Lords Sitting of 20 April 1990

Preamble
The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Peterborough.

Sizewell B Power Station: Costs
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
Whether they are satisfied that the evidence of costs presented to the inquiry into the Sizewell B power station, which led to approval being given for its construction, was accurate.
Viscount Ullswater: My Lords, the evidence given by the CEGB to the Sizewell inquiry included the best cost estimates for the station then available.
Lord Hatch of Lusby: My Lords, I must ask the noble Viscount to reconsider that Answer in view of the evidence which has been produced since that inquiry. I refer particularly to the Greenpeace report written by Alex Henney who was chairman of the Central Policy Working Committee set up by the Prime Minister.
Perhaps I may ask the noble Viscount two questions. First, is it the case that the original estimate for the construction of Sizewell was £ 1·2 billion and that that has now escalated to £4 billion? That will add a minimum of £75 million a year for 30 years to our electricity bills. Secondly, is it the case that at the Sizewell inquiry Sir Frank Layfield accepted the CEGB estimate of £2 million per year for cortinuing research and development into PWRs whereas at that time the true figure was around £30 million?
Viscount Ullswater: My Lords, the original cost as given to the Layfield committee was £1·2 billion. The noble Lord is correct in that regard. I have no idea where the noble Lord obtained his figure of £4 billion The latest estimate that I have given the House is £1·87 billion for the completion of Sizewell.
The Government recognise that the relative economics of nuclear have changed since the Sizewell inquiry. Oil prices have fallen; interest rates have risen. The CEGB has revised its cost estimates and the provision for back-end costs. The additional costs of nuclear power in the short to medium term are reflected in the fossil fuel levy. We believe that this nuclear premium is justified because of nuclear's contritiution to diversity and security of supply and to the reduction of fossil fuel emissions. The levy will be set initially at 10·6 per cent. but we expect it to decline over an eight-year period as nuclear plant performance improves.
Lord Hatch of Lusby: My Lords, will the noble Viscount answer my second question regarding the estimates for research and development given by the CEGB as £2 million per year, although at that time the true figure was about £30 million.
Viscount Ullswater: My Lords, I think that I have answered the noble Lord. I said that the relative economics have changed. I cannot confirm the figures that the noble Lord has given. However the Secretary of State was fully appraised of all the figures given to him by Layfield when he reported and he took the decision on the best available advice.
Lord Ezra: My Lords, is it not a fact that when the Layfield Report was debated in this House on 2nd March 1987, there was already evidence in the light of the substantial fall in fossil fuel prices that even the estimates contained in the report were likely to be optimistic? Is it not correct that the costs of nuclear generation based on those figures were already likely to be higher than those for fossil fuel generation? As the noble Viscount has already said, the gap has widened since then. Can he give us an indication of when the Government feel the gap will start to narrow?
Viscount Ullswater: My Lords, in the longer term no one can predict what will happen to fossil prices. Environmental considerations may well strengthen the economic case for nuclear power. Unlike other fuels —particularly fossil fuels —nuclear power bears the environmental costs of the fuel cycle. The relative economics of nuclear might improve if a comparable basis were used for fossil fuels.
The Earl of Lauderdale: My Lords, does my noble friend agree that there is never a mean point of equilibrium in energy prices? They move up and down like the moving stairways on the Underground.
Viscount Ullswater: My Lords, I am tempted to comment on that but shall not. My noble friend is correct: over the past 15 to 20 years we have seen quite a see-saw in oil prices. I know that even some noble Lords opposite would not consider that oil prices would remain at their low level for the next 10 or 15 years.
Lord Williams of Elvel: My Lords, does the noble Viscount recognise that his estimate of £1·87 billion for the cost of Sizewell B is already way out of date? Will he give the House his latest estimate of that cost? Secondly, does he accept that even at the initial stage the technology of the Sizewell PWR was miles behind the technology of the equivalent French reactors? We have already started and are continuing to build something which is technologically out of date.
Viscount Ullswater: Yes, my Lords. The costs of building Sizewell are being reviewed at the present time. That is an ongoing review. The review is likely to be completed by the end of this month. However, it would be reasonable to give Nuclear Electric time to review the CEGB figures. Nuclear Electric is a new company and it needs time to review the figures. Therefore, that review may be delayed by a month or so.
Lord Williams of Elvel: My Lords, I am sorry to press the noble Viscount, but will he answer the second part of my question?
Viscount Ullswater: My Lords, as regards the technology I feel that the Secretary of State was confronted with the report of the Layfield Committee. The inspector had in front of him all the available evidence on which to base his judgment. He came to the conclusion that the building of Sizewell B was the right thing to do at the time.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that, leaving aside the prejudices of certain noble Lords against nuclear energy, it is the common experience of all major capital projects today that the original estimates prove to be quite inadequate? Will my noble friend contemplate, for example, the case of the Channel Tunnel?
Viscount Ullswater: Yes, my Lords. My noble friend is correct. I should point out to the House that Sizewell is also a major infrastructure project in its own right. It employs some 2,700 people on site and provides prestige work for British contractors all over the country. The project will give UK manufacturers and plant suppliers the experience and capability to compete for similar work in export markets. Well over 90 per cent. of the contracts placed for the construction of the project have gone to UK firms.
Lord Molloy: My Lords, in view of the quite considerable discrepancies in figures that have been referred to by noble Lords on this side of the House and which the noble Viscount has found unacceptable, and bearing in mind the statement that has just been made by the noble Lord, Lord Boyd-Carpenter, would it not be reasonable for the noble Viscount to ask his right honourable friend to issue a statement so that the House can have some idea of the real position? At this moment in time we do not know what the position is, and I believe the House is entitled to know that.
Viscount Ullswater: My Lords, I believe I have given a commitment to the House that Nuclear Electric, the successor company to the CEGB, is at present reviewing the cost of building Sizewell. That review is not yet complete. The figures will be presented to the Secretary of State and obviously he will want to consider them before any decision is made as to whether they should be made public and in what form.
Lord Hatch of Lusby: My Lords, with the greatest respect, the noble Viscount has not answered my Question yet. The matter has nothing to do with prices going up and down. If the noble Viscount looks at the Order Paper, he will see that I asked whether Her Majesty's Government were satisfied with the evidence of costs. I have already given the noble Viscount the figure that was submitted by the CEGB for research and development to the Layfield review. The figure that was submitted was £2 million whereas at that time the figure was around £30 million. That has nothing to do with prices going up or down. Will the noble Viscount reply to that question? Is it not self-evident that this country would save a vast amount of money and would save on the increasing costs of electricity if Sizewell B were to be cancelled now?
