has already held a series of seminars with management and a video is in preparation which will be shown at all depots so that all employees are aware of the issues involved. Thirdly, we have made it clear that in assessing bids for companies we shall give a preference to bids where there is a high level of employee participation. The share-owning structure of a bid is of course a matter for those responsible for developing the bid.
There are various ways of achieving significant employee participation. Employees might have an opportunity to subscribe for shares for cash. There might be an employee share ownership plan under which a proportion of shares is set aside for employees under a profit-sharing trust arrangement. Such plans, known as ESOPs, have become increasingly popular recently. The Chancellor of the Exchequer announced in his Budget speech a number of measures designed to encourage employee share ownership, including new reliefs for ESOP trusts. There are two changes of particular importance in the context of this privatisation. First, the annual limits on the value of shares which can be given tax

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free to employees under all-employee share schemes have been increased. Secondly, the Finance Bill will make it clear that companies' contributions to ESOP trusts to acquire shares on behalf of employees will qualify for corporation tax relief provided that they meet certain conditions designed to ensure that the employees acquire direct ownership of the shares within seven years of their acquisition by the trust.
We hope that bids will emerge which will give employees a substantial share in their company. While preference will be given to bids by incorporating significant employee participation, that preference cannot be overriding and if a bid is to have a good chance of success the price offered will need to be realistic and relevant to the value of the assets of the company being sold. No company will be put up for sale until the management and employees have had reasonable time in which to mount a bid. The basis on which the sales will take place will be set out in the statutory disposal programme which the Secretary of State will draw up in consultation with the Scottish Transport Group.
The other part of the Scottish Transport Group is Caledonian MacBrayne. It provides essential ferry services on the west coast of Scotland. It has a long history going back to the firm of David MacBrayne which introduced steam ships to the west coast and the Caledonian Steam Packet Company which ran services in the Clyde.
In the context of privatising the Scottish Bus Group and dissolving the Scottish Transport Group, we looked carefully at a range of options for the future of Caledonian MacBrayne. Taking account of the many views expressed to us we decided that the best arrangement for Caledonian MacBrayne was that it should become a company owned in the first instance by the Secretary of State. That decision recognises that for the most part the services provided by Caledonian MacBrayne are not profitable and a subsidy of about £6 million a year is required to provide those socially essential services. The Bill therefore provides for the transfer of Caledonian MacBrayne to the ownership of the Secretary of State.
However, we also want to look to see whether the present structure and methods of operation of Caledonian MacBrayne can be improved in order to get better value for money. Once the company is transferred to the Secretary of State he will be appointing a new board for the company. A clear undertaking has been given that although we want a wide spread of experience of commercial and shipping matters on the board, we would look for such persons among those who are resident in the islands. We are anxious to ensure that Caledonian MacBrayne is responsive to its customers. As part of that process the Secretary of State has said that he would like the new board to look at the possibility of moving its headquarters nearer to the centre of the area which it serves. He has suggested that Oban would prove a suitable place for this purpose. I am aware that this suggestion is strongly opposed in certain quarters. However, I am sure that when considering the best arrangements for its headquarters, the new board will take careful
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account of the views of both management and employees and consult them fully before reaching a decision.
The new board will also be asked to look at the possibility of transferring to the private sector two routes at present run by Caledonian MacBrayne: the Gourock-Dunoon and the Wemyss Bay-Rothesay routes. The private sector already runs an unsubsidised crossing between Gourock and Dunoon and that appears an anomalous situation. No options for the longer term will be excluded from consideration by the new board subject to the overriding proviso that it must ensure that at least the present quality of service to the islands is maintained. I consider that with its own board and independance, Cal-Mac will be well placed to continue to provide an improving and cost-effective service to the islands.
The Bill provides for important changes in the organisation of a major part of Scotland's public transport system. It offers the prospect of more competition in the bus industry with a number of companies replacing a single nationalised operator. It offers the prospect of Caledonian MacBrayne with its own board taking a fresh look at how it can continue to serve the islands and improve its services.
I commend the Bill to your Lordships.
Moved, That the Bill be now read a second time—( Lord Sanderson of Bowden.)
11.40 a. m.
Lord Carmichael of Kelvingrove: My Lords, first perhaps I may thank the Minister for his explanation of the Bill and his commendable brevity. He went through the Bill explaining the purpose of the Government. Since he has been through the proceedings in another place and knows the bare bones of the Bill, he will no doubt be aware that the provisions have been thoroughly raked over there.
I do not propose to speak for long today but I wish to raise a number of important points. As the Minister said, there will be the opportunity at Committee stage to go into them more fully. The noble Lord will realise that competition was a matter which worried Members who examined the Bill in another place—and not just immediate competition. The assumption that privatisation immediately leads to competition of a healthy nature is not borne out by some of the results arising from the deregulation Bill. In this case my colleagues in another place tried very hard to find out what defence there would be against a privatiser coming along after the ultimate creation of 11 new companies and combining them into one conglomerate. There seemed to be no way of preventing this.
Although I accept that it may be necessary to look again at the Scottish Bus Group, I am not sure that big is beautiful, certainly not where there is no way in which the consumer can have an effective voice. It is all very well saying that competition gives that effective voice, but we could reach the point where the consortium of 11 different companies, particularly after 1992, could be controlled from somewhere far removed from Scotland. It could be decided in a boardroom in Dusseldorf or Dublin that a bus

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service was no longer needed in a particular place. Very little could be done; that service could be withdrawn. So often in Scotland we have seen companies from abroad suddenly making a decision to close down even a profitable or relatively profitable operation, for instance in engineering, wood pulp or aluminium.
I wish to know whether there will be a mechanism to prevent the amalgamation of the 11 proposed companies, or a significant number of them, so that we do not reach the quasi-monopoly stage. I imagine that whoever owned or took over the Scottish Bus Group engineering side could have a strong grip on the future of buses in Scotland. Through the control of good workshops and the spare parts vital to the bus industry, the owner could have a very strong grip on the industry.
I must raise a couple of other points on the buses and I give the Minister notice that they will be raised very strongly in Committee. In another place, the Minister responsible refused to go very far in giving an assurance that the cost of the purchase of the companies would be made clear. He said that commercial confidentiality made it wrong for him to say how much a company was being bought for. I find it quite incredible that a public asset should be sold and that we, the public who have built up the company over the years, should not know the price. According to Lord James Douglas-Hamilton, the Under-Secretary in another place, he would not be able to state the price. I hope this House would take a rather different view.
I was pleased how far the Minister went in discussing the employee-management takeover. However, it will need careful examination. He has gone a great deal further than we expected. Although no concessions were made to my colleagues in Committee in another place, some of their warnings, pleadings and cajolings have obviously struck a chord in the Scottish Office. We have gained a great deal more than was given in another place, according to my reading of the Committee stage of the Bill.
I think that it is not enough merely to give management assistance in the buyout. We want more for people who have given the whole of their lives to an industry than technical and financial assistance. I hope that when we have examined closely what the Minister says today we shall be slightly more reassured. I do not believe that financial advice is enough. Videos and seminars with management were also raised in another place. We feel that if employees are to be part of the set up in a management-employee takeover, perhaps at least their representatives should be involved in the early discussions.
The Minister will no doubt be aware of another great cause for disquiet which came out in Committee and in the Scottish press over a number of months. It was the matter of asset stripping, particularly the example given of a Scottish company which has done extremely well. It has a mixed reputation, to put it no stronger. Some people think that Stage Coach is wonderful, some people do not put its standing quite so high. Undoubtedly the South Hampshire buses were bought by Stage Coach for £2 million. One of the points I wish to make, referring back to the Minister not divulging the cost
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of the sale, is that the price always comes out. We shall find out at some point—the press in Scotland are very good at finding these things out. It was discovered that the South Hampshire buses were bought by Stage Coach for £2 million. Within a fortnight, two of the bus stations were sold for £4.1 million. That is rather good business, if you manage to get hold of it.
In Scotland it is estimated that the Glasgow bus station is worth about £4 million. But the Edinburgh bus station is right in the heart of St. Andrew's Square, where all the banks and insurance companies are hungry for land. An estimate of about £15 million is put on that St. Andrew's Square bus station. I wonder whether the Minister care give us any reassurance on that point.
I am speaking for longer than I had intended. The other main part of the Bill concerns MacBrayne's. All of us in the West of Scotland know MacBrayne's: they get blamed for everything. The firm is a great Aunt Sally, it is part of the culture of the west coast of Scotland. The Secretary of State announced that there would be a new board for MacBrayne's, and we are very anxious to find out who is likely to be on that board. A tally was made and all the Tory MPs who lost their seat at the last election have been fixed up with something. Perhaps some of those MPs should be offered a little more, if we are to get new blood on the board.
As regards the removal of the headquarters to Oban, I think Oban is a lovely town and it is one of my favourite places, but I do not see why there should be the expense and upheaval of moving the headquarters there, or to any other place away from Gourock, unless the Government are ready for a very quick sell-off of Clyde Western Ferries. If Clyde Western Ferries is sold off and taken away from MacBrayne's altogether, it could lead to some difficulties in terms of the flexibility of ships. In a number of cases in the past ships have had minor accidents and have had to be repaired. When that occurred, the larger fleet could be mobilised and the problems that could have arisen were avoided.
It will be interesting to see how the Scottish public reacts to the privatisation of Clyde Western Ferries. The last time the Government thought of nationalising Clyde Western Ferries in the early 1970s, public opinion was so strongly against it that they had to abandon the idea.
The Government have learnt a fair amount from the Committee stage of this Bill in another place, although they did not admit that at the time. I think the only amendment that was accepted was one moved by my honourable friend the Member for Aberdeen, North, when he succeeded in getting "may" turned into "shall". But, having said that, I believe we will have the benefit of what happened in another place. The Government have had a chance to think over some of the very important points that were made in another place. Some or those points were made by members of the Minister's own party. I hope that in Committee we can go even further towards making this Bill more relevant to the needs of Scotland than appears to be the case at present.
11.52 a.m.
Lord Tordoff: My Lords, I have the temerity to join in a Scottish debate. I apologise that my Scottish colleagues have already left for their Easter break. Having listened to the weather forecast and seen the scenes of snow and devastation in Scotland, I think that perhaps they are wiser than noble Lords who have stayed here for the debate. I shall be as brief as I can, because obviously noble Lords on all sides of the House who are going to Scotland will wish to get there as quickly as they can.
This Bill is curious in that on the one hand it is a privatising Bill, but on the other hand it is a nationalising Bill. The buses are being privatised, but the shipping is being nationalised. That must put the Government Front Bench in rather a theological whirl about.
I hardly wish to welcome the Bill. It seems to me to be a little doctrinaire in relation to the privatisation of the buses. However, once one accepts that privatisation will take place, one has to commend the Government on the way they have handled many parts of the Bill. I refer particularly to the management employee buy-out and the concept of management-employee ownership. That concept is obviously strongly supported by the Government in this case, even perhaps at the expense of obtaining a little more money for the taxpayer. I believe that concept is absolutely right, and that out of it will come perhaps the most efficient form of organisation that one could hope for. There is no doubt that National Freight has been a very good example of what can happen in that direction.
I was very glad to see that the Secretary of State made the distinction between management-employee buy-outs and management buy-outs. There is an important distinction there which has not always been made in the past by the Government Front Bench. We are glad that for the time being a monopoly is being avoided. I know that my honourable friends who represent Border constituencies in another place are particularly glad that the lowland Scottish company is being maintained as an integral unit.
Nevertheless, there is a natural tendency towards an eventual monopoly in these situations. We are not satisfied that there are sufficient safeguards to stop predatory purchases further in the future. One would like to see some safeguards built into the Bill. The English experience so far is of larger operating companies buying up smaller operating companies. That trend will, in the end, lead to a monopoly if one is not careful. So one must ask the Minister what safeguards the Government envisage at the moment. One must further ask the Minister to consider at a later stage amendments to the Bill which might build in safeguards.
The noble Lord, Lord Carmichael, referred to asset stripping. That is obviously a serious matter. The idea that parts of the company can be bought out and then stripped of their assets of bus stations is not merely sharp practice but also does not help to run a good bus service. If all the bus stations are sold off, a good bus service cannot be provided.
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There are still fears for rural services, in spite of what the Government say. It is true that so far rural services have been maintained by means of subsidies from local authorities, but the pressure is on local authority finance all the time to reduce that subsidy. In the English counties, and indeed in my own county of Somerset, there are considerable question marks over whether some of the rural services can be subsidised to the level necessary in the future. As the Government are prepared to recognise the social need in relation to the shipping part of this Bill, I hope they will continue to recognise that there is a social need in rural areas and that taxpayers' money up front may be needed to maintain those services.
The other area which I think we shall probably get into in Committee is the question of staff pensions. We may have a re-run of some of the debates we had when the buses Bill was going through this House a few years ago. I still maintain as a matter of principle that if the Government are going to force a change in these matters, the employees who have been looking forward to certain pension rights should certainly not find themselves in a worse position than they otherwise would have been. Some progress was made on that issue in the buses Bill, but the situation was far from satisfactory in the end. I hope that we can make some more progress this time.
As regards Caledonian MacBrayne, I am glad that the Government recognise the social need there and are prepared to subsidise it. The Secretary of State is proud of the fact that the subsidy has been reduced over the past three years. However, he should not be complacent about that because reduced oil prices have been a factor and there are signs that oil prices may increase. Therefore, it may not be possible to continue the reduction in subsidy. I hope that the reduction will not continue if there is a need for further subsidy.
What can I say as regards the move to Oban, other than state that my honourable friend in another place, the Member for Argyll and Bute, is very pleased at the thought of the headquarters moving to Oban? As she is a true daughter of the late lamented Lord Bannerman who sat on these Benches several years ago, and therefore a figure not to be argued with, all I can say is that I support her in that view.
Lord Carmichael of Kelvingrove: My Lords, just to show that there can be different points of view in Scotland, I should say that my honourable friend in another place who represents the Western Isles thinks, strangely enough, that things would be better left as they are.
Lord Tordoff: My Lords, as I read the proceedings in another place, the honourable Member was not there at the time of the Third Reading. But I may be doing him an injustice. I am glad to have that information, but as I say I do not want to get into these theological disputes north of the Border.
Membership of the board was also raised by my honourable friend in another place with particular reference to the appointment of local people. I agree with the noble Lord, Lord Carmichael, that it is very important that members of the board should not be