Viscount Ullswater: My Lords, I have answered the noble Lord's Question. The evidence was available to Layfield when he reported. He reported on the evidence that was available to him. The noble Lord suggests that it would save money if Sizewell B were cancelled, but it would not. Some £1·5 billion of contracts have been placed. If we were to cancel the project now—the Government do not intend to do that—we would be involved in termination negotiations on those contracts. As a result more money would be expended and I daresay that the site would have to be returned to its original state. Some 150,000 cubic metres of concrete have been used on the site and the removal of that would be considered to be rather a waste of money.
Lord Hatch of Lusby: My Lords, will the noble Viscount not admit that the evidence given by the CEGB to the Layfield Committee was inaccurate?
Viscount Ullswater: My Lords, I refer the noble Lord to my original Answer.

European Central Bank Proposal
11.18 a.m.
Lord Ezra Lord Ezra asked Her Majesty's Government:
What is their attitude towards the creation of a European central bank.
The Paymaster General (The Earl of Caithness): My Lords, we believe that it is premature to make detailed plans for further stages of economic and monetary union before Stage One has even begun. We have expressed our reserve on the monetary aspects of EMU beyond Stage One, including the proposed European system of central banks.
Lord Ezra: My Lords, will the noble Earl comment on the widespread press reporting after the recent meeting of European Community finance ministers at Ashford Castle in Ireland to the effect that there was a noticeable softening of the British attitude towards the possibility of moving ahead with monetary union and particularly with the creation of a European central bank? Will he furthermore reassure the House that, in any discussions on a European level of these matters affecting future monetary and financial arrangements, the Government will bear carefully in mind the need to safeguard the position of the City of London as the financial centre of Western Europe and will not jeopardise that by appearing to be standing aside from the mainstream of development?
The Earl of Caithness: My Lords, regarding the noble Lord's first question, I hope that he was not beguiled by the press reports but read the statement that was issued by my right honourable friend the Chancellor of the Exchequer afterwards which made it perfectly clear that the British position had not changed. Regarding the second question and the position of the City of London, of course we are keen to see the City of London retain its pre-eminent position.
Lord Barnett: My Lords, I recognise and agree with the Minister that without knowing much more about a European central bank it is impossible at this stage to decide whether or not one wants to join it. However, can he say whether the Government are in favour in principle of joining a European central bank?
The Earl of Caithness: My Lords, it was made perfectly clear in the debates in another place and in this House that the mood of Parliament was that we should not go to Stage Three, including a European central bank.
Lord Kennet: My Lords, do the Government recognise that it is possible that a European central bank could be created without the participation of this country? What likelihood do they place on such an institution being located in London? What relationship do the Government see between a European central bank—whether or not it includes Britain—and the proposed East European development bank? Would it not be a pity if Britain were excluded from a European central bank in view of the likely preponderant role of that bank in setting up, financing and collaborating with the East European development bank?
The Earl of Caithness: My Lords, that is a little wide of the Question on the Order Paper. The noble Lord has also asked me a number of hypothetical questions.
Baroness Seear: My Lords, will the noble Earl explain a little further the answer that he gave to the question before the last one when he said that we should not go to Stage Three? Does he mean that we should never go to Stage Three or does he mean that we should go when the time is right?
The Earl of Caithness: My Lords, the Government have spelt out clearly on a number of occasions their attitude towards Stage Three. I said that the gist of the Government's position was supported by both Houses in the debate.
Lord Monson: My Lords, does the noble Earl agree that it is a fallacy to imagine that central banks can ever be wholly immune from political pressures, generally in favour of inflationary policies, particularly when countries such as Greece are involved? Does he also agree that the supposedly Olympian Bundesbank has been leant on heavily by the West German Government to hold down interest rates pending the unification of the two Germanics even though on the basis of purely economic considerations a rise in interest rates would have been justified?
The Earl of Caithness: My Lords, the position of any bank depends on its terms of reference. The extent to which a bank is genuinely independent varies from country to country.
Lord Bruce of Donington: My Lords, in view of the Governor of the Bank of England's interesting admission that bankers can sometimes make major
234
policy mistakes, and in view of the conduct, which some have called irresponsible, of a very large number of banks towards Third World indebtedness, will the noble Earl give the House an unequivocal undertaking that his Government will not under any circumstances take steps that would affect the right of the British Parliament to determine fiscal, economic and financial policy within the United Kingdom and that that will remain exactly as it is now?
The Earl of Caithness: My Lords, the noble Lord makes a very clear statement of his position on the matter. The Government have made a very clear statement of their position. As the noble Lord will know, the inter-governmental conference is due to start later this year, in which we shall play a very active part.

Social Security Bill
11.24 a.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): My Lords, I beg to move that the Bill be now read a second time.
In another place my right honourable friend the Secretary of State for Social Security said at Second Reading that there had been a Social Security Bill before the House every year since this Government took office. This year's Bill is not a major piece of social security legislation but its scope is substantial. As with most social security Bills it has some necessary fine tuning and some substantial measures to implement new policy.
The Bill as it now stands has broadly three main themes. It makes changes to disability benefits—part of the comprehensive strategy set out in The Way Ahead. It provides greater protection for the members of occupational pension schemes —particularly with the changes introduced at Report stage in another place by my right honourable friend. In addition, the Bill now contains a package of interim measures to help obtain maintenance for lone parent families. The Bill makes a number of minor changes to the law relating to income support and the social fund, to the law relating to various other benefits, to national insurance contributions, and makes a change to the scope of the National Insurance Fund. The Bill also gives new powers to my right honourable friend the Secretary of State for Energy to introduce a new scheme of grants towards the cost of insulation measures in low income households.
In the course of my speech I intend to dwell on the important themes in rather more detail. I am sure that the whole Bill —including the minutiae —will be of interest to the House. I am equally sure, however, that the House will think it right that I should not detain it over long in attempting to be too comprehensive. I do, however, want the House to bear in mind at the outset that the changes in this Bill represent only one chapter in our continuing development of the social security system.

235
We are now spending over £1 billion each week on social security. The total of £56 billion is over a third higher in real terms than expenditure in 1979. We have to make sure that those enormous sums are spent efficiently, wisely and fairly and that we respond quickly to changing demands. Together with the many other changes we are carrying forward separately —for example, in the uprating of benefits that has just taken place—the Bill is designed to help prepare both the social security system and the arrangements for occupational pensions to meet the needs of the next 10 years.