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only government appointees. The debate that we had yesterday raised grave doubts about the way in which some appointments have been made by the Government. I hope that in this case the local interest will be seen as paramount and the members of the board will not be solely party appointees.
With that, and in the hope that simultaneous translation has not been necessary for what I have said, I look forward to the Committee stage of this Bill with interest.
12.1 p.m.
Lord Teviot: My Lords, in broad measure I support what the Government are doing in this Bill. I believe that returning the companies to the private sector, where they were born and grew up, is a logical step given that deregulation has already taken place in Scotland. There is little case for bus operations in Scotland remaining nationalised industries. However, as with all legislation, we have a duty to ensure that the Bill contains all that is necessary to ensure that it meets its objectives. In that respect I have some concerns.
First, I believe that the Bill should contain safeguards to prevent large groupings of former SBG companies establishing monopolies over large areas. We noted the care with which the Government split up the National Bus Company when it was privatised during 1986 and 1987. Despite that care, however, several large groups of former National Bus Company companies have been established and are undoing some of the Government's good work which was intended to further competition.
For example, on Merseyside it has come to my attention that Crosville and North Western are owned by the same company, Drawlane. We have recently seen the report of the Monopolies and Mergers Commission which found that the merger between Badgerline and Cityline in Bristol was against the public interest. I hope that the Government will introduce measures into the Bill to ensure that the companies being privatised cannot re-combine or seek to take over other independent companies to establish territorial monopolies as happened in England. That could be achieved by several means, including providing in the Bill for automatic referral to the MMC of any bid by or for such a company and retaining a golden share to control mergers.
Secondly, I make no apology for raising the issue of service performance. We must not forget the performance of several of the companies affected by the Bill on D-day. It was not a creditable performance. The streets of Glasgow were literally swamped with buses out of all proportion to demand. It was a bus war, for want of a better term. During the next year or so the companies will go through a difficult period as they prepare for privatisation. We must ensure that the standard of service does not deteriorate and affect the passenger. The resources of the traffic commissioners need to be adequate for that task.
Thirdly, like other noble Lords, I hope that the Bill will ensure that any bus stations now owned by the Scottish Bus Group will be retained for that use.
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They serve a valuable purpose for the travelling public and help to reduce congestion on the streets. We do not want to see them turned to other uses by companies whose interests are primarily in property development with bus operation a poor second.
Finally, like other noble Lords who have already spoken, I am glad that my noble friend has said that the Government will be able to give bids from management—which I hope will be supported by employee share ownership plans—a discount, as they did with the National Bus Company. That will ensure that privatisation takes its most acceptable form and will help guard against the dangers of monopoly to which I have already referred.
I shall follow the progress of this legislation with great interest. I already feel encouraged by my noble friend's introduction this morning, but there may be one or two matters which I shall wish to raise in Committee.
12.5 p.m.
Lord Sanderson of Bowden: My Lords, I thank all noble Lords who have taken part in this short but very important Second Reading debate. I should like to come straightaway to some of the points which have been raised.
Perhaps I can start with the noble Lord, Lord Carmichael, and the difficult point of the publication of sales proceeds. The noble Lord referred to proceedings in another place. It is perfectly true that the suggestion that the amount paid for each company should be published raises difficult problems of commercial confidentiality. I am sure that we shall come back to that point when we debate the Bill in Committee. During the process of privatisation it would clearly not be a good idea to publish what has been received for each company because that could well affect prices of subsequent sales. It might lead to less satisfactory prices as the process of privatisation proceeded.
Publishing the prices once the sales were completed also raises problems of commercial confidentiality, as was mentioned in another place. I shall be interested to debate the matter at a later stage. In terms of the public interest, however, I believe that the important figure is the sum which is realised for the Scottish Bus Group as a whole. If individual purchasers wish to reveal what they paid for a company I believe that that is a matter for them.
I wish to deal at greater length than I did earlier with the very important matter of property disposal raised by the noble Lord, Lord Carmichael. It is essential that property assets are properly valued and that measures are taken to prevent their being sold on after privatisation at a very large profit. Specialist property advisers have been appointed by the Scottish Transport Group to value all the properties of the bus group and to advise on the best treatment of those properties in the course of sale.
There are a number of options for dealing with the properties. The first is to strip the property from the company and sell it separately. That might apply to property which is not essential to the running of the bus undertaking. A second option is to sell the

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property with the company but to ensure that the price received fully reflects the range of values of the assets. A third option is to sell the property with the company but with a legal charge on the property which ensures that if subsequently sold within a specified period for development purposes the Government will receive a specified share of the development proceeds. A fourth option would be to dispose of an operational property separately from a company but with a long lease arrangement to allow the company to use it and to prevent early disposal for development. We shall be considering all those options very carefully in the light of advice that the group will be getting, we hope very shortly, from the property advisers.
I turn now to the restrictions on purchase. The prime aim of the Government's privatisation policy is to increase competition and hence efficiency and service to the customer. The Secretary of State has therefore decided against privatisation as a single unit. The choice of nine operating bus companies was made in order to strike a balance between strong, viable bus companies and lively competition. If the Secretary of State had wanted a smaller number of competitive units he would have divided the bus group into a smaller number of units for sale. It is therefore clear that we do not want a single buyer to buy up several SBG subsidiaries.
No limitation on the number of companies which one buyer could acquire was written into the English and Welsh legislation and we have not specified one in this Bill. However, we accept entirely the need to avoid a single buyer acquiring too many bus companies. In part the situation depends on where those companies are. Given the nature of Scotland with its concentration of bus travel in the central belt we accept the need to limit the number of companies bought by one purchaser.
In the NBC disposal, as my noble friend Lord Teviot said, the maximum number of operating companies allowed to be bought by one company was four. In Scotland, in proportionate terms, that would mean one, but we have not yet taken a final decision on such a limit. Nor would we want to approve the sale of two adjacent companies to the same buyer. Those limitations will be set out in the disposal programme which will be published.
Perhaps I may deal with a couple of other points that have been raised before I come to the issue of competition safeguards which all noble Lords who have spoken in the debate thought was very important. Let me deal first with the question of the resourcing of the traffic commissioners which my noble friend raised. The responsibility for the traffic commissioners throughout Great Britain rests with the Secretary of State for Transport. The commissioners and their staff are funded from within the Department of Transport Vote. The arrangements seek to ensure that, as far as possible, they have sufficient resources to meet the demands placed upon them. I am well aware of the demands that were placed upon them in relation to Glasgow at the time of deregulation. They include any work that may arise directly or indirectly as a result of privatisation. Those costs are recovered from fees levied for the services provided.
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I listened with interest to what my noble friend said about Crosville and North-West. As I have already said, a limit will be placed on the number of companies that can be bought by a single purchaser. We have not yet decided on the details, but once in the private sector—this is the important point—companies will be subject to the monopolies and mergers provisions of competition legislation. Under those provisions, cases may be considered by the Office of Fair Trading, which in turn may refer them, where appropriate, to the Monopolies and Mergers Commission. I am sure that my noble friend will be aware of the situation regarding the city of Bristol to which reference has recently been made.
On the question of pensions raised by the noble Lord, Lord Tordoff, it will be for the privatised companies to establish new pension arrangements for their employees. When making bids, prospective purchasers will be asked to state their proposals with regard to pensions and that information will be taken into account in considering bids. I understand that the terms of new pension arrangements will be different from those of the STG schemes, but I should like to return to that matter when we debate the Bill at Committee and subsequent stages.
The main thrust of what was said by the noble Lords, Lord Carmichael, Lord Tordoff and Lord Teviot, refers to safeguards in competition legislation, which applies to the bus industry in the same way as it applies to other industries in Great Britain. The main areas covered are restrictive agreements, monopolies and anti-competitive practices. The Office of Fair Trading has the power to carry out investigations and, where appropriate, to refer cases to the Monopolies and Mergers Commission. I hope that the noble Lord, Lord Carmichael, will join me in saying how pleased we were to see the result of the recent Elders—Scottish and Newcastle referral to the Monopolies and Mergers Commission. The system can work.
The noble Lord, Lord Teviot, referred to the experience of former subsidiaries of the National Bus Company. It is true that since privatisation some subsequent inter-company sales have taken place and a number of substantial bus groupings have emerged. The name of Stage Coach has emerged in this debate. However, generally the ownership of former NBC subsidiaries remains fairly widely dispersed.
Taking the whole, there have been relatively few takeovers since privatisation, but I want to make this point: one way of making it more likely that companies will remain independent after privatisation is by encouraging management-employee buy-out bids. It will be open to prospective purchasers to establish shareholding arrangements which may reduce the likelihood of a company being sold on after privatisation. For example, it would be possible for the new company to make provision in its articles of association to limit the ability of shareholders to dispose of shares outside existing groupings of shareholders. Articles of association can be changed only if 75 per cent. of shareholders vote to do so. That is something to which we may return in our later deliberations on the Bill.

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Perhaps I may now turn briefly to the question of the Caledonian MacBrayne arrangements and say to the noble Lord, Lord Tordoff, and other noble Lords who have welcomed the general thrust of our proposals that it is not so easy to privatise a company if it receives an annual £6 million government subsidy. I believe that that must be the answer to the charge that the Government are perhaps facing in two different directions in this Bill. But I should point out that since 1979 investment by the Government in Caledonian MacBrayne, which is the best way to improve the services for the people in the Islands, cost£22 million in vessels and £6 million on piers—not a small amount of money given the size of the company. The noble Lord is quite right to say that some of the benefits are due to the reduction of prices. However, I hope that he will understand that the arrangements that we make from now on will reflect the wishes of the islanders.
I note what noble Lords have said about membership of the board. Of course I cannot give them any indication at this stage. However, my right honourable friend the Secretary of State and I, with our responsibility for the Highlands and Islands, want to hear from the highlanders and islanders if representation from the Islands is not to the liking of the islanders when I go to see them.
On the question of the Gourock—Dunoon and Wemyss Bay—Rothesay services raised by the noble Lord, Lord Carmichael, there is no doubt that the present situation regarding the Gourock—Dunoon crossing is anomalous. An unsubsidised private sector crossing competes with a subsidised public sector crossing on similar routes. I remember only too well what the noble Lord said the last time that this matter was raised. The vessels operated on that crossing are shared with the Wemyss Bay—Rothesay crossing and are interchangeable. There therefore seems to be a good case for the private sector to take on those crossings. We shall ask the new board to look into the matter, investigate and report. The size of the remaining Cal-Mac fleet—some 25 vessels—will be such that it will still be able to substitute vessels in the event of breakdowns and refits. I hope that that reassures the noble Lord on that issue.
Finally, I should like briefly to remind noble Lords of our objectives. First, we wish to promote competition in the bus industry. I believe that I made that clear in my opening statement. Secondly, we want to encourage a wider pattern of share ownership. Thirdly, we hope that the pattern of privatisation that we have chosen will lead to the setting up of independent, locally based companies responsive to local needs. Coming from the board, I appreciate what the noble Lord, Lord Tordoff, has said. We have certainly worked with the grain in allowing Lowland Scottish to become a company on its own dealing with that particular part of the world.
We shall transfer the ownership of Cal-Mac to the Secretary of State and appoint a new board. We hope that that arrangement will ensure the continuation of at least the present quality of service to the Islands and the maintenance of essential transport links which are so important to them. I believe that this is an important measure which I hope noble Lords will support.
On Question, Bill read a second time and committed to a Committee of the Whole House.

Evidence in Divorce Actions Order 1989
12.17 p.m.
The Lord Advocate (Lord Fraser of Carmyllie)The Lord Advocate (Lord Fraser of Carmyllie) rose to move, That the draft order laid before the House on 22nd February be approved [11th Report from the Joint Committee].
The noble and learned Lord said: My Lords, this order looks complicated, but I can assure the House that it does not raise novel questions of social policy. It is designed to maintain the present arrangements. As my maiden contribution in this House, it is difficult to envisage a less controversial measure. The purpose of the order is to retain the current relaxed evidential regime which applies in simplified divorce actions in Scotland, but with reference to the provision of the Civil Evidence (Scotland) Act 1988.
That Act will come into force on 3rd April. When that happens, Section 8 of the Act will apply to divorce actions as well as other actions concerning family relationships. Subsection (3) of that section is a statutory statement of the current practice; namely, that evidence required to establish the grounds of divorce must come at least partly from a source other than a party to the marriage. However, the divorce actions which are dealt with under the simplified divorce procedure which has been in operation in Scotland since 1983 can proceed on the basis of the evidence of the pursuer alone.
If Section 8(3) were allowed to apply to simplified divorces, the existing relaxed requirements would be replaced on 3rd April with a stricter regime. That would be entirely inappropriate when one of the aims of the 1988 Act is the removal of technical barriers to the proving of an otherwise justifiable case. The order before the House therefore disapplies the requirement in Section 8(3) where simplified divorces are involved. As I have indicated, the order simply maintains the status quo.
I hope that I have fully explained to the House the basic purpose of the order. I shall, of course be very happy to explain it in more detail should noble Lords wish to have an elaboration on this particular branch of the law of Scotland. However, at this stage I commend the order to the House.
Moved, That the draft order laid before the House on 22nd February be approved [11th Report from the Joint Committee].—(Lord Fraser of Carmyllie.)
Lord Macaulay of Bragar: My Lords, there is no opposition to the approval of this order which in fact brings a measure of civilisation to the very controversial field of divorce law. It gives me great pleasure to rise on this occasion to congratulate the noble and learned Lord, Lord Fraser of Carmyllie, first of all upon his appointment to the office of Lord Advocate and secondly upon his excellent and short maiden speech. We look forward to hearing his future contributions in your Lordships' House.

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Perhaps I may say that we have been friends and working colleagues for a large number of years and I hope that that relationship will not be diminished by the fact that on occasions in your Lordships' House we shall be sitting staring at each other.
Lord Tordoff: My Lords, It would be improper for me to join in the meat of this discussion, but I think that it is very proper for me to welcome to the Dispatch Box both the noble and learned Lord the Lord Advocate and the noble Lord, Lord Macaulay. It is a rare privilege indeed to be able to congratulate together two maiden speakers and to say how lucky they are to have such a subject with which to open, a subject on which there will be absolutely no controversy at all, whatever they say. As to the meat of the business, I have nothing more to say.
On Question, Motion agreed to.

Merchant Shipping (Weighing of Goods Vehicles and other Cargo) (Application to Non-UK Ships) Regulations 1989
12.20 p.m.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara) rose to move, That the draft regulations laid before the House on 2nd March be approved [12th Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move the first Motion standing in my name on the Order Paper. It may be for the convenience of the House if at the same time I speak to the other Motion standing in my name.
These regulations would extend to foreign ships when in UK ports provisions similar to regulations for UK ships. Orders applying to foreign ships must be made by affirmative procedure unless the requirement is the subject of international agreement.
These regulations are of course part of the comprehensive programme of measures which the Government have introduced in the 20 months since the Sheen Report. Eight sets of wide-ranging main regulations are already in place, having been initially the subject of consultative documents from my department. Many of these have already been extended to include non-UK ships when in UK ports. In addition, there were important changes in primary legislation in the Merchant Shipping Act 1988, and there have been administrative measures contained in merchant shipping notices. An increasing number of random and unannounced inspections as part of the traditional enforcement work of marine surveyors have been introduced. Moreover we are well into an urgent research programme which aims to produce proper evaluation in terms of effectiveness and cost of various design methods of enhancing the stability standards of new ro-ro passenger ferries. In all this we have not forgotten the international implications of our actions, and we have taken important initiatives in the International Maritime Organisation, but the provisions in today's regulations go beyond the current scope of IMO requirements.
The draft Merchant Shipping (Loading and Stability Assessment of Ro-Ro Passenger Ships) (Non-UK Ships) Regulations 1989 include a requirement that draught gauges be provided on all ferries engaged on cross-channel and other international services. There is general agreement in IMO that the assessment of stability before departure should be made on the lines that we propose but not entirely on our requirements for the fitting of draught gauges and the use of computers. In the case of draught gauges, the convention will require their use only when the draught marks at the bow and stern cannot be easily read. We remain convinced that the draught of a ship (and therefore its stability) at a typical cross-Channel ro-ro berth cannot be accurately assessed by direct sighting, even in good visibility. This is due to shore-based encumbrances and the flare of the ship's structure at the stem and stern. Accordingly, our regulations call for the provision of this equipment on all non-UK ro-ro passenger ships in UK ports.
We have also been unable fully to persuade IMO on the merits of loading computers. Thus the convention will only require that on completion of loading, and prior to departure, the master should determine the ship's stability and also ascertain and record that the ship is in compliance with set stability criteria. The means of making the calculations can be either an electronic loading and stability computer or other equivalent means. As a consequence of that decision our regulations also permit such other means of carrying out the calculation as will enable accurate results to be obtained. In addition the master must be supplied with sufficient information to enable him to monitor his ship's stability during loading and unloading operations. Then prior to departure he must record the ship's draughts and the assessment made of the adequacy of its stability.
I turn now to the draft Merchant Shipping (Weighing of Goods Vehicles and Other Cargo) (Application to Non-UK Ships) Regulations 1989. These regulations also apply to all ferries engaged on cross-Channel and other international services and some services within the United Kingdom, and require the weighing of all road vehicles (except buses) and all non-vehicular items of cargo exceeding, in each case, 7·5 tonnes for all voyages on which passengers are carried. Subject to certain exceptions, cargo must be weighed within the port at which the ship is to be loaded, and the weighing machine must be certified by an inspector of weights and measures and operated in accordance with conditions laid down by him.
We believe that it is important if there is to be confidence that improper loading will be avoided and in the accuracy of stability calculations to seek to eliminate all substantial discrepancies between the displacement of the ship as calculated from the weights of the cargo and that determined from the measured draught. Weights determined from a weighing machine are the only reliable method by which the master can be confident about the weights he is being asked to carry and thus produce the required more accurate stability assessment for the voyage.
I am confident that these regulations will be an important contribution towards improvement in ro-ro passenger safety.
Moved, that the draft regulations laid before the House on 2nd March be approved [12th Report from the Joint Committee].—(Lord Brabazon of Tara.)
Lord Underhill: My Lords, the House is grateful to the Minister for explaining in some detail these two very important sets of regulations. I shall be extremely brief in my comments. However, that does not mean that these Benches do not value the importance of the regulations. It is not only equitable and a matter of common sense but in fact vital to considerations of safety that these regulations should apply to non-UK ships, as such regulations already apply to UK vessels. I recall the numerous discussions we had during the passage of the Merchant Shipping Bill in 1988—which has now been enacted—on these very points. We are therefore very pleased that regulations are now being issued.
I am glad that the Minister pointed out why it is necessary for regulations which apply to non-UK ships to be effected by affirmative resolution. When looking at the Act I noticed that the regulations arising from it were effected by negative procedure. I am therefore pleased with the Minister's explanation.
The noble Lord referred to the research that is being conducted into the stability and structure of ro-ro ferries. Perhaps he will give the House some indication on when that research might be completed. That seemed to be the most important factor arising from the discussion of stability in various clauses of the 1988 Act. Under the clauses relating to responsibilities for loading and stability the 1988 Act made certain references to both owners and masters. However I note that there is only one very small reference here to the position of the owner. I wonder whether the Minister can confirm that there is some reason for that. In other respects we welcome these two sets of regulations.
Lord Brabazon of Tara: My Lords, I am grateful to the noble Lord for his reception of these important regulations. I should point out that abour 40 per cent. of passenger ro-ro ferries from the United Kingdom sail under a foreign flag. It is therefore important that such regulations as have already applied to UK registered vessels since, I think, 1st February should be made to apply to foreign flag vessels.
So far as concerns the research programme, I can tell the House that we are making good progress. The first phase should be completed later this year. Obviously we shall have to consider the implications of that and then we propose to conduct model tests. They could take a little longer. That is not to say that lessons will not be learnt from the first phase of the research programme and they might have to be put into practice before the model tests take place.
As regards the point raised by the noble Lord about owners and masters, perhaps I may write to him on that. I shall need to consider it in some detail if I am to give him a proper reply. If he will accept that from me, I shall be most grateful.
Lord Greenway: My Lords, before the Minister sits down, perhaps I may ask him one small question. These regulations are intended to apply in the main to cross-channel ferries. Am I correct in assuming that ro-ro passenger ships engaged in international trade—for example, two Italian vessels which call at the port of London on a service to West Africa and Brazil carrying 60 passengers—would also be affected under this legislation?
Lord Brabazon of Tara: My Lords, my immediate answer to the noble Lord is, yes. If they were passenger carrying ro-ro ferries operating international services out of a UK port, they should be covered by these regulations. With regard to the example to which the noble Lord referred, I can confidently say that, yes, they would apply.
On Question, Motion agreed to.

Merchant Shipping (Loading and Stability Assessment of Ro-Ro Passenger Ships) (Non-United Kingdom Ships) Regulations 1989
Lord Brabazon of Tara: My Lords, I beg to move.
Moved, That the draft regulations laid before the House on 2nd March be approved [13th Report from the Joint Committee].—(Lord Brabazon of Tara.)
On Question, Motion agreed to.

Rent Officers (Additional Functions) Order 1989
12.32 p.m.
The Earl of Arran The Earl of Arran rose to move, That the draft order laid before the House on 23rd February be approved [12th Report from the Joint Committee].
The noble Earl said: My Lords, I beg to move that the draft Rent Officers (Additional Functions) Order 1989, which was laid before your Lordships' House on 23rd February, and the draft Rent Officers (Additional Functions) (Scotland) Order, which was laid on 1st March, be approved.
These orders represent a crucial follow-up to the measures in the Housing Act 1988 and the Housing (Scotland) Act 1988 deregulating new private lettings. Those provisions have beer. in force since 2nd January in Scotland and since 15th January in England and Wales.
The key feature of deregulation is of course the freedom for landlords to charge a market rent. The Government have never disguised that in many areas of the country market rents will be well above existing fair rent levels. We have further accepted that many tenants will need help from housing benefit to pay the higher rents. We have therefore given an unequivocal commitment that housing benefit will be available on rents up to the level determined by the free market. That undertaking is absolutely fundamental to our approach to the private rented sector and I am happy to restate it in your Lordships' House today.
However, a tenant who has all or most of his rent met by housing benefit obviously don not have the

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same incentive to strike a reasonable bargain with his landlord as would apply if he were paying the rent from his own resources. Noble Lords will, I hope, agree that it would not be right for taxpayers' money—which provides up to 97 per cent. subsidy on housing benefit— to be used to underwrite a rent which bears no relationship to the level of rents being paid by tenants who are not dependent on benefit. It is therefore vital to have a system for checking that rents being paid from the public purse are not significantly in excess of market level. The Housing Acts provide for rent officers to take on the task of operating such a check. These orders set out how they will discharge that task.
As well as looking at claimants' rents, rent officers will consider the size of the accommodation they are occupying. The Government very firmly believe that full Exchequer subsidy ought not in general to be paid where a claimant is occupying accommodation that is too large for his reasonable needs. Local authorities have long had powers to limit benefit in such circumstances. However, we believe that, given the prospect of higher rents in a deregulated market, it is right to apply control directly on subsidy.
Accordingly, from 1st April local authorities will refer to the rent officer most cases where a claim for housing benefit is made by a tenant or licensee of a private landlord with an agreement beginning on or after the date on which deregulation came into effect. The only major exceptions to this rule will be assured tenancies where the rent has already been fixed by a rent assessment commmittee and—in normal circumstances—lettings by registered housing associations.
Where a case is referred to the rent officer, his first task will be to decide whether the claimant's rent is at or below market level. If the rent satisfies this test, the rent officer will notify the local authority accordingly. If, on the other hand, the rent officer judges the rent to be above market level, he will determine what a market rent would be for the property and inform the local authority of that rent.
The rent officer's second task will be to assess the size of the claimant's acommodation against the size criteria set out in Schedule 3 to each order. If the size exceeds the criteria, the rent officer will determine a market rent for a notional property which does not exceed the criteria, but which otherwise corresponds as closely as possible to the claimant's actual accommodation.
Let me emphasise that the decisions made by the rent officer will in all cases bite on Exchequer subsidy, and not directly on benefit. So long as the rent officer is satisfied that the claimant's rent is not above market level and that his accommodation meets the size criteria, the local authority will be able to pay benefit in the knowledge that susidy will be available on the basis of the existing rent.
In a case where the claimant's rent is above market level or his accommodation exceeds the size criteria—and the rent officer accordingly determines a lower rent than that which the claimant is actually paying—it will still be a matter for the local authority to decide on what basis benefit should be awarded.
Authorities will continue to be precluded under the housing benefit regulations from limiting benefit in cases where the claimant comes within a specified vulnerable group—the elderly, the sick and disabled and those with children—unless the authority itself is satisfied that cheaper, suitable alternative accommodation is available and that it is reasonable to expect the claimant to move. If an authority concludes that it cannot restrict benefit in the case of a vulnerable claimant, Exchequer subsidy will be available above the level set by the rent officer in that case, at a rate of 50 per cent.
We further accept the need for a special safeguard in respect of recently bereaved claimants. We therefore propose to introduce new provisions to peclude the restriction of benefit for a full 12 months following a bereavement. The 50 per cent. subsidy concession will also apply in such cases.
In all other cases local authorities will retain their discretion to pay benefit up to the level they judge reasonable. The rent officer's determinations set a ceiling on the rent on which full subsidy is payable, not on the level of benefit itself.
We have always accepted the need for a right of appeal against a rent officer's decision. Accordingly, we have provided for a local authority to request that a case already dealt with by a rent officer be redetermined by an experienced rent officer from outside the registration area in which the original decision was taken. The redetermining officer will be required to have regard to advice from one or—more usually—two other rent officers, one of whom will be from the original area, though not the officer who previously dealt with the case.
The purpose of these procedures is simply to safeguard the taxpayer against having to underwrite unreasonable housing benefit claims. It in no way detracts from our undertaking that housing benefit will keep pace with open market rents—quite the reverse: it provides the most effective possible means of delivering that promise. I comend the order to the House.
Moved, That the draft order laid before the House on 23rd February be approved [12th Report from the Joint Committee].—(The Earl of Arran.)
Lord Graham of Edmonton: My Lords, we are grateful to the Minister for the care and clarity with which he has explained the order. However, he cannot possibly expect those of us on this side of the House to welcome the thrust of what he and his colleagues are doing. I imagine that every single person who will be the subject of this order is already living a miserable life. He is already living in circumstances and conditions at which Members of your Lordships' House would be appalled were they to visit him and discuss matters with him. The Minister has informed the House that this is to safeguard taxpayers' money. We shall have other opportunities to consider how this Government safeguard taxpayers' money in other respects on other occasions. However, the Government have brought forward what I consider to be a miserable measure which will do nothing to make housing available, more affordable, or more enjoyable.

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The Minister talked about a need to ensure that taxpayers' money is safeguarded. Can he give us some illustrations, not generalities? We do not want to hear, "We are lead to believe", or "We have been told". Can we be given some hard facts upon which this measure has been conceived? I hope it is not in anticipation of what the Minister's advisers believe could happen.
The Minister speaks in terms of market rents and market levels. Has he any idea of the grotesque way in which the market level of rented property has increased, especially in London? I should like to know whether his advisers have visited some of the miserable places, such as those in Westminster, Bayswater and Paddington, which are used for bed and breakfast accommodation. I wonder if the Minister and his advisers understand that both the national taxpayer and the local ratepayer are being held to ransom, not by the individuals who use that kind of accommodation, but by the sharks, the rogues and the villains who are making a good living out of it.
I do not see anything in the order which is likely to ease the lot of the person who, by dint of circumstances, is forced either to rent or to have to accept state largesse through bed and breakfast subventions. I see nothing that will make it easier for that person. We are speaking here about additional functions for the rent officers. How many additional rent officers will be required as a result of the order? Are we to be told that they are already very busy people, but they will have to take on the additional function of policing this tiny bit of legislation?
The Minister has spoken of exclusions for certain vulnerable groups. He mentioned the sick, the elderly and those who have children. Does not the Minister understand that if there are not hundreds of thousands there are certainly many thousands of people who are vulnerable not because of a sickness, because they are parents or looking after children, or because they are unemployed, but because they are not in the housing market?
The Minister and his colleagues have told us what a great boon the recent housing legislation will be. It will free much allegedly free rented accommodation which the private landlord has kept to himself. He will now put it on the market because he is able to enjoy a fairer return for his investment in housing. Will the Minister tell us what is happening there? Have the housing lists for those who need housing been reduced as a result of that? I am not arguing about the Government wanting an effective use of money, but the measure fails as so many measures do because it fails to take into account the human element at the bottom end—the people who will suffer.
We are told in Schedule 3 of the size criteria that will be taken into account in determining whether a person seeking assistance is either enjoying or using accommodation greater than that which is held by the State to be adequate. We read:
"One bedroom shall be allowed for each of the following categories of occupiers".
I am a bit surprised that the order has not stated the size of the bedrooms, because in this respect already depressed people are being hemmed in and
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their lives made even more miserable. The schedule refers to two children of the same sex. What are the age parameters in paragraph 1(c)? We are told of the number of rooms:
"excluding any allowed as a bedroom … suitable for living in … if there are less than four occupiers, one … if there are more than three and less than seven occupiers, two … in any other case, three".
Will the Minister tell the House who has advised that that is a satisfactory yardstick to determine the basis upon which individuals will be directed by the state to live? The Minister must be under no illusion that where there is a shortfall in money which is left to the individual to pay, in 999 cases out of a 1,000 it will be a question not of the individual having to find the money from some other source but of him having to find some other accommodation because the money will not be available in his pocket. I do not exaggerate. The people I have met in Bayswater and Finsbury Park are among the most hapless groups of individuals in this so-called affluent Britain of 1989. The Minister has some questions to answer, but more importantly he has to convince the House. So far he has not convinced me that he understands the agony of people who will be affected by this measure.
12.46 p.m.
Lord Tordoff: My Lords, first, I want to apologise to all those people waiting for the Unstarred Question, because I believe this order will take a little longer than they might have supposed. It is unfortunate that the order is brought on at this time on the eve of the public holiday. Here we are on Maundy Thursday with Her Gracious Majesty giving away Maundy money, with various clerics washing peoples' feet and the general feeling of support for the poor, whereas the Government with their order are succeeding in increasing homelessness in this country.
It is an appalling order and frankly in other circumstances I should have done my best to persuade colleagues and other members of your Lordships' House to break the convention and to vote against this order. I feel so strongly about it. It has been badly handled and various organisations have written complaining about the lack of consultation that there has been and the lack of time in which they have been able to consult. The National Federation of Housing Associations tells me that it was consulted by way of a copy of a letter from the Department of the Environment and the Housing Corporation dated 8th February. The DoE required comments on the proposed draft order returned by 15th February, just a week later. That is no way to pass sensible legislation.
What is the logic behind the order? I understand, and I have sympathy for the Government's view, that people should not be allowed to fiddle taxpayers' money. There may be cases which can be demonstrated where landlords and tenants have colluded in putting up the rent of property to obtain increased housing benefit and to share the proceeds between them. I suspect that those cases are very few and far between. But if that is happening perhaps orders are necessary to prevent it, but this is not the