The first part of the Bill concerns benefits for the disabled. The House will know that we came forward last January with major proposals for improving the balance and structure of social security benefits for people who are disabled. Those are contained in The Way Ahead: Benefits for Disabled People. Those proposals include the introduction of a disability allowance and a disability employment credit, both of which we aim to have in place by April 1992. Much detailed work is still required in developing our proposals for those new benefits. In carrying out that work we shall, of course, take account of comments made by disabled people and those who represent them.
Other proposals are reflected in some of the measures which are in the Bill before the House today. They are intended to enhance the benefits of severely disabled people who were never able to work or who were disabled early in life. At the same time we are ensuring that there is a better overall structure of income replacement benefits, taking account of the encouraging growth of occupational provision in this field.
It gives me particular pleasure to introduce Clause 1 of the Bill. It follows directly from debates during the passage of last year's Social Security Bill concerning the problems faced by people who satisfy the criteria for attendance allowance but who, sadly, die before they become eligible for payment. The House will recall in particular the close interest taken in this matter by my noble friend the Duke of Norfolk. This clause will bring into effect the commitment made then by my noble friend Lord Skelmersdale to tackle this problem. It will ensure that people who suffer from a progressive disease and for whom death in consequence can reasonably be expected within six months will be able to qualify for attendance allowance without having to satisfy the normal six-month qualifying period. They will be awarded the higher rate allowance —that is £37·55 a week—and if they are on income support, housing benefit or community charge benefit they will also benefit from the disability premiums. Their carers will be eligible for invalid care allowance and, for those on income support, housing benefit or community charge benefit, the new carers premium.
About 58,000 people each year will benefit. By the year 1992-93 the total extra benefit for terminally ill people, their families and carers will add up to some £35 million. When added to the extra help that we have already provided for disabled people and their carers this year—for example, by removing the lower age limit on attendance allowance to allow people to claim it for severely disabled babies, by
236
increasing the invalid care allowance earnings limit from £ 12 to £20 and by the extra £ 10 carers premium in the income-related benefits—I hope that the House will agree that this package represents a large improvement in the balance and structure of the benefits provided for disabled people.
Clause 2 introduces age-related additions to severe disablement allowance, which is a benefit available to people who have not paid the necessary national insurance contributions to qualify for invalidity benefit. There will be three rates of addition, with the highest payable to people who become incapable of work before reaching the age of 40. This will increase their benefit by £10 a week to £38·20.
Clause 3 deals primarily with the abolition of reduced earnings allowance for new claimants. Reduced earnings allowance is payable where a person loses earnings as a result of an industrial accident or prescribed industrial disease. In bringing legislation before the House, we have uppermost in our minds the needs of the disabled population as a whole and the needs of those among them who suffer the most disabling of incapacities. The abolition of the allowance is part of the consideration of the balance of provision among disabled people generally and should be seen particularly in the context of the two new benefits.
The abolition of reduced earnings allowance will remove a clear overlap between benefit provisions for the majority of the recipients of the allowance who are not working. Those people in the main also receive the normal long-term national insurance benefit—invalidity benefit—which is available for those who are unable to work as a result of sickness or disability.
I should stress, however, that present beneficiaries and new entitlements established before the Bill becomes law will be fully protected. They will continue to receive reduced earnings allowance so long as they fulfil the qualifying conditions and of course the benefit will continue to be uprated on the same basis as of now. In addition, claimants with occupational disabilities assessed at 14 per cent. or more which occur after the Bill comes into force will continue to be eligible to receive disablement benefit.
The final disability measure relates to invalidity benefit. That benefit consists of three elements. First and most significantly, there is the basic invalidity pension payable at the same rates as retirement pension. Secondly, there is the age-related invalidity allowance and, thirdly, the earnings-related additional pension. Clause 4 is concerned only with the additional pension.
The average payment of additional pension with invalidity benefit at present is about £9 a week, with a maximum payment of £41 a week. That currently costs some £450 million a year, but by 1998 those amounts will, if unchecked, have risen to an average payment of £21 a week, a maximum payment of £84 and an annual cost of some £1·6 billion. Growth on that scale would not only inhibit the welcome expansion in occupational sick pay coverage for the long-term sick, which has trebled to something approaching 60 per cent. in the last 15 years, but would further widen the gap between those who have been able to work and those who have not.

237
That would be contrary to the Government's objectives in The Way Ahead to which I have already referred. We want to ensure that both now and in the future we can give proper emphasis to the needs of the most vulnerable among the disabled who are least able to make financial provision for themselves. That is why we are concentrating the available resources on those people who have unfortunately been disabled from birth or from very early in their working lives.
Clause 4 therefore provides that no new—and I stress the word "new"—entitlement to additional pension with invalidity benefit will arise after the 1990-91 tax year. However, I should make it clear to the House that all rights built up in the year up to and including 1990-91 will be preserved. That will apply to both existing claims and to those made in the future.
The complete package of measures for the disabled outlined in The Way Ahead will give extra help to an estimated 850,000 people. The total net effect by 1993-94, even allowing for the savings, will be to add some £300 million to the total costs of the benefits that we pay to the disabled and their carers. That is over and above the money that we shall pay on account of inflation and over and above the money paid on account of increased demand. That amply demonstrates the substantial extent of our commitment.
Clause 8 contains a package of interim measures to help obtain maintenance for lone parent families. The number of families in Britain headed by a lone aprent has risen substantially in recent years, as has the proportion of those families on benefit. However, the proportion for whom maintenance is paid has fallen. We must ensure that there is a framework which will ensure that absent parents do more to meet their responsibilities. The Government have already announced that they are reviewing the whole system of maintenance and we have commissioned a survey to give us a proper basis on which to assess possibly radical changes to the system. The Bill makes three changes that we can introduce on a faster track. It will ensure that, where the absent parent has the means to pay, realistic account is taken of the benefit cost of the lone parent because of her responsibility for caring for the children. That is consistent with powers available to the court under family law.
The Bill will enable the Department of Social Security to transfer a maintenance order that it has itself taken out under social security legislation to the lone parent when she leaves benefit. The lone parent need not therefore go to the trouble of taking out her own order in those circumstances. Finally, the Bill will enable the department to take action to enforce payment of existing private maintenance orders taken out by lone parents on benefit. At present the lone parent has to approach the courts herself. I hope that the House will welcome all these steps. They address issues which are of particular concern to lone parents and all will benefit, both the mothers and their children.