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way to go about it. In the first place I do not believe that the order will save money. If it will not save money, why are we bothering with it? However, it will add bureaucracy with minimal savings.
The Association of District Councils which is a Conservative-controlled body, in its response to the consultation paper said:
"Whilst it appears that the proposals will result in a very thorough examination of individual rents, the Association seriously doubts whether it will represent value for money. The DHSS is reminded that the new subsidy incentive to control unreasonable private sector rents in 1988/89 is by its own estimates only likely to result in a 0·5 per cent. reduction in total subsidy expenditure".
That is what we are talking about and that is a Conservative view. Thus that organisation is far from convinced that there will be any significant saving.
We have a Government who cherish the idea of a family unit. However, it appears that in this matter their idea of a family unit is that it should be compressed into as small a space as possible and that every member of the family should live, sleep and eat as close as possible to each other. As the noble Lord, Lord Graham, has indicated, it is the criteria for the size of accommodation which fails totally to reflect the ordinary living patterns of ordinary people. It will prohibit those in receipt of housing benefit from having what every Member of this House will see as reasonable living criteria.
The result will be that parents whose children have grown up and left home will be penalised financially if they remain in the family home keeping a spare room for their children when they visit. Elderly people will be penalised financially if they stay in their home and keep a spare bedroom for relatives to stay when visiting or if a couple needs two bedrooms for health reasons. Parents will be penalised financially if their teenage son or daughter does not share a bedroom with a child of the same sex under 10 years of age. Can your Lordships imagine someone in their late teens being forced to share a bedroom with a much younger child? It is a great inhibition on children in relation to their education, apart from anything else, to force them into such a situation.
The criteria set out for the size of accommodation also fall well below the standards set by housing associations and many private landlords letting in the private sector. They fall even further below the standards set by local authorities when allocating council homes. The Association of District Councils' Housing Committee has expressed concern that accommodation standards are too severe. Its housing officer said:
"It means an elderly couple would have to share the same bedroom and that is not always appropriate".
The size of the rooms is not specified, so two children may have to share a box-rooom.
While, through the order, the Govenrment places restrictions on the maximum size of a living room for those in receipt of housing benefit, they have totally failed to specify a minimum size. In the words of a representative of the Institute of Housing:
"This means that draconian and regressive new standards of housing have been introduced".
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The result is that claimants will be penalised for having too much but will not be protected from having too little.
What will happen to the families affected? It is the fear of many local authority associations, from the AMA to the ADC and the housing associations, that there will be a greater burden by increasing the number of homeless people. According to the statutory instrument, the housing associations can be referred to the rent officer if the local authority considers that there is unreasonable rent or the accommodation is too large for a claimant's reasonable needs. If they are found to be guilty of over-accommodating, they do not have the powers to compulsorily re-house their tenants. There is great concern about their future tenancies, and the intrusive nature of the investigations by the rent officer could amount to harassment of private tenants. As has been said, some people will be forced to leave their homes because they no longer receive sufficient benefit to remain.
Your Lordships have heard about the appeal procedure. However, an appeal procedure which simply goes to another rent officer in an adjoining area does not appear to me to be an appeal procedure at all. If we are not careful about this, there will be a great deal of, "You scratch my back and I'll scratch yours". Those who are subject to the restrictions will not consider that they are getting a fair deal out of such an appeal procedure.
The rent officer's decision on unreasonably high rents will be based on the assumption that the claimant is able to find cheaper, suitable alternative accommodation. That is not always possible and the order contains no provision for similar accommodation in the same area. It provides for similar accommodation in a similar area. That may be far from what is needed by the family. The order takes no account of many of the difficulties in the rented sector as a result of the Housing Act. Namely, it makes no reference to key money. The Government allowed key money to be included in the Act but there is no guarantee that people who are thrown out of accommodation because the rent officer considers it to be too big will be able to find smaller accommodation at anything like a reasonable price if issues such as key money are not taken into consideration.
In assessing these matters, full access costs should be taken into account. The local authorities are put in a difficult position. As the AMA has said, the inevitable choice for a local authority in this situation is to pay unsubsidised benefit and pass on the cost to the community charge—which the Government have so carefully introduced to stop local authorities spending the ratepayers' money—or to restrict benefit to the claimant, who may then have to give up the accommodation. The local authorities are being put in an impossible position. In the end, more and more people will be forced into bed and breakfast accommodation, which is the most expensive and inefficient way of housing people.
The second order deals with Scotland, where approximately 80 per cent. of the housing stock consists of three-room apartments or larger. Fifty

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per cent. of the people on the waiting lists are single. I believe that the situation in Scotland will be even worse than it is in England, particularly in London.
The Government have set out to avoid collusion between landlord and tenant. I am certain that the result of the order will be to ensure that more and more people go onto the streets, into cardboard boxes or into bed and breakfast accommodation at best. If the rent officer must set the level, we on these Benches believe that the Government ought to oblige the landlords by statute to lower their rents to the level assessed by the rent officer. That is the key to the matter.
As I said at the beginning, I am not against the Government trying to stop a waste of taxpayers' money by collusion between landlord and tenant, although that happens only rarely. However, this not the way to tackle this problem. I am sure that the alternative which is offered to us will be a massive increase in homeless people.
Lord Kilmarnock: My Lords, I had not intended to intervene in the debate on the order and I shall not do so at length. However, I am impelled to make two or three comments as a result of a letter received today from the Association of District Councils, of which I have the honour to be vice-president. Practically all the points of substance have been made by the noble Lords, Lord Graham of Edmonton and Lord Tordoff. One objection that has leapt to my eye is the case of a couple with two children under the age of 10. They would be penalised if they had a third bedroom. As a result of the order, a school child studying for A-levels would be expected to share a room with a toddler. Can your Lordships imagine that, with the complexities which now face students studying for A-levels and GCSEs? There would be inadequate study space in the home, and from the educational point of view that is a strong objection.
I believe that it is reasonable for households in rural areas to have a spare room in order that relatives can visit. It is ridiculous that that should be prohibited under the order. The ADC also makes the point that the proposed criteria are not much above the antiquated overcrowding standards of the Housing Act 1985, which dates back to the Housing Act 1935. We appear to be putting the clock back a long way.
The final point, as the association points out, is that it was only given five working days by the Department of the Environment to comment on the proposals. It says that that reinforces its view that the size criteria was hastily devised with little thought given to the consequences. The association goes on to say:
"We do hope you share our concerns and will press the Government to produce a more reasonable standard".
In view of everything which has been said on this order, I believe that it is reasonable to ask the noble Earl whether the Government will, on this occasion, take back the order and rediscuss it with the various bodies concerned. The association says:
"We recognise that for the swift processing of referrals a broad brush approach is necessary and that it would not be appropriate for the rent officer to be involved in measuring claimants
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accommodation. But a broad brush approach must be tempered by reasonableness and provide for a reasonable standard of accommodation and in this respect the size criteria falls considerably short".
Taking that as a starting point, is it not possible to rediscuss this problem and to see whether or not an order along more reasonable lines could be produced?
1 p.m.
Baroness Gardner of Parkes: My Lords, I have been asked to speak on this matter by the London Boroughs Association which is very concerned about some implications. When I came to speak this morning I thought I should be 100 per cent. opposed to this order but having listened to noble Lords opposite, perhaps they have turned me into a devil's advocate because I can see many flaws in the points they have made.
For example, the noble Lord, Lord Graham, implied that these were terrible criteria which had never existed before. As far as I know, the GLC lettings were always based on those criteria and many local authorities in this country base their lettings on those criteria; for example, two children of one sex sharing a room. Therefore, I do not find those criteria surprising.
The noble Lord, Lord Kilmarnock, said that he would like this order taken back. There is no question of that because it has been voted on and passed in another place and will clearly be passed here today. Therefore, I believe that it is important to appeal for a more practical and humane implementation of the criteria, which are not so extraordinary. In particular, I believe that the issue of the size of the room should attract flexibility. If, for example, the room is half the size of this Chamber, then that is rather different from the box room which has just been described. Many older buildings have large rooms. In fact, when I came from Australia, those huge rooms were divided into three small bed-sits for Australians coming here. However, they were huge rooms, large enough to accommodate people without any problem at all. However, if the room is very tiny, there is no doubt that that can create claustrophobia, all the problems of the different age groups and so may other problems. I believe that in implementing this order, there should be the possibility of looking flexibly at the particular unit involved.
I believe that it is essential that a system exists whereby a rent officer assesses the value of private housing accommodation. For too long it has been the case that anything was payable because anything was claimable. Some units of accommodation for which people have received benefit have been bad value for the persons concerned as well as for the taxpayers.
The noble Lord, Lord Tordoff, made the point about the large units in Scotland. Perhaps I may say that that was also a problem in England. The GLC found that there was a need for more and more smaller units. Demographic changes in London mean that we need more and more small units, perhaps due to more single-parent families and so on. Therefore, there are many reasons why we need

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small units of accommodation. I believe it is wrong--and again I have has this problem when I have sat on housing committees both at County Hall and at Westminister—for one person to live in a flat which has three or four bedrooms which could be used by a family which desperately needs a three or four-bedroomed flat. Perhaps these regulations will help to make available larger accommodation for those people who require it and then I believe there will be the creation of smaller units.
Lord Graham of Edmonton: My Lords, I am grateful to the noble Baroness for giving way. She says that we are really concerned about practicalities and I accept that completely. However, let us consider the practicality of a family occupying rented accommodation which merits them being in receipt of the subventions of which we are speaking, whereby they are occupying a room in excess of the criteria applied for the maximum that they should have. The rent officer will say that the rent that he can charge or that he is prepared to allow for that is not £100, which is now being claimed, but, (shall we say?), £60 a week. Can the noble Baroness take us through the impact of that on the family? It either finds the extra £40, which is ridiculous, or it has to find other accommodation? That may very well satisfy the criteria of the noble Baroness that another family will be able to come in, but what about the family which, in effect, is being evicted?
Baroness Gardner of Parkes: My Lords, had I continued to the end of my comments, I should have covered that. The practicality of the situation is that it is not the family which will be disadvantaged but the local authority. The noble Lord gave the example of a family. If that family became homeless, it would become the responsibility of the local authority and would become a much greater and more expensive responsibility. Therefore, I believe that the local authority will suffer because it will pay the additional subsidy. That is the point that I think is unfair in this scheme. I do not believe that people will be put out of what is almost suitable accommodation of the type described by the noble Lord. Again, I make the point that the size of the room should be looked at.
I believe that the local authority is being put into a very unfortunate position whereby it has to look at the family and say, "Now, who is going to find the extra money? If we say that they must find it themselves and they have no means to do that, then they will be homeless. If they are homeless, they will be back on our doorstep". Therefore, it will be far cheaper to pay the extra £40 per week, apart from the obvious desirability of that.
Everyone in this Chamber knows that I am greatly opposed to bed and breakfast accommodation for the homeless. I believe it is a tragedy that people are living in Bayswater in bed and breakfast accommodation. My daughter is a doctor in Lambeth and people trek every day to Lambeth from Bayswater for social services because Lambeth does not have available bed and breakfast accommodation. That is a terrible situation of which I have only recently become aware. I have known of the Bayswater problem but I did not know of the problem whereby
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people have to go back to the area which put them into that accommodation. Therefore, there is a problem.
I do not agree with the point made by one noble Lord that if the rent officer determines a rent, the rent should be reduced down to that. I do not agree with that because that would take us back to the old system which I believe did nothing to help to create a pool of rented accommodation. I firmly believe that the Housing Act—although I do not think it is perfect because it has many flaws—will go a long way towards creating a pool of private rented accommodation. If instead we have a rent officer who says that it is only worth so much and it is reduced down to that, then that would create the same freeze which we had for so long. It would be all right for the person in that accommodation but it would not create more accommodation for other people.
I should like the Minister to be aware that the London Boroughs Association is very concerned about the implementation and how this will work. It believes that although it appears to create difficulties for the tenants, and in some cases it may, it is even more concerned about the knock-on effect for the local authorities because the money used to top up units of accommodation must come from community charge payers. Therefore it means that it must come off something else because the community charge payers cannot accept unlimited loading on to them. That is really the great worry. We all wish to avoid any more homelessness. If these regulations are implemented with care and concern they may work very well. I hope that they will and that our fears are unfounded.
Lord Pitt of Hampstead: My Lords, I hope that it is not too late for the Government to look at this matter again and to have further consultations with the local authorities. We are dealing with a very serious matter. I am glad that at the end the noble Baroness made the point that the choice will be between the local authority bearing the difference between the rent officer's assessment and the actual rent or making the person homeless. That is the stark choice. Some of the authorities will act in the way she suggested and some will not. The Government must look at the problem seriously because the chances are that unless this order is handled with great sensitivity and flexibility we are going to have a great number of homeless people as a consequence. I invite the Government to look at the problem realistically in that way.
One understands the reasons behind it. After all, the Government do not want a subsidy-led increase in rent which can happen if there is not some kind of control over housing benefit. That is quite straightforward. However, what is required is that the rent officer should not only look at the possibility of alternative accommodation of a smaller and cheaper kind that the person or family can have, but he should also weigh the actual cost of that alternative against the cost of the accommodation which the family is in at the time. In that I include not only the key money to which the noble Lord, Lord Tordoff, referred, but also the cost of moving and living in accommodation in a new area with the

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different situation for schooling and travel. There are all kinds of additional problems that will arise if people have to move from one area to another.
The rent officer does not have to decide merely whether there is cheaper accommodation in the same area that may make the situation a little less problematical; he has to consider whether there is accommodation in a similar area. A similar area may not be the one in which the family is at the time and it may mean a complete change. That should be borne in mind.
I accept what the noble Baroness said.—that the Government will probably not take the matter away for reconsideration and that it will become law. At this stage I am trying to get from the Government an undertaking that the way in which the order is implemented will not cause the worries that some of us have. There is no doubt that the criteria are too low. The noble Baroness mentioned the GLC, of which we were both members. I am quite certain that in that organisation there was never any compulsion to have one room for children of the same sex if the ages were significantly different. That is one area where there is a definite retrograde step. The idea that you cannot allow a spare room in a house is also a retrograde step. There are all kinds of reasons why it will be valuable to have a spare room. That can be borne in mind by the rent officer making his assessment.
I wish the Government to undertake to instruct the rent officer to bear in mind the balance between the assessed rent and what in fact it will cost the family to move to the cheaper accommodation that the rent officer has in mind. That kind of adjudication by the rent officer should be in writing and it should state where the accommodation is and name it. The consequences of moving to it should also be stated, as should whether making the rent £60 in this area as opposed to £80 in another is good value for money. That is what we are asking the Government to do at this moment because I am quite certain that as the regulations are drafted they will cause a great number of homeless people unnecessarily.
1.15 p.m.
Lord McIntosh of Haringey: My Lords, I apologise for having arrived after this debate started. I can only say in mitigation that my faith in the health service is undiminished though it has been slightly dented temporarily by spending three-and-a-half hours this morning in a casualty waiting room. I only intervene in the knowledge that my noble friends Lord Graham and Lord Pitt, and the noble Lord, Lord Tordoff, besides the noble Baroness, Lady Gardner, have made the most substantive points that need to be made against these orders. I wish to add the point of view of one who took part in the passage of the Housing Bill which is now the Housing Act 1988.
I really wish to say, "We told you so". All the time that the Bill was going through we said that the safeguards against additional homelessness provided in the Bill and those that were to be provided in these orders—I remind the House that they only come before us because of the partial acceptance of
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opposition amendments to ensure that they would and would not be taken as negative resolutions—would not do the job of keeping people out of accommodation for the homeless and bed and breakfast places.
We said right from the beginning, that the scope given to rent officers for the payment of realistic rents was not enough and that the pressure on local authorities to make up the rents for the purpose of housing benefit when rent officers had determined rents was also not enough. We are now being proved right. It is quite clear from these orders that the Government have no intention of insisting that rent officers assess rents at a realistic level bearing in mind similar and suitable accommodation in the locality in which the people live. I am not referring to some other locality to which they would have to move and pay removal expenses. They would have to return to their own locality for work and school. These orders do not take account of the abominable legalisation of key money that is made in the Housing Act 1988. These orders refer to comparable rents and they do not speak of the access cost for accommodation that includes key money.
All the matters that we raised at the time and in answer to which the Government gave assurances that we considered to be inadequate at the time have now come true. It is clear from the evidence taken from around the country and from the London Boroughs Association that there will be an increase in homelessness, injustice, pain and poverty as a result of these orders. I make one last appeal to the Government to take them back for reconsideration in view of the very well-informed criticism that has been made by noble Lords on this side of the House.
The Earl of Arran: My Lords, I am grateful to the noble Lord, Lord McIntosh of Haringey, for his apology and I am delighted that, like all of us, he is a great believer in the National Health Service. Even if the only thing for which the noble Lord, Lord Graham, is grateful is the fact that I explained the order with some clarity, that is a small crumb for which I thank him.
Many noble Lords have spoken on the order. I am aware, as the noble Lord, Lord Tordoff, pointed out, that an Unstarred Question is to follow this debate. I hope to be brief in answering questions. Perhaps noble Lords will allow me to write to them in detail if I do not cover their points this afternoon. I fully accept that many of your Lordships have considerably greater experience than I on this order.
The noble Lord, Lord Graham, pointed out that landlords may charge excessive rents which tenants cannot afford to pay. With deregulation of private accommodation rents are likely to rise. Housing benefit will be available up to market rent levels. However, we cannot accept that the Exchequer and the taxpayer should generally subsidise rents above market levels. The new arrangements will ensure that landlords cannot be subsidised for excessive rents through the housing benefit scheme.
The noble Lord asked about the age parameters for children. People are considered to be adults at 18 and children from nought to 17. The noble Lord asked about the number of additional rent officers