238
The House will expect me to say a little about Clause 9. Clause 9 was introduced by my right honourable friend at Report stage in another place in response to concerns expressed about the way income support is paid to residents of residential care and nursing homes. The Secretary of State will take account of the charges negotiated by local authorities with homes as part of the new community care arrangements when setting the limits for people in homes after April 1991 under the preserved income support arrangements.
That power is designed to assist in setting up a system of local limits; namely, a move to some system of geographical variation specified for districts or areas of Great Britain. At present, as noble Lords will know, the limits are set nationally across the country with only a limited variation in the case of London.
The House will recall that at the same time as announcing that new power my right honourable friend announced further action ahead of 1991. There will be a second stage to the increase in the current limits in 1990-91. In addition to the changes already effective from this month, from 13th August further targeted increases to all the income support limits will be made to help maintain their value during the coming year. In all, we estimate that more than 200,000 people will benefit from these additional increases.
I turn now to occupational pensions, an area in which we have introduced some important measures in recent years. In Clauses 11, 12, 13 and 14 of this Bill we are building on that platform. That platform has encouraged individuals to make proper financial plans for their retirement and has given them greater choice in deciding what is best for them in their particular circumstances. There has of course been a tremendous response and the numbers of people taking out personal pensions is just one indicator of that.
Our measures have been designed to create a more stable and sustainable pensions structure, in which a larger part of provision over and above the basic state retirement pension will be as a result of people's own savings while in work.
There are significant measures in the Bill designed to give greater protection to members of schemes. Most of the measures stem from the recommendations of the Occupational Pensions Board, whose report was entitled Protecting Pensions. I must acknowledge the expertise of the noble Baroness, Lady Turner, who has been a member of that board for a number of years. I know that our debates on these matters at later stages of the Bill will be all the more informed for the contribution that she will make to them. As the House will be aware, the Government have accepted the vast majority of the OPB's recommendations, and our proposals have been widely welcomed. The main theme is to improve benefit security and give greater assistance to scheme members.
We are therefore introducing a number of proposals. First, revaluation is to be applied to the whole of the preserved pension rights of future early leavers, not just that fraction accumulating after

239
1985. This will help a large number of people in this country, and especially those who change jobs. The value of the pension rights above the guaranteed minimum pension level will be revalued until they come into payment in line with price increases, or by 5 per cent. if that is less.
Secondly, schemes will have to pay annual increases to members for pension rights for future service. For these rights members should be guaranteed increases in line with the RPI up to a maximum of 5 per cent. a year. We are also requiring schemes to use their surpluses to pay increases to members for pension rights which they have already built up. This will improve very substantially the attractiveness of schemes to their members and will turn what are at present often only discretionary increases into guaranteed entitlements.
Clauses 12 and 13 of the Bill are concerned with providing a better service for individual members of schemes. We believe that the introduction of a pensions ombudsman is a major step forward. Although assistance is already available from various sources, such as the Occupational Pensions Advisory Service—and again I acknowledge the valuable support which the noble Baroness has given to this body since its inception —there is a clear need for a straightforward method of redress for consumers' problems. Individuals will be able to approach the ombudsman and schemes will have to abide by the decisions given.
A tracing service should also assist many people to track down where past pension rights may be held. A levy will be charged on occupational and personal pension schemes to help pay for those new services.
The final item that I wish to mention at this stage is Clause 15. This gives power to my right honourable friend the Secretary of State for Energy to introduce a new scheme of grants towards the cost of household insulation measures. I hope that this will be welcomed by the House. The new scheme of grants will build on the success of the community insulation projects and the home insulation scheme.
The clause does no more than give an enabling power to my right honourable friend to make regulations governing the new scheme. Those regulations will set the detailed framework for the new arrangements. I know that my right honourable friend is consulting widely on the details of the scheme at present.
As I said at the beginning, I shall not trouble the House with all the various provisions. They cover much of the social security field and are, I hope, clear from the face of the Bill. We are all primed and ready to debate everything in detail at Committee and during the later stages.
The main purpose of the Bill is to begin the process that we have embarked upon to give a better balanced system of disability benefits. It also makes major and necessary changes to the maintenance arrangements for lone parents, and to the operation of occupational pension schemes. As an important element of this Government's measured and deliberate strategy across the field of social security I commend it to the House.
240
Moved, That the Bill be now read a second time. —[Lord Henley.)
11.44 a.m.
Lord Carter: My Lords, the House will be grateful to the Minister for his lucid exposition of what he correctly said is not a big Bill. But it is a very important Bill, even though we are discussing it at what I can only describe as the connoisseur's hour of 11.30 a.m. on Friday. As the Minister said, we are used to having a social security Bill every Session, and like all such previous Bills from this Government it contains a number of measures which are welcome and a number which we regard as a step backwards, but the Bill also omits a whole range of important provisions which I shall mention.
As the Minister said, the Bill has two broad divisions: benefits and occupational pensions. I propose to concentrate on the benefits provisions and, like the Minister, I shall not attempt to deal with every clause. My noble friend Lady Turner has great expertise in pension matters and will deal with the pension provisions.
With regard to benefits and Clause 15 we welcome the removal of the six months' waiting time for attendance allowance for the terminally ill, particularly as this change was the subject of an amendment moved by the noble Baroness, Lady Faithfull, in the 1988 Bill when the Government undertook to deal with the matter in this year's Bill. The Government have kept their word. They have tried hard to obtain an acceptable definition. I congratulate them on their effort. As the clause states, it is where death,
"can reasonably be expected within 6 months".
However, as I understand it, there is still considerable concern in a number of quarters regarding the wording and operation of the clause. We shall investigate that in the later stages of the Bill. For example, there are the terminally ill whose life expectancy is greater than six months—for instance, those who suffer from AIDS. There are also the proposals to merge attendance allowance and mobility allowance (which are not dealt with in this Bill) to have a common qualifying period of three months. On the face of it that would appear to have a direct and contradictory bearing on Clause 1 of the Bill. There is a strong argument that all those whose illness, while not terminal, is permanent should qualify for attendance allowance with no waiting period. We shall wish to explore that possibility further in the later stages of the Bill.
The proposals in Clause 2 for age-related additions to the severe disablement allowance are not at all what they seem. That is because SDA claimants in receipt of income support or housing benefit will not receive the addition because it will be deducted from their means-tested benefits. I believe that this will affect well over half of those in receipt of SDA. There are no proposals in the Bill to abolish or amend the harsh qualifying conditions for SDA.