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we consider to be necessary. We have provided some initial strengthening of officers who will be hardest pressed. Further strengthening will be provided in the light of actual workload. Their role in relation to fair rents will decline as their new work increases. We are satisfied that they will have the necessary capacity.
The noble Lord, Lord Tordoff, raised several points. He asked whether the rent officer arrangements are necessary and whether they are too bureaucratic. With the removal of the old system of statutory controls following deregulation of the private rented sector, there is a danger that the housing benefit scheme will be abused and that unreasonably high rents will be charged by landlords and paid by tenants in the knowledge that they will be met by housing benefit. We need to be sure that housing benefit follows the market and does not lead it and that the Exchequer does not subsidise unreasonable rents. That is why we are introducing the rent officer arrangements. In drawing up the procedural arrangements every effort has been made to minimise the work involved for local authorities and rent officers and to avoid delays for claimants. The noble Lord asked about houses in Scotland being larger than space limits. The larger rented houses in Scotland are mostly local authority or housing association houses for which a lower than market rent will be charged. As rent officers are determining market rents, a referral in these circumstances by a housing association should have no effect.
The noble Lord, Lord Kilmarnock, was concerned about the lack of consultation. The local authority associations were first informed of the proposed rent officer referral arrangements in October 1987, when a consultation paper was issued. In January 1988 a sub-group of the housing benefit standing committee was set up to consider the implications of the proposals for housing benefit administration of regulations. The Government's proposal had been amended in a number of areas following representations made by the local authority associations. The fact that they had only a week to comment on the draft order itself must be put into that context.
Lord Tordoff: My Lords, does the noble Earl accept that it was not a consultation process? They were simply being informed of changes. They were told that they had to reply by 15th February and that the document was going to print on 17th February. There was no chance of changing the document. It was not consultation. It was merely informing people of the changes the Government had made.
The Earl of Arran: My Lords, my advice is otherwise, but the noble Lord would expect me to say that. I shall take up the point and I shall write to him on it.
Lord Kilmarnock: My Lords, if the noble Earl is to write to the noble Lord, Lord Tordoff, on that point, will he send a copy of the letter to me?
The Earl of Arran: Naturally, my Lords, I shall do so.
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My noble friend Lady Gardner said that costs to local authorities would have to be paid out of the community charge. Housing benefit spending not covered by direct subsidy is reflected in the rate support grant arrangements, so additional support is available to local authorities.
The main aspect mentioned by many noble Lords, and the one on which we seemed to differ, concerned what constitutes a reasonable size of acommodation. It has been suggested that the criteria laid down in Schedule 3 represented the absolute minimum that we could have allowed and that their effect would be to force two children to share a box room or to force small families living in homes with two living rooms to move to smaller accommodation. As noble Lords will recognise, one of our aims in drawing up the criteria was to avoid imposing over-bureaucratic controls. Rent officers will have to deal quickly with hundreds of thousands of rent allowances claimed each year, so we have to keep things simple. If we had to decided to specify room sizes, someone would have had to visit each claimant's home to measure the rooms. That would have added massively to the task.
We accept that the criteria are less generous than those used by some housing associations. But many people not receiving housing benefit live in accommodation that is no larger than the criteria specify. The Government do not agree that as a general rule taxpayers should subsidise accommodation so that people on benefit can live in larger homes than some people who have to pay for their housing from their own pockets. We see no reason why, if three adults share a standard two-up, two-down house, one of the living rooms—
Lord McIntosh of Haringey: My Lords, surely taxpayers subsidise owner occupiers who have tax-subsidised mortgages however large the house is in relation to the size of the family? The Government are being inconsistent in this matter.
The Earl of Arran: My Lords, the Government are not normally in the habit of being inconsistent, and I do not believe that it is the case on this point.
We see no reason why, if three adults share a standard two-up, two-down house, one of the living rooms should not be used as a bedroom. We do not agree that as a general rule housing benefit claimants should be entitled to a spare room for guests. However, we must emphasise that the protection for vulnerable groups, such as I described in my opening speech, means that application of these criteria will not mean, as some have suggested, that elderly people or young families will be made homeless or forced to move to unsuitable accommodation.
The housing benefit regulations provide a wide measure of protection for such people. No benefit restriction can be placed on the elderly, the sick and disabled or people with children unless the local authority is satisfied that cheaper, suitable alternative accommodation is available and the local authority considers it reasonable to expect a peson to move. If an authority decides that, in these cases, because there is no suitable alternative accommodation, it cannot restrict benefit to the level

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appropriate for accommodation which meets the size criteria, it will receive 50 per cent. Exchequer subsidy on the benefit awarded above the rent officer's determination. That represents a significant concession by the Government since our original proposal was that no subsidy would be payable above the rent officer's figure. In all cases local authorities will retain their discretion to pay the benefit up to the level they judge reasonable. The rent officer's determination sets a ceiling on the rent on which full subsidy is payable, not on the level of benefit itself.
I am conscious that I have not answered some of the points that were raised. In the meantime, I commend the order to the House.
On Question, Motion agreed to.

Rent Officers (Additional Functions) (Scotland) Order 1989
The Earl of Arran: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the draft regulations laid before the House on 1st March be approved [12th Report from the Joint Committee].—(The Earl of Arran.)
On Question, Motion agreed to.

Hong Kong: British Passports Proposal
1.30 p.m.
Lord Wyatt of Weeford Lord Wyatt of Weeford rose to ask Her Majesty's Government whether they will reconsider their policy on the issue of British passports to Hong Kong citizens.
The noble Lord said: My Lords, the agreements made over the future of Hong Kong are admirable on paper, but there is a growing danger that they may not work out as well in practice as we all hope. The continuing success of Hong Kong depends on enough of its most enterprising and able residents remaining there. They will do so if they have confidence in the Chinese Government honouring their promise to let Hong Kong conduct its internal affairs and its international trade in the way that it does today. That confidence will be much enhanced if those who are anxious to stay felt that they had some way to leave Hong Kong if a future Chinese Government looked as though they were intending to reverse the present benign intentions of Beijing.
Dramatic changes are not unknown in recent Chinese history. Everyone in Hong Kong is aware of what happened during the Cultural Revolution and they are a bit nervous about what is happening in Tibet today. After 1997 we shall be helpless to intervene. Hong Kong residents will have no means of preventing Beijing interpreting and modifying the agreement or the new basic law. It will be quite diffferent if a significant number of those essential to the administration and commerce of Hong Kong had a passport enabling them to live elsewhere if things went wrong.
Beijing receives one-third of its foreign currency through Hong Kong. Even the most extreme Chinese Government would hesitate to put that at risk through the departure of key figures from Hong Kong. To stop that happening would be as much in the interests of China as of Hong Kong residents. It will be a potent sanction against unilateral changes of the ground rules. With no such safeguard in sight, a disturbing brain drain has already begun. Thirty thousand residents left Hong Kong in 1987 going mainly to Canada, Australia and the USA. Forty-five thousand residents went in 1988. The emigrants are those with enough money, and also middle management and professionals who can easily obtain employment overseas.
The brain drain is mounting and a very substantial wastage in the civil administration is also occurring. By 1997 it could severely damage Hong Kong's prospects. These valuable people would much prefer to stay in Hong Kong. They will only do so if they have the key to what they fear, we hope irrationally, might become a Communist prison. The brain drain is our fault and we do not gain any benefit from it.
In Australia only two years' residence is required before an immigrant from Hong Kong can get a passport; in Canada it is three years. They welcome HongKong immigrants, but here we obstruct them. They cannot get a passport in under five years and that is only if they can jump many deliberately difficult hurdles with regard to financial status and other matters.
Our inflexibility over passports provokes rising hostility towards us in Hong Kong. It has contrasted with our willingness to take in Vietnamese refugees from Hong Kong as British citizens; it has contrasted with the willingness of the Portuguese authorities to give passports to ethnic Chinese born in Macao. Those passports are valid throughout the entire European Community. It is thought that anything between 35,000 and 100,000 such passports will be issued.
After the European Community transitional period all those people from Macao of Chinese ethnic origin will be able to live and work here immediately and receive permanent resident status after four years; but the Chinese Hong Kong and the citizens of Hong Kong will not be able to do so. By the year 1997, apart from the Portuguese Chinese, some 270 million people from other countries in the EC will have the right of abode here, but not the Hong Kong people.
There is a stock answer from the Foreign Office and the Home Office about the ethnic Chinese from Macao. I shall now quote from a letter that Sir Geoffrey Howe wrote to me on 8th March:
"Portuguese nationality law is different from ours. Portuguese nationals in Portuguese overseas territories have always had the right of abode in Portugal".
That is somewhat misleading. Until we changed the law in 1962, the Hong Kong Chinese and Hong Kong citizens were British subjects with an absolute right to live and work here and become United Kingdom citizens. It is not their fault that alarm at the growth of coloured immigration from countries which had demanded, and achieved, independence from us made us remove those ancient rights from Hong Kong citizens.
Like the Falklanders and the Gibraltarians they had never wanted independence. The former have kept their full British passports but, with monstrous injustice, Hong Kong citizens have all lost theirs. In their place the Hong Kong citizens have at present a second class British dependent territories citizens' passport. It gives no right of abode here and will be invalid after 1st July 1997. There are believed to be some 2 million of those in existence. Before, but not after, 1st July 1997 Hong Kong residents can apply to have a new travel document called a British national overseas passport. It will be endorsed as follows:
"In accordance with the United Kingdom immigration rules the holder of this passport does not require an entry certificate or visa to visit the United Kingdom".
The same rule is supposed to apply to the BDTC travel documents, but there are many cases of harassment to owners of these by immigration officials. They do not seem to believe the authorities in London that holders of such documents from Hong Kong are entitled to unharassed visits. They frequently try to stop them entering.
On 13th May 1986 in another place the Home Secretary said that this concession about passports has been welcomed by the unofficial members of the Hong Kong executive and legislative councils (at col. 656 Hansard). That does not square with a letter I received, dated 17th March of this year, from the much respected Mr. John Swaine, QC. He wrote:
"With the unanimous support of the non-Government members of the executive and legislative councils of Hong Kong—
who must be taken to represent the feeling, as accurately as anyone can, in Hong Kong. Among other things he said:
"There is indeed very deep resentment in Hong Kong over British Government policy on nationality for Hong Kong citizens, which has been one of progressive erosion of those rights through the immigration legislation of 1962 and 1971 and the Nationality Act of 1981".
The loss of the full passport and the erosion of the other Hong Kong citizen nationality rights occurred before negotiations with the Chinese Government. It has nothing to do with the draft agreement of 1984, except for merely being described in the associated exchange of memoranda tabled at the end of the agreement.
The Portuguese Government have almost identical agreements with the Chinese Government, to take effect in 1999. Beijing has not made the slightest protest over the issuing by the Portuguese authorities to ethnic Chinese of proper passports. There is no evidence that Beijing would make any objection to our doing something similar. The objection comes from the Foreign Office and the Home Office and not from Beijing.
Logically, and in fairness, all Hong Kong residents—whether Chinese or not—who were born in Hong Kong should be entitled to a British passport. It is thought that that could involve the issuing of 3.5 million fully operative British passports. If that were to happen, only a tiny number would be used to acquire permanent residence in Britain or the Common Market. The vast majority of Hong Kong residents want to stay in Hong Kong or, if they leave, to go to warmer climates without
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top rate income and capital gains tax of 40 per cent. That is not how the enormous commercial success and high standard of living of Hong Kong have been built. They have been built on low taxation.
I realise that the Government will not feel able to do the honourable thing and allow proper passports for those who depended upon our protection and who never wanted to lose it; but even if they all came, it would be a minute fraction of the 270 million who will shortly be able to come here from the rest of the EC. We have not yet added 52 million from Turkey. Doubtless the Government will go on saying that it is not them but Parliament who decided that point; but Parliament then had no knowledge of the negotiations over Hong Kong which had not even started. Many Members of both Houses, as did many Hong Kong Chinese, thought that the permanently ceded territories, which were ceded in 1842 and 1860, in and around Hong Kong Island and Kowloon, would never be handed back, and also that Britain might well continue to control, in agreement with the Chinese Government, over the territories where the lease expires in 1997.
It is not Parliament's wishes about which we are talking, but the Government's wishes. Realistically, I do not expect them to go as far as I should like, but they could be much more flexible, even within the laws upon which they rely to excuse them from doing anything.
The Home Office immigration rules (HC169) allow exceptions to the norm: persons of independent means with no less than £ 150,000, or £15,000 a year, can come here from any country on certain conditions. They have to be able to maintain and accommodate themselves and their dependants without help from other relatives or from government funds. They must show a close connection with the United Kingdom, through relatives or in other ways. They must show that their admission would be in the interests of this country. Permission to stay on that basis is renewable every 12 months. After five years, the restrictions are removed and applicants can apply for British citizenship and a proper passport. There is another category from any country with the same privileges but different conditions. One must have means of one's own of not less than £15,000, which one will put into a business in an amount proportional to one's interest in it. One must work full time at it and the Home Office must be convinced that there is a genuine need in this country for the business concerned.
The last two conditions would be fully met if up to, say, 50,000 energetic Hong Kong residents, selected for their ability and capacity, come to enrich our commerce and industry. The Home Office requires itself to be selective in this matter. It could easily be more selective, to the great benefit of the country, if it were not so wooden; 50,000 Hong Kong citizens, even supposing that they wanted to come here, would not open the floodgates from the new Commonwealth. Immigrants from there could not meet the financial qualifications. I should think us fortunate if 50,000 enterprising Hong Kong residents came here. That might make us as rich and enterprising as Hong Kong. The period of residence required

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before a passsport is issued to such selected entrants should be reduced to two years. That would bring us into line with Australia.
But there are other things which could and should be done. Immigration restrictions under Section 4(2)(c) of the British Nationality Act 1981 should be lifted during the fifth year of the applicant's stay in the United Kingdom. At the moment they have to wait the full five years. Periods of study in the United Kingdom should be sufficient for the purpose of satisfying the residential requirements. The passport issued to Hong Kong residents only should be endorsed with the right of readmission to the United Kingdom. That in itself would fall far short of the right of abode, but it would guarantee the international acceptability of the new Hong Kong passport, enabling the holder to travel freely.
I understand that about 10 countries only will allow entry for a visit with the rather feeble travel document, as it now stands. Mr. John Swaine, together with all his non-government colleagues on the executive and legislative councils, strongly urges that, if the holder wishes, the right of readmission could mature into the right of abode after five years' stay.
There is then the problem of holders of proper British passports whose wives or husbands do not have one. The latter cannot reside in this country with their spouses without going through an immensely complicated rigmarole: the spouse with the passport has to produce documents satisfying the authorities about his or her educational qualifications, financial standing and so on. Even if they surmount that demeaning process, and they both come to live in Britain, the spouse without the passport can be ejected if the financial circumstances of the spouse with the passport change. However, graciously the Government have said that children may be allowed to remain.
I have seen a number of heartbreaking letters and articles from those who reasonably fear that they will be split from their wife or husband. If the Government are to show humanity, they must change those rules immediately. All those with a proper British passport should be able to confer the same right on their spouses. I should have thought that that was only common decency, it will affect only a few people. Likewise, the Government ought to give passports automatically to those who are or have been in the civil administration or the military services, if they want them, and to their widows. That is being refused on a substantial scale.
The Government have been niggardly about those small categories, including the Indian community which will be in a kind of nationality limbo after 1997. They will be neither Chinese nor Hong Kong citizens nor anything else. The Government's reluctance to behave decently in these matters is a major cause of the rising resentment in Hong Kong.
In what I have said I have carefully tried not to raise the hopes of Hong Kong residents beyond what it is realistic to expect. I know that most of them think that the British national overseas passport which is the only one available for use after 1997 is hardly worth applying for. I urge them nevertheless to apply. At least the residents could use them, even
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in their present weak and feeble condition, as a passport to get out of Hong Kong in an impending emergency, to visit Britain, if only for a short while. Once here, it could be a different ball game, according to the nature of the situation which prompted the holder of the British national overseas passport to leave Hong Kong to visit Britain. That document might become extremely useful, although I hope that the emergency need for it will never arise.
The Government must not delude themselves that all is well in Hong Kong simply because they have made good agreements with Beijing. Business is certainly doing exceedingly well in Hong Kong and the British management of 40 per cent. of the £650 billion worth of companies on the Hong Kong Stock Exchange means that we are doing very well too out of Hong Kong.
However, as 1997 approaches, anxieties are mounting. Usually in Hong Kong strikes and disputes are unheard of. But during the last month there have been four: a strike of mini-bus drivers in protest against the police; a taxi drivers' strike; a dispute of doctors and nurses over pay and working conditions. That sounds familiar to us but it is extremely unusual in Hong Kong. Even court interpreters have started industrial action over their pay and promotion. Hong Kong is becoming harder to rule. Our duty to hand it over in good working order will be much easier to fulfil if we listen to and cease cavalierly to dismiss—as the Government do—the worries of the Hong Kong people. Worries may start with relatively small active groups; they can rapidly affect the whole population.
It must be in China's interests and in the interests of our huge British business investment in Hong Kong, which brings us in so much foreign exchange, to ensure the smooth working of Hong Kong after 1997. But much more flexibility is required from the British Government, particularly in the matter of passports—the potential key to freedom which could dissuade the Chinese Government from ever making Hong Kong a prison.
The Hong Kong people do not share the Government's rosy view of Chinese communism. It is for the Chinese Government to convince them that Her Majesty's Government are right. I believe that Beijing will be much assisted in doing this if our Government were to act along the lines I have suggested. The Hong Kong people would then feel that we had not abandoned them out of mistaken and misplaced deference to Beijing.
1.54 p.m.
Lord Fanshawe of Richmond: My Lords, I wish to congratulate the noble Lord, Lord Wyatt of Weeford, on this Question today and as a result activating the debate. I think that all of us were most impressed by the skilful way in which he put his case. I support him wholeheartedly in the views he has expressed so well today to the House.
The matter of passports is not only important here in the United Kingdom but, as the noble Lord has stressed, it is crucial to Hong Kong. I have an interest in that for four years I had the honour to be Foreign Office Minister responsible for the supervision of

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the Government of Hong Kong. I did the job which my noble friend on the Front Bench who is to reply is doing today.
I have resisted the temptation over the past few months to speak about the Hon Kong situation, realising how very dificult and sensitive it is. However I feel now that as it is three years since the Hong Kong British Nationality Order was introduced in 1986, it is time that the British Government thought again on the passport and nationality issue. As was indicated by the noble Lord, Lord Wyatt, there seems to be a strange alliance between the Home Secretary and the Foreign Secretary to make no move at all on the matter. It is an alliance which gives great anxiety to all of us who are interested in Hong Kong. This afternoon I must request my noble friend to ask his right honourable friend the Secretary of State for Foreign Affairs to sit down round the table with the right honourable gentleman, the Secretary of State for the Home Department, and try to see whether something can be done to meet the real fears which were expressed only yesterday in this Palace by the Governor of Hong Kong when giving evidence to the Select Committee in another place.
Why is that so important? As the noble Lord, Lord Wyatt, said, the need is clear—to raise morale in Hong Kong. There is concern that the governments in Hong Kong and London are perceived to be inclined to dance to the Peking tune. This may not be true, but that perception is held widely in Hong Kong. Although Hong Kong feels that Peking will keep to the agreement, other outside events such as the recent developments in Tibet cause anxiety that Chinese attitudes may change for the worst in Peking over the course of the next few years, before the new agreement comes into effect.
The noble Lord, Lord Wyatt, has mentioned the Macao decision to issue European Community passports to 100,000 Macinese. This of course has raised eyebrows in Hong Kong becasue the people living there know perfectly well that in due course, as described by the noble Lord, Lord Wyatt, the Macao Chinese will be able to enter the United Kingdom as members of the European Community. It seems to me that British passports should first be granted as a matter of fairness to those who can contribute financially to the UK on the lines that were set out by the noble Lord, Lord Wyatt.
Many applicants during their working lives will not have made any contribution to the United Kingdom economy. Naturally, because they have lived outside the United Kindom, they have made no contribution in taxes to the United Kingdom or the superstructure, pensions, housing etc. But they have been British subjects in Hong Kong and therefore we have a duty to them. If they are prepared to make a financial contribution on the lines suggested by the noble Lord, Lord Wyatt, it seems to me that a gesture such as this could make a substantial contribution and give benefit to the UK economy. Those benefits, as has already been said, now go to the United States of America, Australia and Canada. About 97 per cent. of all Hong Kong immigrants at the moment go to the USA, Canada
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and Australia. We are talking about 45,000 emigrating in 1988. These are the leaders of the community, the trained technicians, the people who will be keeping Hong Kong on the road in the years ahead.
Most Hong Kong citizens wish to live and flourish in their own city. They have made a considerable success of that. They do not wish to leave; I do not believe that they will do so. But the gesture of passports can provide an immense boost to their morale. Again, this point was underlined by Sir David Wilson, the Governor, in his evidence yesterday to the Select Committee in another place.
There are elaborate safeguards in the international agreement which has been negotiated by the British Government with Peking. But that does not alter the need to be more flexible regarding access into the United Kingdom and into the European Community. That is both in the interests of the United Kingdom and of Hong Kong. It was interesting that Peking did not view the Macao decision of the Portuguese Government with concern, so I see no reason why it should view with any concern any change or alteration that Her Majesty's Government may make regarding passports for Hong Kong citizens.
My next point was, I believe, touched on by the noble Lord, Lord Wyatt. It concerns the need for more flexibility and the fact that so much unnecessary caution is shown by the Home Secretary regarding his ability in Section 4(5) of the British Nationality Act to make decisions on individual cases. The Home Secretary should surely use this power much more widely and to the benefit of the civil servants who have given their lives to the service of the British Government in Hong Kong. I wish to quote briefly from the leading article in The Times on this issue on 13th January 1989. The article states:
"If Chinese rule should prove oppressive after 1997, Britain's doors will be closed to most of Hong Kong's 3·5 million British nationals. Their passports do not give them the right to reside in the United Kingdom. But in recognition of their special vulnerability, ministers have discretion to issue passports to members of Hong Kong's administrative and security services. Yet of the modest 700 who have applied, all but 54 have been refused.
If Britain is confident—as Sir Geoffrey Howe has claimed in The Times—that Hong Kong's people will 'wish to build their future in their own territory', there is no need for it to be so niggardly in granting them the right of residence. Britain's policy contrasts unhappily with Portugal's decision to give full passports to its 100,000 nationals in Macao … The size of Hong Kong's population is, of course, much greater. But that is no reason for not granting British passports at least to those with special claims. This would be just, and would confer needed credibility on ministers' assertions that they are not walking away from Hong Kong".
Britain has political and moral obligations to Hong Kong. There is, rightly, a feeling in Hong Kong that we are not meeting them.
2.3 p.m.
Lord Bonham-Carter: My Lords, I too wish to congratulate the noble Lord, Lord Wyatt of Weeford, on raising this important subject on this occasion. I also agree with him that we are discussing two things in particular. First, there is the question of the confidence which anyone can have in the undertakings given by the Chinese Government, and in

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particular the confidence which the people of Hong Kong and British passport holders in Hong Kong can have in the undertakings of that Government. Secondly, we are looking at the consequences of British immigration policy. That is never very defensible in any respect, and in respect of these citizens it is particularly indefensible.
The contrast between the policy of the British Government and that of the Portuguese Government is stark and wholly in favour of the latter. I do not intend to dwell on the issues which have been so fully and convincingly covered by the noble Lords, Lord Wyatt and Lord Fanshawe of Richmond. I simply wish to draw attention to a particular group of people who probably could not be favoured on account of their bank balances, but to whom we have a particular obligation. They should not pass unnoticed in this debate.
The group to which I refer consists largely of the Indian population which in 1985 consisted of about 6,000 people from India and 4,000 from Pakistan. It included also some Portuguese and other Europeans. That group of people, which amounted then to some 10,000, seems to me to be a group to which we have a particular obligation. Some of them came to Hong Kong in the 19th century as merchants at the same time as we took over the colony. Others came over to serve the British Government as public servants, as policemen and as junior civil servants. The children of those people, some of whom came in after partition in India, are unable to claim Chinese nationality. They can only become British nationals overseas.
As has already been said, this status does not provide them with a right of abode. They are therefore stateless de facto.It seems to me that these people, who came over to a British colony, who have served the British Government and who do not want to serve the Chinese Government, are a group to which we have a particular obligation. Moreover, they are a small group. We should ask the noble Lord when he replies to this Question to pay special attention to this group of people to which we have an undeniable obligation.
2.7 p.m.
Lord Geddes: My Lords, I too must, and indeed would like to, congratulate the noble Lord, Lord Wyatt, on raising this Question today. The matter of British nationality for the citizens of Hong Kong has been debated at length over some years now. Some noble Lords may remember the amendment that I had the privilege of proposing on 13th October 1981 to the then British Nationality Bill. It read, somewhat appropriately for this afternoon's Question:
"Every person who under this Act is a British Citizen, a Citizen of the British Dependent Territories or a British Overseas Citizen shall have the status of a British National".—[Official Report, 13/10/81; col. 261.]
I admit to a feeling of considerable disappointment that that amendment was defeated, albeit extremely narrowly in a very full vote, by 105 to 102. I think it worth emphasising that it was not designed only to encompass the Hong Kong situation; it was a much broader amendment. It is also worth pointing out that it followed the granting
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of British nationality to the citizens of Gibraltar. However, it preceded the granting of British nationality to the citizens of the Falklands, which was itself the subject of a separate amendment tabled by my noble friend Lady Vickers, which, if I recall correctly, resulted in a tied vote of 99 to 99 and under the rules of this House was therefore declared defeated.
That defeat of my amendment regarding British nationality by 105 to 102 was followed by a series of amendments which I proposed when this House considered amendments from another place to the British Nationality Bill. My noble friend the late and sadly missed Lord Drumalbyn said in the debate on 29th October:
"I have never seen an Order Paper such as the one we have today".
I apologise if this seems somewhat egotistical, but it is relevant. He went on to say:
"It seems time that my noble friend Lord Geddes has set the Government 100 lines! It is practically a 100 repetitions of the same correction. The Government have delivered their task on time".—[Official Report, 29/10/81; col. 1138]
I had hoped to have been able to congratulate my noble friend the Leader of the House because on that occasion he was sitting in the place where my noble friend Lord Glenarthur is sitting and had to respond to the comments of my noble friend Lord Drumalbyn.
The Government have made it abundantly clear that they consider that the future of the people of Hong Kong is safeguarded by the joint declaration and the basic law, together with the discretionary power to grant British citizenship under Section 4(5) of the British Nationality Act 1981. I do not think that this is the occasion to debate the merits and shortcomings of that document. What is clear, however, and has already been mentioned this afternoon, is that the people of Hong Kong do not appear to agree with the Government and they are voting with their feet.
Reports of the brain drain have already been mentioned this afternoon and continue to flood in. I shall quote just a few statistics. Last August it was reported that just under 68 per cent. of computer experts were planning to leave Hong Kong. In January this year a survey by the Institute of Personnel Management showed that the private sector lost just under 8 per cent. of its top staff last year. In the same month an opinion poll conducted by Survey Research Hong Kong revealed that in 29 per cent. of all households at least one member was planning to leave or had already gained a foreign passport. That figure rose to 46 per cent. when limited to professionals, business executives and the self-employed.
As has been mentioned this afternoon—and I make no apology for repeating the point—in order to retain for its banks and corporations key personnel who might otherwise emigrate, the French Government have decided to confer upon about 100 Hong Kong people full French national status without any need to meet residence requirements. They have been issued with French passports with the right of abode in France, and therefore right of abode in this country.