The proposals in Clause 4 to end the new rights to earnings-related additions to invalidity benefit after April next year are quite simply a cut in benefits but with no commensurate reduction in

241
contributions. This is just another in the series of cuts in invalidity benefit which started in 1985. The effect of the change can be gauged from the fact that that resultant savings in expenditure from this measure are estimated to amount to £350 million by 1999.
As the Minister said, Clause 9 deals with the very important question of income support from those in residential or nursing homes. It is fair to say that this is a matter on which the Government got into a fair muddle in another place. Clause 9 has now been drafted but I am not at all sure that the provisions in fact deal properly with the problem.
There are two aspects to the matter. First, there are the people who are on income support now who cannot meet the full cost of their residential or nursing care. As the Minister said, the Government have come forward with an interim rise of £5 to £15 per week, which will be payable from August, depending on the type of care. That is to cover a gap which ranges from £30 to £60 a week at the highest. As a result there are now many frail and frightened old people who are fearful of eviction from their residential or nursing homes. I must ask the Minister what the Government propose should be done for those people now. Who is supposed to foot the bill now for any shortfall?
The second aspect concerns the question of what happen:; after April 1991 when community care becomes the responsibility of the local authorities. I have read extremely carefully what the Secretary of State, Mr. Newton, said in another place at col. 590 on 28th March. He stated:
"The power that I am taking in the new clause is designed to set up a system of local limits … In fairness to my hon. Friends, whose concern I understand and respect, I am not saying that it would necessarily be possible to make use of those powers at the absolute starting point in April 1991.
It is clear that we shall need to gain experience of what local authorities are negotiating. For a long time, there may be many homes in which local authorities have not negotiated and have not placed people. It would be foolish of me to suggest that we can suddenly produce a wholesale change in the system … However, once we have adequate information on the scale required, the new clause will give me the power to respond",
and so on. I have a simple question for the Minister. How long is a long time? When will the Government have the information they need to ensure that there is not a continuing shortfall between income support and the cost of nursing and residential care after April next year with all that that will mean to elderly infirm people and their families?
I must also say a word about Clause 10 which relates to the social fund. The relevant words in the Bill are worth studying. They are stated on page 15 in subsection (10ZA):
"The Secretary of State may issue directions… for the purpose of securing that a social fund officer … shall not in any specified period make awards of any specified description which in the aggregate exceed the amount, or a specified portion of the amount, allocated to that oficer".
So much, my Lords, for flexibility; so much for discretion; so much for a fund that we were assured in this House would not be cash limited. Clause 10 does nothing to remove the fundamental flaw in the social fund. One cannot have a flexible, discretionary
242
fund which is cash limited. The proposed changes are bound to lead to an increase in the number of applicants who are refused help because local funds are inadequate, regardless of the level of the applicant's need.
I should like to quote two examples out of many supplied by the National Association of Citizens Advice Bureaux. A CAB in Dorset reported an elderly client with a heart condition refused money for removal expenses because there was no money available. A CAB in Yorkshire reported a family with two young children rehoused by a housing association. The social fund officer was upset but said that there was no money available to help them start up home even if there were a danger of the children being taken into care.
The concept of the social fund is deeply flawed. There is nothing in the Bill to put right. The Government have simply been forced to spell out on the face of the Bill what they tried to slip in through the back door in the so-called "guidance" to social fund officers—a guidance which was found to be illegal.
Noble Lords may have seen in the press this morning the extraordinary story of the homeless family who were offered a loan from the social fund to buy a tent. Obviously there was something seriously wrong between the social fund office and the local authority. However, I thought that the story was curiously symbolic of the social fund with its mixture of maladministration and insensitivity.
I referred at the beginning of my speech to omissions in the Bill. I should like to refer first to disability benefits. What I say is not the ritual Opposition denunciation of a government measure. The Government must know that there is a deep sense of anger and frustration among people with disabilities at what they regard frankly as deception by the Government. To their credit, the Government set up the OPCS surveys in 1984 and we congratulate them for that. For five years until the last OPCS report was published in July 1989, the Government promised that there would be a comprehensive review of disability benefits to follow the OPCS surveys. At one stage there was even talk of an independent review. What happened after five years of surveying and the promise of full consultation and a comprehensive review of disability benefits? The Government allowed one day between the publication of the White Paper, The Way Ahead: Benefits for Disabled People, and the publication of the Bill. I cannot help feeling that the Government would save much parliamentary time if they just gave us the Acts of Parliament and obtained the Royal Assent before they gave us the Bills.
The package of government proposals in the so-called comprehensive review will help 850,000 people. That is 13 per cent. of the 6·5 million disabled people who were identified in the OPC surveys.
In a speech to the Industrial Society on 3rd April, the Secretary of State, Mr Newton, said:
"Disabled people are another group whose needs have become more apparent against the background of social change and economic growth. The numbers of disabled people and the nature

243
of their disabilities have changed. The growing elderly population leads to an increase in the disabilities associated with old age. Medical advances have also prolonged the lives of many people with chronic conditions."
The Secretary of State is absolutely right. The OPCS survey showed that the largest single group of disabled people are those over pension age. Those are 4·2 million out of 6·5 million—two thirds of the total. There is virtually nothing in the Government package to help that very large and needy group. I suspect that the paucity of the government proposals was the cause of the total absence of consultation and the simultaneous publication of the White Paper and the Bill.
We are committed on this side of the House to a comprehensive disability income and a disability cost allowance. They will take time to achieve, but achieve them we shall.
There are a number of other matters which are not in the Bill but to which we shall certainly wish to address ourselves as the Bill proceeds through the House. Those are the issues regarding child benefit, the extension of the mobility allowance to the severely mentally handicapped, the compensation for nuclear test victims and the situation of students and social security.
Once again there are no proposals to uprate child benefit. The arguments are well known to noble Lords but they are none the weaker for that. We shall certainly wish to put down amendments to restore the sums that the Government have filched from child benefit.
In the 1988 Bill this House accepted an amendment moved by myself and the noble Lord, Lord Allen of Abbeydale, to extend the mobility allowance to a carefully defined group of severely mentally handicapped. The Government rejected the amendment in another place, so robbing about 10,000 people of £26 a week. We shall try again to put that right in the Bill.
An amendment was put down by Mr. Bob Clay and defeated in another place. It attempted to deal with compensation for servicemen who were victims of nuclear testing in Australia in the 1950s. I believe that some 28,000 people are involved at a total cost of about £4 million. The numbers, for obvious reasons, sadly, are reducing all the time. America now has legislation which allows for compensation. It is high time that similar legislation was introduced in this country. We shall be putting down amendments to that effect.