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In addition, as my noble friend Lord Fanshawe has already mentioned, the Government's application of their powers to grant British citizenship to Hong Kong citizens is hardly encouraging. I think that it is worth repeating that out of 700 members of the administrative and security forces who have applied for citizenship, we are told that only 54 have been successful.
Leaving aside for the moment the question of Britain's moral responsibility towards the people of Hong Kong, to which I should like to return, there is an arguable and more general case for granting British nationality which might be called the sword of Damocles argument. The threat of a mass exodus from Hong Kong of all or the vast majority of professionals, at that stage armed with a British pasport, must at the very least be a strong inducement to the PRC to observe the spirit of the joint declaration without alteration.
I should also like to refer to yet another survey conducted by Emigration magazine last year, which has already been mentioned. It found that of the 45,000 people who left Hong Kong in 1988 the vast majority did not want to come to this country. Ninety-four per cent. quoted Canada, Australia or the USA as their first choice. However, even if one were to accept that the overall argument has been lost—and I do not consider that it has been—one must return to that statistic, that of 700 applications for British nationality only 54 have been granted.
My noble friend Lord Glenarthur, for whom I have a great deal of sympathy in this matter, justified the situation by saying, as he has said in the House in the past, that the granting of such citizenship would be given "only sparingly" and on a very limited basis. He said that in his letter to The Times of 17th January this year. I support the argument that that seems an inadequate reason, to say the very least, to explain why those numbers should be so small. Why have the Government not been more open about their reasons for that refusal?
I believe that this is more than an emotional issue even within this House. It is certainly a serious issue within Hong Kong. It has been an ongoing issue for a very long time and I am proud to have been involved in it for the last eight years. Sadly, I believe that there is little chance of Her Majesty's Government granting full nationality to the entire population of Hong Kong, but, having said that, one questions why not. We are talking of a population of 3·28 million in Hong Kong; that is less than 1½per cent. of the Common Market's population of more than 250 million. As has been said but cannot be proved, there is no way that anything like all those 3·28 million people will be able to come to this country even if they wanted to do so.
As His Excellency the Governor said yesterday—my noble friend Lord Fanshawe has already quoted him—Hong Kong feels that Britain has a moral obligation and a debt of honour towards its subjects there. For 140 years they have been encouraged to behave as British subjects and, as the noble Lord, Lord Wyatt, said, before 1962 they had the right of abode in this country. I hope that I am not a voice crying in the wilderness, but I urge the Government,
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and particularly my noble friend Lord Glenarthur, to think seriously about the issue. There is no longer a precedent being set. There are no others to whom such a granting of nationality, other than to the Chinese in Hong Kong, could be made. There is no precedent elswhere in the world. Let us look seriously at the matter again to see whether we can give real encouragement to the Chinese people of Hong Kong on a question about which they feel deeply and which they have a great deal of justification for asking.
2.17 p.m.
Lord MacLehose of Beoch: My Lords, this question of British nationality is exceedingly bitter for people in Hong Kong. It is the subject that arouses most passion and is at the heart of the disilllusionment with the United Kingdom which is so constantly and, I fear, correctly alleged in the media.
I entirely agree with what the Governor said to the Select Committee yesterday about the matter and I am most grateful to the noble Lord, Lord Wyatt, for having raised the question today. I shall not take noble Lords through the sad history of this business from the Commonwealth Immigrants Act 1962 down to the last bitter pill of what happened in Macao, but we must surely view the situation with great sympathy. We must realise that it harms Britain's reputation, including among our best friends in Hong Kong. Moreover, the sense of a need for an alternative nationality is causing some or many people to emigrate. I do not think that many now expect that the restrictions imposed during the last 27 years can be legislated away as was done for the small numbers in Gibraltar and the Falklands, but I agree with the suggestions of the noble Lord, Lord Wyatt, about how the present situation could be mitigated. His suggestions very much cover the points raised by John Swaine and the Hong Kong officials of the executive and legislative council.
For my part, I want to concentrate on what harm could be mitigated by more flexible administration of the 1971 Act. It adds up to very much the same as the noble Lord, Lord Wyatt, has said, although I have had no previous contact with him about this subject. I should like to put the case in my own way.
The success of Hong Kong up to 1997 and of the SAR thereafter depends on many factors. High on the list of essentials is that most of the managerial core—the decision-makers—whether in government or in business should stay in place. The long-term answer to this requirement is exactly what the Government are trying to do. I entirely agree with the reply of the Minister to the noble Lord, Lord Wyatt, on 2nd February to the effect that one should make Hong Kong an attractive place in which people can live, work and plan their lives.
However, the certainty of those attractions will only be felt in time and as events unfold. Meanwhile, anxious people ponder what to do. For those who are in doubt about whether to stay or emigrate, registration as a British citizen would end their dilemma. I am sure that, given that assurance, they would not hasten to the United Kingdom but, on the contrary, would thankfully get on with their jobs and lives in Hong Kong.

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I do not suggest that as yet there is a crisis. At this stage I simply propose a reconsideration of the administration of Section 4 of the 1981 Act in order to see whether, for example, "special circumstances" under subsection (4) or "Crown Service" referring to subsection (5) could not be used more widely to accommodate the people of whom I have been speaking.
I noticed that both the noble Lords, Lord Fanshawe and Lord Geddes, referred to subsection (5). It is of particular interest to me because it provides for registration without residential qualification. In the present circumstances the last thing that is wanted is for these key people to spend several years outside Hong Kong qualifying for some nationality and perhaps deciding never to come back.
Perhaps I may say in anticipation of the Minister's reply that I know that it has always been claimed that this subsection would be applied sparingly. Indeed, I can almost hear the then Home Secretary, Mr. Whitelaw, warning me that that would be the case. I am seeking now reconsideration of what "sparingly" really need mean. My submission is that it ought to mean a great deal more than it does at present.
I believe that, other things being equal, the kinds of people I have in mind want to stay in Hong Kong. Such is their commitment that many would stay there in any case. It seems to me that putting at rest the minds of those people is something practical which the British Government could do and which would not involve large numbers. It would be very much in the interests of the Chinese Government. Indeed, I agree with the noble Lord, Lord Wyatt, that probably there is no question of their objecting. It would in any case help to underpin the stability of Hong Kong at what may prove to be a critical point. It is very much in the joint interests of both governments.
In support of his excellent arguments the noble Lord, Lord Wyatt, warned that all was not well in Hong Kong. If I may say so, it would be surprising if it were. There is a situation—a unique situation—of very rapid change and of course there are worries. However, I hope that no one will underrate the achievements of the government in Hong Kong. One sees emerging the framework of a viable, prosperous future out of what was once total uncertainty. The details of the policies are under constant attack in uninhibited terms by some of the press and most of the politicians in Hong Kong. That is certainly healthy, for all I know helpful and, in any case, common form in a free society.
Let us remember that the economy is booming. The standard of life there is the highest in Asia, after Japan. Hong Kong is proving to be what one had always hoped that it would be; namely, the motor of the latent productive and commercial capacity of large areas of South China. These facts reflect a truer commentary on what the Government are achieving in Hong Kong, although, as the noble Lord, Lord Wyatt, stressed, there are still some very important things to be done.
2.25 p.m.
Viscount Torrington: My Lords, I too should like to join in the thanks to the noble Lord, Lord Wyatt, for giving us the opportunity to debate this subject today.
I visited Hong Kong in June last year. I received ample evidence of the dismay of Hong Kong citizens on this subject of nationality. Indeed, as was referred to earlier in the debate, I met Mr. John Swaine who talked to me on this subject. I see the problems of Hong Kong as being rather like the problem of exchange control. When a country has stringent exchange control, it seems that everybody wants to get their money out. When one abandons exchange control, as we did in this country a few years ago—surprise, surprise!—capital does not flood out left, right and centre. In fact it begins to flood in because the capital feels free to move.
Evidence in Africa and other places suggests to me that most of the countries which have the most stringent exchange control are those pursuing policies which make people want to vote with their financial feet. I do not believe that most of the residents of Hong Kong want to vote with their financial or physical feet. But they need the right. They need an insurance policy.
Should they have that right? As has been said on several occasions in this debate, up until 1962 they had that right: the right of free abode in the United Kingdom if they so choose it. That applied to many other Commonwealth citizens. However, most of those Commonwealth citizens received independence in their own countries under their own governments, and it was perfectly reasonable that their right of free abode in this country should cease. However, Hong Kong is not a democracy. It has not opted for independence. It never had any intention of doing so. The change that will happen is that a country—which has only in a sense a rudimentary democracy now—will be handed over to the control of a country with very little history of democractic process.
The passport problem is in a sense a symptom of the disease. That disease is fear—fear of China and what it will do after 1992. Therefore, as I said when we debated this subject in June last year in this House, it is China that holds the key. What it has to do is to make the Basic Law better for the people of HongKong than the Sino-British Agreement. It must not regard it as a matter of face to win back points conceded in that agreement; it must go further and prove to the people of Hong Kong that autonomy will mean what it says.
Equally, if the citizens of Hong Kong have the right to vote with their feet then China cannot use the stick to keep them there. It will have to use the carrot and that can only be beneficial.
The noble Lord, Lord Geddes, and others have made the point that it is perhaps too much to hope that the British Government will reverse their position and grant the full right of abode to British nationals in Hong Kong. However, as several noble Lord have said, the situation today is vastly different. First, we know that very few of them really want to come to the United Kingdom. We in the United

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Kingdom are not now threatened by vast hordes of potential immigrants. Indeed, it is to the EC that the Hong Kong citizen will be coming. Living in a somewhat warmer climate than Britain, I have no doubt that there are many other parts of Europe in which those who wished would ultimately settle.
I am in favour of the grant of more or less full UK citizenship to the residents of Hong Kong. I do not see, as has been said, that it creates any new precedents. I appreciate that there are practical difficulties. I ask my noble friend the Minister to confirm it, but I hope that the way may be open for a somewhat more pragmatic approach than is being applied now.
It has been said that we should perhaps survey the market and allow all British nationals in Hong Kong to apply for a passport which would allow them a right of abode in the United Kingdom. Perhaps subject to suitable financial self-sufficiency criteria, we might institute a quota which could be fulfilled by a ballot and thus create a mechanism which would not commit the Government to letting in a particular number in any one year, but which would create a sympathetic approach and a flexibility, which the noble Lord, Lord Wyatt of Weeford, requested.
Many small nations have changed hands in this century without being consulted about their fate. That is nothing new, but now in 1989, running up to 1997, we hope that we shall be entering a period of civilisation when glasnost is rife and possibly its Chinese equivalent.
We are in a civilised fashion discussing the problem of the reversion of a piece of freehold property. It is interesting that we should have been discussing a housing order before this debate started. But there is plenty of legislation in this country which requires a landlord to protect tenants' rights and, if necessary, to rehouse tenants should they so require it.
I should like to join other noble Lords in asking the Government to give a more sympathetic consideration to this issue.
2.32 p.m.
Lord Irvine of Lairg: My Lords, the House must be grateful to the noble Lord, Lord Wyatt of Weeford, for bringing before it once again the legitimate concerns of the people of Hong Kong on the passport issue. The Government have deployed the argument that wrong signals would be sent if we were to give the people of Hong Kong a lifeline to Great Britain in the form of a full British passport. But because that security is not there, there are, as the House has heard, the beginnings of an enormous brain drain out of Hong Kong. The noble Lord, Lord Wyatt, has given the most recent figures: 30,000 in 1987 and 45,000 last year.
Security is the most legitimate of aspirations for every man and woman. Today it is those with the most exportable assets who are finding with their feet security away from Hong Kong. These are people whom Hong Kong can ill afford to loose. It would be idle to deny that what is already much more than a trickle may by 1997 become a flood. This accelerating damage to the future wellbeing of Hong
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Kong must be recognised by the Government, who should appreciate that it would be arrested by the security of a full British passport.
The argument that displeasure from Beijing would result from a more liberal policy on the passport issue is thoroughly bogus. I hope that we do not hear any of that in the reply from the Minister. As the noble Lord, Lord Wyatt, rightly said, Beijing made no protest whatever when Portugal granted to the ethnic Chinese of Macao passports fully valid anywhere in the EC. The sense of security conferred by these passports will mean that there need be no disproportionate reactions on the part of their holders to concerns that could so easily be exaggerated in new and unusual circumstances if they had no lifeline elsewhere.
The fact is, as the noble Lord, Lord Bonham-Carter, has emphasised, that the conduct of the Government of Portugal is in sharp contrast to our own. We refuse to grant the right of abode to the 3·5 million British dependent territory citizens in Hong Kong, whereas Portugal is granting EC passports to its 100,000 nationals in Macao. As has been said, these passports will allow the Macao Chinese to live and work in all Common Market countries, including the United Kingdom, while the Hong Kong Chinese, who have every reason to regard themselves as British, have no such right.
It is far too easy to say that those who are able today, by moving, to acquire a Canadian passport after three years' residence, or an Australian passport after two years' residence, will duly return to Hong Kong with their families and with their new insurance policies in their back pockets. In some cases that may be. However, it is beyond doubt that Hong Kong is suffering and will continue to suffer a serious and permanent loss of human capital.
For my part, I give no weight at all to the argument that to grant the right of abode to the 3·5 million nationals in Hong Kong will signal a lack of confidence in the future of Hong Kong. On the contrary, it will give to those 3·5 million people, on whom the future success of Hong Kong depends, the confidence to make Hong Kong work.
As a number of noble Lords have reluctantly recognised, it may be that this argument has long been lost. But at least let us abstain, and may the Minister in reply abstain, from bogus arguments that the just solution—to grant the right of abode—will send the wrong puffs of smoke elsewhere. That is just no argument at all.
The fact is that it is fear for the future, which can so easily become a self-fulfilling prophecy, that is poisoning a new venture. The same rights for the Hong Kong Chinese as Portugal has conferred on the Macao Chinese would create that climate of confidence which alone can guarantee the success of the new Hong Kong.
I have one overriding question to put to the Minister. In reply, will he in good conscience tell us how the strongest reason for refusing the right of abode—that is, fear of mass immigration from Hong Kong into the United Kingdom—can live alongside the Government's continually expressed confidence that Hong Kong's way of life will continue for at

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least 50 years so that the people of Hong Kong have nothing to fear and no reason to want to leave? If the noble Lord knows the answer to that question, no doubt he will wish to give it to the House so that it can be heard in Hong Kong.
Before departing from that point, I should like to remind your Lordships of the words spoken by the noble Lord, Lord MacLehose of Beoch, not today but in this House on 16th May 1986. He said:
"It is difficult for us here to realise the feelings of someone who was born a British national with right of abode in the United Kingdom who through no fault of his own finds that that right has gone from him, in spite of the fact that all this time he has been called British and has been administered from Britain".—[0fficial Report, 16/5/86; col. 1422.]
Let it be that I and other noble Lords who have spoken in the debate have been pushing at a door that was bolted years ago: so, no general right of abode in the United Kingdom for Hong Kong citizens. But I should at least add my voice from these Benches to the words of realism that have come from the noble Lord, Lord Wyatt of Weeford. Can the discretion to grant British passports not be exercised in a much less restrictive way for the benefit of many more Hong Kong citizens?
As the noble Lord, Lord Fanshawe of Richmond, pointed out, there it, for example, discretionary provision of full British citizenship for current and former servants of the Crown and their relatives. Why have only 54 out of 700 applications been successful? We are told that the Government's policy is to grant these applications on a very limited and sparing basis. Can we be told why that is the policy? This House will not be impressed by being told that it is wet because it is wet.
I should like to ask the Minister whether in all the respects listed by the noble Lord, Lord Wyatt, he can offer any assurance that there will be a more generous grant of United Kingdom passports to Hong Kong citizens. Has he anything tangible to say about the discretionary grant of full United Kingdom passports beyond the well-worn utterances about BNOC passports, in which Hong Kong citizens have so little faith?
Having said that, I join the noble Lord, Lord Wyatt, in urging Hong Kong citizens to take up the BNOC passports, even though they may think so little of them. In an emergency which no one anticipates, in which the expectations of the people of Hong Kong under the joint declaration and the basic law were defeated, I cannot see how our Parliament and the Government of the day, whoever they may be, could do other than consider it the obligation of our country to grant a right of abode to those who feel constrained to leave Hong Kong. I hope that the Minister will wish to say something on that possibility, which, however remote it seems, is a real source of current fear for so many.
Finally, before I sit down perhaps I may make this observation. I hope that in his reply the Minister will acknowledge that no Member of this House who has chosen to participate in this debate has spoken in support of the Government's policy and I hope that he will feel constrained to respond accordingly. Perhaps I may also add that we on these Benches do not doubt the commitment of the Government of
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the People's Republic of China to make a success of Hong Kong in accordance with the Joint Declaration. However, from the United Kingdom Government we seek a flexibility in the issuing of British Passports and in undertakings—and if not undertakings, encouraging indications—for the future which will make a tangible contribution to that climate of confidence which is necessary for the continuing success of Hong Kong between now and 1997, and beyond.
2.42 p.m.
The Minister of State, Foreign and Commonwealth Office (Lord Glenarthur): My Lords, the noble Lord, Lord Wyatt of Weeford, has given us an opportunity to consider a subject which is of great importance and sensitivity to people in Hong Hong. It is a topic to which I have devoted much attention as the Minister with special responsibility for Hong Kong and I have listened with interest to the thoughtful and concerned views which your Lordships have put forward this afternoon.
The sensitivities go well beyond the immediate matter of nationality and passports. They involve important questions about Hong Kong's future and about the viability of the Sino-British Joint Declaration on which Hong Kong's future depends. But it has in particular been suggested that Her Majesty's Government's policy on the matter of passports for Hong Kong citizens reflects a lack of commitment on our part to the Joint Declaration and lack of confidence in Hong Kong's future.
It has also been argued that our policy on passports indicates that we have reneged on our responsibilities towards Hong Kong people. That may not have been addressed in quite those words this afternoon but it is, nevertheless, a theme which has developed over time and I tell your Lordships that those suggestions are far from the truth, as was the suggestion of my noble friend Lord Fanshawe that we were dancing to the Chinese tune, if I have his words right. All our efforts and success in negotiating the joint declaration, and now in securing its faithful implementation, would have been in vain if it were not now our intention to uphold our responsibilities towards Hong Kong.
The Joint Declaration is a binding international agreement. It contains detailed and comprehensive provisions for Hong Kong's continued stability and prosperity in the years up to 1997 and beyond. We are committed to making the agreement work and to ensuring that Hong Kong remains a thriving and dynamic society in which her people can look to the future with confidence.
In the four years since the signing of the Joint Declaration, Hong Kong has taken full advantage of the favourable conditions which the Joint Declaration helped to create. Hong Kong has enjoyed impressive and sustained economic growth. Her people have achieved an unprecedented level of prosperity. Hong Kong today is a remarkable success story. I have visited the territory four times in the past 18 months and I can personally testify to that. While the British Government remain fully committed to the maintenance of Hong Kong's success, I say to the noble Lord, Lord Wyatt, and to

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the noble Lord, Lord Irvine of Lairg, that I am as confident as they are that the commitment of the Chinese Government is every bit as firm.
The noble Lord, Lord Wyatt, clearly feels strongly about the matter, but with respect, however, he seemed in a sense to overlook a lot of all that. In his speech he seemed to condemn with faint praise the sound record of astonishing success which we have had so far in implementing the arrangements set out in the Joint Declaration, and the many manifestations of Hong Kong's growing prosperity.
So far as concerns the terms of Lord Wyatt's Question, it will come as no surprise to him to hear that the Government's view remains as I explained to the noble Lord when I answered his Starred Question on 2nd February. Let me explain why and begin by hitting one myth on the head straightaway; that is, the comparison that has been suggested between the Vietnamese boat people and letting some of them come here, and not the Hong Kong Chinese. I cannot stress too strongly that there is simply no connection between those two issues and it is quite wrong to draw such a connection. Those Vietnamese boat people who qualify as refugees are eligible for resettlement; those who are not refugees are detained as illegal immigrants pending repatriation to Vietnam. Clearly, there is no question that Hong Kong Chinese are, or should be treated as, refugees.
I believe also that there is a widespread misunderstanding that it was the British Nationality Act 1981 that deprived holders of Hong Kong British passports of the right of abode in this country. The noble Lord, Lord Wyatt of Weeford, went some way towards putting the case in a rather more accurate way and pointing out that there is a considerable history to this. The present nationality and immigration status of Hong Kong British Dependent Territory Citizens reflects the worldwide nationality and immigration policies of successive British Governments since the early 1960s. The British Nationality Act of 1981 merely confirmed the trend of previous legislation, in line with the wishes of Parliament and the British people.
I must emphasise that this legislation is of worldwide application. It is not, nor has it ever been, in any way restricted to, or directed at, Hong Kong. Nor is it the case, as some people in Hong Kong seem to believe, that the British Nationality Act of 1981 was designed with Hong Kong's future transition in mind so as to keep Hong Kong people out of Britain.
Hong Kong BDTCs are subject to United Kingdom immigration control and do not have right of abode here. But they do not require visas or entry certificates to enter the United Kingdom as visitors, and they are entitled to full British consular protection when travelling overseas.
Your Lordships will no doubt recall that when we discussed Hong Kong matters last June concern was expressed about entry refusals of Hong Kong British passport holders. The noble Lord, Lord Wyatt of Weeford, has raised this matter again today. I have personally looked into that problem with the Home
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Office, and visited Gatwick and Dover to see the situation for myself. Following this, we agreed a package of measures, including provision of a hot-line service to the Hong Kong Government office in London to assist and offer advice in cases of difficulty.
I am glad to say that the rate of entry refusals dropped significantly. Indeed, the hot-line has taken only two calls relating to Hong Kong travellers seeking advice because of difficulty at ports of entry since it was established in November. Having looked thoroughly at the issue I can give an absolute assurance that there is no doubt about the validity of BN(O) or BDTC passports, nor any question of discrimination against their holders at United Kingdom ports of entry. Holders of BDTC passports will continue to enjoy these same benefits after 1997 as British Nationals (Overseas), a status created under the British Nationality (Hong Kong) Order 1986 which was fully considered and endorsed by Parliament at the time.
The noble Lords, Lord Wyatt and Lord Fanshawe, have sought to draw comparisons between Hong Kong and Macao. Both noble Lords will not be surprised if I echo the remarks of my right honourable and learned friend the Foreign Secretary. I do not believe that any valid comparisons can be made. The nationality laws relating to the two territories have long been different. The nationality law of Portugal differs from our own, in that Portuguese nationals in Portuguese overseas territories have always had the right of abode in Portugal. That situation existed long before the signing of the Sino-Portuguese joint declaration on Macao. The fact that Portuguese nationals in Macao have recently begun to be issued with passports in the common EC format does not reflect any change in their nationality status.
When the noble Lord. Lord Wyatt of Weeford, referred to the Macao Portuguese, he seemed in effect to be proposing that Hong Kong BDTCs— some 3·25 million of them—should be given the right of abode in the United Kingdom. That would require an amendment to the law. It would also involve a substantial change in well established nationality and immigration policy. By far the most common basis for granting British citizenship is that the people concerned are already resident in Britain and have met the residence requirements set out by law.
The noble Lord might like to ponder the fact, as should the noble Lord, Lord Irvine of Lairg, that the grant of citizenship and the right of abode to 3·25 million Hong Kong British Dependent Territory citizens at one go would involve well over six times the total number of people granted full British citizenship in the 10-year period 1977–87. I cannot believe that the noble Lord seriously expects—he seemed to recognise the realities, as did other noble Lords—that there would be sufficient support in this country for a proposal which would entail the prospect, albeit a theoretical one, of large-scale immigration into this country from Hong Kong.
I have noted the argument put forward by several noble Lords, and in particular by the noble Lord, Lord Irvine, that, even were the right of abode to

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be provided for all Hong Kong British Dependent Territory citizens or those holding BN(O) passports, only a small percentage of them would wish to exercise that right. To legislate on that basis would in effect be little more than a shot in the dark. No one is in a position to predict with any accuracy or certainty what effect such a move would have on Hong Kong, whose population has always been a highly mobile one. To introduce new provisions on the basis that they will never be exercised seems to be a most curious starting point for any proposal for new legislation.
The noble Lord, Lord Wyatt, and other noble Lords suggested that the Chinese Government would have no objection to his proposal. I am not so sure. It would certainly not be right to attach any weight to the fact that the joint declaration does not explicitly rule out what the noble Lord has in mind. The Chinese memorandum on passport and nationality matters associated with the joint declaration states that under Chinese nationality law:
"All Hong Kong Chinese compatriots, whether or not they are British Dependent Territory citizens, are Chinese nationals".
It would not be easy to reconcile that with the proposal that 3.25 million Hong Kong Chinese should also acquire full British citizenship.
The noble Lord, Lord Wyatt, and my noble friend Lord Fanshawe—and probably other noble Lords—expressed concern that Britain may be losing out in failing to attract investors or professionals from Hong Kong. We have also an important responsibility to ensure that Hong Kong does not lose out. But, from whatever premise one starts out, we are satisfied that our provisions for investors to gain entry for settlement in the United Kingdom are broadly as favourable as those of other countries which emigrants from Hong Kong traditionally choose to go to. Entry for settlement can be granted to people willing to invest £150,000 in a business in a way which creates two new jobs. Once such a person has obtained settled status, the way is open for him to apply for citizenship. My right honourable friend the Home Secretary of course has discretion in interpreting the established residence criteria for granting settled status, and I know that he is fully aware of the benefits that can be generated by exercising this discretion in cases where people wish to bring investment and entrepreneurial energy to the United Kingdom.
I am of course well aware that emigration is a matter of concern in Hong Kong, and my noble friend Lord Fanshawe certainly referred to it. It is certainly true that emigration from Hong Kong is increasing. Indeed, the accurate figures were given by the noble Lord, Lord Wyatt, and other noble Lords. Moreover, a proportion of those who are leaving are professional or well-qualified people. However, it would be quite wrong to suggest that all 45,000 who left in 1988are qualified. I must stress that it is only a proportion who are in that category. It is important to look at this trend in perspective. Hong Kong people have traditionally been very mobile, often spending some years abroad for study or training. There are now more opportunities for emigration to some countries such as Canada or
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Australia, which operate a world-wide quota system for people with skills that are in short supply in those countries.
The fact that many Hong Kong people go elsewhere seems to suggest that there must be other reasons why they choose to go principally to Canada, Australia and the United States. One reason is that there are well-established and prosperous Chinese communities there which have family ties to people in Hong Kong. Another is that these countries have attempted with some success to encourage immigration, while over the same post-war period we have been actively restricting it. Your Lordships will need no reminding of the many factors which have contributed to this difference of approach.
It has also been suggested that the United Kingdom should do more to attract professional people who are contemplating leaving Hong Kong. In fact, our immigration rules already do provide for talented and experienced people to come here as employees.
If we were to go beyond that and make special arrangements targeted on particular groups of people in Hong Kong, that would run counter to our responsibilities under the joint declaration. It would be seen in Hong Kong as divisive and discriminatory. Our action could be interpreted—rightly, I think—as an attempt to cream off the best in Hong Kong at the expense of the future prosperity of the territory.
The noble Lord, Lord Wyatt, my noble friends Lord Fanshawe and Lord Geddes and the noble Lord, Lord MacLehose, have also suggested that arrangements should be made for civil servants in Hong Kong to be granted British citizenship. They referred in particular to Section 4(5) of the British Nationality Act. Under that section, civil servants who are BDTCs or BN(O)s may apply for registration as British citizens.
I understand the concerns which have been voiced about this matter. But I must say to my noble friend Lord Geddes and the noble Lord, Lord MacLehose, that—as they themselves hinted—it was made perfectly clear when the Bill was going through Parliament that Crown servants in dependent territories could not expect British citizenship as an automatic reward for long and loyal service. Citizenship would be granted only where particularly deserving service had been rendered to the Crown; the applicant's connections with the United Kingdom would also be relevant, and, as both noble Lords would expect me to say, each application is considered on its merits.
The noble Lord, Lord Wyatt, has argued that the provisions of Section 4(2) of the British Nationality Act should be interpreted more flexibly to allow larger numbers of Hong Kong people to register as British citizens. The provisions of the law are quite specific in terms of what requirements must be met, in particular residence requirements, before BDTCs or BN(O)s can register as British citizens. Flexibility is set out in Section 4(4), but obviously it cannot be expected that that could be exercised to the extent of undermining the spirit of the Act.
It was also suggested by the noble Lord, Lord Wyatt, that immigration restrictions under Section

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4(2)(c) should be more readily lifted during the fifth year of an applicant's stay in the United Kingdom. As I understand it, immigration restrictions are already normally lifted after four years if the person concerned is here in a capacity which leads to settlement; and so I do not believe that there is a problem there.
The noble Lords mentioned the matter of citizenship for the wives and widows of ex-service-men. There should be no problem for spouses of British citizens. If a British citizen chooses at any time to return to this country, his or her spouse would also be able to come and could apply for British citizenship after satisfying the residence requirements. The point about widows was raised with me in Hong Kong in January. In the past day or so I received a dossier which OMELCO promised me and I am looking into it. I am sure that my right honourable friend the Home Secretary would look sympathetically at individual requests for entry to this country. But under present law the question of citizenship cannot arise until after the person concerned has taken up residence here. I have undertaken to look at the matter, and now that I have the facts, it is possible to act upon them.
The noble Lord, Lord Bonham-Carter, mentioned the ethnic minorities. I hope that he will look at a careful speech that I made in your Lordships' House on 16th May 1986 when I addressed that problem. The kernel of my remarks was that we should consider it an obligation upon any future government to treat with considerable and particular sympathy the case for admission to the United Kingdom of any individual British national who, against all our present expectations, came under pressure to leave Hong Kong. I hope that the noble Lord will study the debate in full.
My noble friend Lord Geddes talked about the French giving passports to professionals. I noted the report to which he referred. I understand that for a long time France has had a policy of naturalising selected individuals who have served French business or cultural interests overseas. That reflects a different approach to nationality policy. As it stands, our law would not permit us to adopt such a policy. I do not anticipate that the law will be changed in that direction.
It has been argued by the noble Lord, Lord Wyatt of Weeford, that a period of study in the United Kingdom should be sufficient to satisfy the residential requirement. Periods of time spent here as a student are of course not a bar to citizenship, but it is an established requirement that applicants for citizenship must be free of immigration conditions; that is, they must have achieved settled status. Students are not normally admitted on a
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basis leading to settlement, since by definition those seeking entry to study are seeking entry only for a temporary period.
As for the point suggesting that Hong Kong passports should contain an endorsement with the right of readmission to the United Kingdom, as I understand it the intention behind that proposal would be that holders of such endorsed passports would be free from immigration control. However, Hong Kong BDTCs and BN(O)s remain subject to immigration control until they have achieved settled status.
I think it is important, before I come to the end of my Answer, to refer to one point raised by my noble friend Lord Fanshawe when he drew a comparison between Hong Kong and Tibet. Again, I do not think that comparisons can be drawn between Hong Kong and Tibet. I recognise the sensitivities of the point at the moment but there are crucial historical, ethnic, economic and constitutional differences between Hong Kong and Tibet and between Chinese policies towards those two places. I am sure that my noble friend recognises the force of that.
I have listened with great care to the points which have been made in the debate. As with any other matters which have been raised, either in your Lordships' House or directly with me by people in Hong Kong, I and my right honourable friends will reflect upon them. To use the words of the noble Lord, Lord Wyatt of Weeford, cavalier dismissal of the worries of the people of Hong Kong is not something with which he can fairly charge Her Majesty's Government. Pragmatism as advocated by my noble friend Lord Torrington is another matter. But it seriously worries me that the course of action proposed today by the noble Lord, Lord Wyatt of Weeford, and others might have the opposite effect from that which they intend. It is essential that the principles enshrined in the joint declaration be upheld and that we should not be seen to lure away talent and capital from Hong Kong.
Therefore I cannot say that there will be amendment to the British Nationality Act in order to bring about the changes which the noble Lord advocates. Her Majesty's Government are committed to ensuring that the detailed and comprehensive provisions of the joint declaration are fully implemented. That is the way to secure a stable and prosperous future for our territory. Our aim is to make sure that Hong Kong remains a place where people will want to continue to make their lives. We are on course and are determined to stick to the task. That is how we can best discharge our important responsibilities towards the territory and its people.
House adjourned for the Easter Recess at eight minutes past three o'clock.