Another area to which we shall pay attention is the decision to deprive students of unemployment benefits, income support and housing benefit. I understand that there may be procedural difficulties in dealing with that as a result of the passage of the student loans Bill, but if we can deal with the issue in this Bill we shall certainly attempt to do so.
However, the biggest omission in the Bill is the failure to deal with the increasing gap between the rich and the poor in our country—a gap which the social security system should be closing and not widening. We now learn that the figures regarding poverty that have been quoted for the past two years by Ministers, in particular the Prime Minister, were
244
badly wrong, Ministers have been saying that the income of the poorest 10 per cent. of the population has risen faster than the average. In fact we now know that it rose only half as fast as the average. The reason for the discrepancy was an error in the calculation of housing costs.
Lord Ennals: And repeated time and again.
Lord Carter: It was repeated time and again, as my noble friend says. The increase for the poorest group was in fact 2·6 per cent. against an average increase of 5·4 per cent. Those figures show that the poor have become relatively poorer, as many of us have been arguing for some time. The income divide between the top 20 per cent. and the bottom 20 per cent. of men in work is now wider than it was 100 years ago. The relative pay of the lower paid is now the lowest on record. Seventeen per cent. of the population is receiving income support, which is a 50 per cent. increase since 1979. There has been an increase in poverty and homelessness, a reduction in the real value of social security benefits, a widening of the gap between the rich and the poor and the creation of the so-called underclass. It is sad to say that, while in the traditions of this House we shall support the Second Reading of the Bill, it does nothing to deal with the situation that I have described.
12 noon
Earl Russell: My Lords, I wish first to take up my noble kinsman's remarks about the size of the social security budget. I hope that by raising the matter now I shall save myself the need to run through the argument 10 or 20 times in Committee, which may bore your Lordships.
My noble kinsman gave a figure of £56 billion, which is a considerable sum of money. He spoke of "enormous sums" and it is not fanciful to imagine the voice of the Treasury repeating those words in a slightly different tone. I have a suspicion that the department is under a certain amount of pressure. If so, I hope that the Secretary of State will give the robust reply that the difficulties in his budget are a result of the failure of the policies of his right honourable friend the Chancellor of the Exchequer. A great deal of the social security budget is the result of unemployment. I did not say "registered unemployment" because one area in which the difference between unemployment and registered unemployment shows up most clearly is the cost of income support.
Another area in which costs are falling on the Department of Social Security in its usual position as long stop is the results of the part-time revolution. Far too many people in part-time work are not receiving a living wage or a proper occupational pension and have to fall back on the department to top up inadequate wages. In talking about the size of the budget we are not talking about the profligacy of the department—it is not the department's fault —but about the policies of the Chancellor of the Exchequer and the Secretary of State for Employment. I hope that the argument will not be unduly deployed in order to block actions which need to be taken.

245
In considering the Bill we should to a large extent regard this House as being the initiating House. At the Report stage of the Bill in another place three new government clauses were introduced, two of which will detain us the longest time. It is not for Members of this House to criticise the way in which another place chooses to manage its business. However, the Guillotine then used had the result that some of the clauses now come to us almost undebated and in at least one case almost entirely unexplained. It will take a little of the time of this House to pursue those matters. Before the provisions become law they should receive parliamentary scrutiny in at least one House, and that cannot be done without spending a little time.
This is a miscellaneous provisions Bill and, as with any such Bill, some of the provisions are better than others. Clause 1, dealing with the attendance allowance, represents a concession from last year's Social Security Bill in response to pressure from the noble Duke, the Duke of Norfolk, the noble Baroness Lady Faithful!, and my noble friend Lady Seear. It represents a government undertaking honourably discharged, which I warmly welcome. However it is the function of this House to look gift horses in the mouth and I hope that I shall not be misunderstood if I raise one or two questions. I gave my noble kinsman notice of my question about the uprating order.
The first question is whether the phrase "progressive disease" is correct when applied to AIDS or whether the progressive disease is the AIDS or the pneumonia or cancer which is consequential on it. If one matter became clear in the debates on the clause: it was that the whole House, including the Government, intended the phrase to apply to AIDS. Perhaps before the Committee stage my noble kinsman can discover whether that intention was achieved.
Another matter to which we should pay attention, which was mentioned by the noble Lord, Lord Carter, is the phrase,
"reasonably expected to die within six months".
Having regard to the kind of spirit in which social security is sometimes administered, I should not wish to find people being told that they are not entitled to the allowance because they might live for seven months instead of six. That would create a great deal of unfavourable publicity and we should check to ensure that we have not inadvertently achieved that effect.
I agree with practically everything said by the noble Lord, Lord Carter. The OPCS reports are cases of the mountain labouring and bringing forth a mouse. I know that we are told that there is yet a further stage in prospect. I hope that it will be larger than anything we have had so far. I shall not soon forget the noble Lord, Lord Carter, saying in July last year that he expected the Minister to rise, say "OPCS" and then sit down again. We have not yet gone beyond that stage. The Government should consider that it is a grave political failing, and one usually severely punished, to raise massive expectations which one then fails to satisfy.
246
I give a warm welcome in principle to Clause 15 providing for energy insulation. Anyone familiar with old houses in London will know that a vast amount of money is being wasted through the cracks in those houses. That is of considerable cost to the country as a whole. However, I have one or two misgivings about the provision. Twelve million pounds is not much money, and I hope that after the initial experiments the scheme will be implemented on a more generous scale than is now envisaged. Perhaps if it were it might in the end save the country money. I have misgivings about the use of agencies to implement the scheme. I am not clear about the precise objectives of the agencies and how far they will genuinely involve a true concept of public service.
I also have misgivings about Clause 5. It reverses a court judgment and has a retrospective effect, both of which we should view with misgivings. Indeed, I wonder whether the Government's attitude to the courts is becoming a little like their attitude to this House. Another reason why we should look carefully at Clause 5 is that in another place it received no more than two-and-a-half minutes in debate. The Minister was unable to finish her speech explaining the clause; indeed, she was unable to finish her sentence. At some stage Parliament must be told what the clause is about. I shall facilitate that by tabling a Motion in Committee opposing the Question that the clause stand part. I do not necessarily have the objective of removing it—I reserve judgment about that—but I simply wish to discover what it is about.
The issue of single parents will detain the House for some time. As my noble kinsman said, it is one of interim changes which I provisionally welcome, as did my honourable friend Mr. Kirkwood. The aim of requiring fathers to take financial responsibility for their offspring is a rule of civilisation and it is not one which will be opposed from these Benches. On the other hand, we should bear in mind that it is an aim which has been pursued by Parliament in various forms for more than 400 years. Success in that area has been distinctly limited. As has been said, it is difficult to get blood out of a stone, especially if it is a rolling stone.
I was very glad to see that the Secretary of State in another place said that there was sometimes good reason for mothers not naming fathers. Even if there were no good reasons, that has sometimes proved impossible. This Government are not the first to have considered the possibility of forcing mothers to name fathers. The very earliest attempt in that direction was made in the reign of Elizabeth I by the justices of the peace in Wiltshire. The effect of that was that the mothers named not the fathers but men who had subjected them to sexual harrassment and who found it difficult to clear their names. Therefore, I hope during the further review that the Government will bear in mind that the success of measures of that type is limited.
It has never been possible to get all fathers to accept their liabilities. There has always been a problem of fathers not feeling that they can pay as much as they are assessed to pay. While one may not necessarily have any moral sympathy with that

247
claim, an attempt to get too much sometimes results in getting nothing at all which could defeat the object of the exercise.
The other matter which I hope will be borne in mind in the review is that in the whole history of legislation on this subject many times people have thought that legislation could deter people from becoming single parents. That hope has been invariably disappointed and I hope that the Secretary of State does not entertain it.
As regards the present Bill, I welcome the use of the Secretary of State's power in obtaining maintenance orders but I rather share the regrets expressed by Mr. Frank Field in another place that he has not taken that rather further and carried on with the power of enforcing maintenance orders even if the person concerned is off benefit. There is a rather general problem which stretches well beyond maintenance; namely, that it is not very clear that among those who are extremely short of money the right to initiate a civil action is a very valuable protection especially in the light of the current difficulties with the legal aid system. If there is to be any really adequate protection and any regular recourse to the law to obtain maintenance orders, then there must be a machinery of public enforcement. Otherwise, I do not believe that that will happen.
We shall also have to spend considerable time on the Social Fund. On that, I agree with practically everything said by the noble Lord, Lord Carter. Lord Justice Woolf's judgment is worth a good deal of study. Lord Justice Woolf expressed surprise that Parliament should have authorised the Secretary of State to give directions having the force of law without even recourse to Parliament. However, he said that although he was surprised that Parliament should have intended any such thing, he had come to the conclusion nevertheless that Parliament had done so.
What is remarkable and what gave rise to that judgment is that although the Secretary of State had power to issue directions he chose to conceal his cash limiting instructions under the guise of less mandatory guidance. That is an interesting decision. I can only say that the use of guidance instead of directions appears to me to be—and I choose my words carefully —a homage which cash limit pays to entitlement.
I shall not develop further the examples from the NACAB report to which the noble Lord, Lord Carter, referred. I have a number of examples here but I am running out of time. We need to think very hard about the notion of flexibility and cash limiting. The noble Lord, Lord Carter, said that they were incompatible. I think that depends on what is meant by flexibility and I fear that what the Government mean by flexibility is that whether a need will be met depends on how many people have that need. The more people who have it, the less likely it is to be met.
Again, that is something which has been tried before. In the early centuries of the history of this system attempts were made to limit relief to the amount which could be raised from a local rate in
248
one area; that is the same idea as a local cash limit which is now being tried. Inevitably, need did not follow predictable levels. For example, there was a famous situation in Sheffield some 350 years ago when the number of people paying for poor relief was a good deal smaller than the number receiving it. There is always a severe problem where there is a collapse of local industry, a severe local epidemic or perhaps a town where there are more broken marriages than usual. Need does not not follow planned guidelines. Therefore, if there is to be cash limiting there will be a failure to meet need.
I shall touch very briefly—and it can only be briefly —on the problem of residential homes. That is a concession as a result of a government defeat in another place. It is entirely a good thing that we should be reminded that we are not the only people who defeat the Government. I welcome the concession. I think that the Secretary of State has done his best. He has bought himself time but I do not think he has done much more than that. He must look closely at the system of income support and residential homes which seems to me to combine all the disadvantages of both the free and controlled markets.
We have something which is rather like the system of contract funding designed for universities on which the noble Lords, Lord Beloff and Lord Swann, spoke very eloquently a few years ago. We have a near monopoly provider of money trying to buy services for a number of people who do not really have the ability to shop around at a rate to be fixed by the Government. I cannot think of any case in which the Government have fixed a financial limit where they have got it right. This is no exception.
Therefore, there is still a gap between the amount of income support provided and the actual cost of residential homes. I do not see any way in which that gap can be closed. The Government will have to consider taking over the homes themselves, in which case they can control both costs and the amount of funding, or completely free the market and meet whatever that costs. I do not see any way out of that other than continuing with the same problems which we now have. I shall not pursue that matter further but there is a good deal in this Bill which we can take up in Committee.
12.17 p.m.
Lord Boyd-Carpenter: My Lords, as the Minister said, a Bill of this kind is now an annual event. In itself that is an interesting indication of the way in which our social security system has developed and is partly a by-product of the sheer complexity of the system. Many years ago when I had responsibility for it, the system was comparatively simple. It has now developed into a system of such complexity that, as one sees in your Lordships' House this afternoon, only a limited number of your Lordships feel able to be present in order to deal with further developments.
On the other hand, it is important that there should be these annual reviews of the system, not least from the point of view of what is rather crudely called targeting. That is not a phrase which I particularly like but I think it is intended as an

249
indication of something very important. The importance is that there are innumerable good cases to be made—and we have heard some this morning—for various increases, improvements and benefits for further help to all sorts of people with misfortunes. However, there is and must be on the Government a responsibility for deciding which of those particular matters should be given priority. Given the immense expenditure to which my noble friend referred in moving the Motion and given the very large effort made in respect of social security throughout the country, it is obvious that there must be a degree of selectivity in picking out not merely good cases but the cases with a justification for priority.
Noble Lords opposite may recall that the late Mr. Ane jrin Bevan once said that the language of socialism is the language of priorities. In fact it goes a good deal further than that; the language of social security is the language of priorities. Few people with practical experience of social security administration fail to appreciate that there are many admirable things which one would like to do but which it is not possible to do. Ministers therefore have the difficult responsibility of choosing the directions in which it is possible to make improvements. That is true of Ministers in any government. It has certainly been true of Ministers in the past. I am not saying particularly Ministers in the past; they may be wrong on occasions. All humanity is subject to error. Nonetheless, Ministers have always seriously and earnestly tried to distinguish which particular claim is the strongest.
That is the reason why I have sometimes ventured to comment in your Lordships' House when a particular issue has been raised and people feel strongly about the merits of particular claims that it is not quite fair on the Government or the House simply to take one issue and point out its merits unless one is in a position to weigh it against other competing ones. That is the advantage of this annual Bill. It gives the Government the opportunity to choose their priorities, to say which items have a claim on resources in priority over other admirable claims and then for your Lordships' House to decide whether the Government are right. That is the object of the Bill and the debates, rather than, if I may say to the noble Earl, Lord Russell, general consideration of the economic policies of the Government. Our time in Committee, but also on Second Reading, will be spent more profitably if we look at the individual items and try to come to a conclusion as to which are entitled to priority in the circumstances of today.
One of the reasons for an annual Bill is that the priorities vary over the years. The needs of the situation today are not the same as they were a few years ago, It is therefore up to the Government to suggest remedies for what are at the moment the most difficult problems. The Bill is evidence of some success in that direction.
I was delighted to see Clause 1, which deals with the attendance allowance particularly in the case of the terminally ill. As your Lordships were reminded, this has been discussed in your Lordships' House
250
before and the Government's response to the discussion is extremely welcome. I particularly welcome one aspect of Clause 1 which has not so far been mentioned. At the top of page 2 of the Bill, subparagraph (b) states:
"where a person purports to make a claim for an attendance allowance by virtue of that subsection on behalf of another, that other shall be regarded as making the claim, notwithstanding that it is made without his knowledge or authority".
In the case of people who are terminally ill it is vital that somebody else should be entitled to make the claim without involving them. I speak with some feeling on the matter because in my family I have experienced a somewhat similar situation. A person was known to be terminally ill, for it was around six months that life was forecast, and it proved possible not to disclose to her what her condition was. The advantage of the provision which I read out is that one does not need to frighten or embarrass the person concerned in order to apply for the allowance. An independent person, without consulting the person who is ill, can apply for the allowance. That is a very humane and extremely sensible and sensitive provision in the Bill.
I do not wish to detain your Lordships for very long this afternoon because we shall be discussing the individual clauses no doubt at length. However, I should like to welcome the provisions of Clause 2 in respect of severe disablement allowances. There are adjustments to be made when disability comes on, shall we say, in the mid-30s and early 40s. Again this is a sensible attempt to deal with a very real situation.
I have two questions to ask my noble friend to consider when he replies where I have not been able to follow what is proposed. Clause 16 concerns industrial injuries and the transfer of part of the charge from the National Insurance Fund to the Consolidated Fund. Perhaps my noble friend will explain that provision. I should also be grateful if he could tell me who "an authorised complainant" is as referred to in Clause 12 and Schedule 3. How does one become an authorised complainant and what sort of people might be complainants but not authorised? I foresee certain difficulties in that direction, but it may be that there is a perfectly simple answer.
Finally, I welcome the appointment of the pensions ombudsman. It is curious how we have adopted into the English language that foreign expression, and how the sex discrimination enthusiasts have not insisted on "ombudsperson" or "ombudswoman". Apparently it is felt that in this vital area it is a man's job. I welcome the appointment in the Bill and do not suggest any proposed amendment. Given the complexity of these matters and, as has been emphasised, the importance of them to a great number of the least fortunate of our fellow citizens, it is very useful to have an independent person who can help with guidance, advice and the taking up of cases.
I am not necessarily an enthusiast for every provision in the Bill, but on the whole it is a good Bill. It is moving in several of the right directions and I hope that when it emerges from your Lordships' House it will be not only a good Bill but a splendid one.
12.29 p.m.
Lord Stallard: My Lords, I find myself in the strange position of agreeing with almost everything that the previous speaker said. I seldom agree with him, but I agree with most of what he said this afternoon. I well recall his stint when he was Minister for Pensions and his contribution in that field.
The only point on which I might take issue with him is his description of the Bill as an "annual" Bill. It is not annual. We have had 12 Bills in 10 years, so it is a little more than annual. It is the twelfth Bill in just over 10 years under this unfortunate Government.
The noble Lord said that the annual Bill gives the Government an opportunity to rearrange their priorities. That may be true, but I do not happen to agree with their priorities. Does it not also in many cases make the complexity of the situation referred to by the noble Lord, Lord Boyd-Carpenter, more complex? Each and every Bill that comes forward makes the position more and more complex and impossible for staff to keep up with training on new regulations and so on. The situation becomes totally impossible for the people who are on benefit—the claimants, or the targets, as the noble Lord said. The regulations are a jungle. By and large, people probably do not even understand the first Bill and we are now on Bill No. 12. The position becomes worse and worse, like some awful snowball that trundles on.
Having made those few remarks about the noble Lord's contribution I come to my own comments. I am a little less enthusiastic about the Bill than some, though there are measures contained in it that we all welcome and I shall come to those in a moment. I am less enthusiastic because I was frightened when I heard the Minister say that the Bill forms part of a continuing policy in the Government's social security programme. That frightens the life out of me because government policy so far has been disastrous in my view and in the view of millions of ordinary working people. Those people cannot say that, considering the facts, they are pleased with progress so far, and I share their apprehension about continuing progress if it is in the same direction.
All 12 Bills so far introduced have something in common. They were all designed to reduce public expenditure. They were designed to take pressure from the Treasury and in particular to reduce spending on the social services, which was said to be getting out of hand; that much could be privatised, much abolished and so on. The aim—the target, as the noble Lord said —has been to cut down on public expenditure and the obvious place is the biggest spending department—social services. That is also a worrying aspect of this policy.
Second Reading of this Bill provides an opportunity, and after 10 years an additional excuse, to look briefly at some of the previous Bills. I start with the 1980 Bill. Together with many noble Lords I have served in some capacity on all these Bills and we have memories of some and nightmares of others. However, the 1980 Bill broke the link between pensions and other benefits and wages or the cost of living index, whichever was the higher. The
252
cumulative effect is that pensions are now worth only four-fifths of what they would have been worth had the link remained. The single pension is now £12·65 less, and the married pension £20 less than they would have been had they been linked with wages.
That does not take into account the fact that pensioners almost always —in fact I go so far as to say always—lose out in relation to the rate of inflation. When the pension was introduced in 1948-49—I believe the Bill was introduced in 1948 and implemented in 1949—a year had already passed and the figures were based on 1948, so pensions were already one year behind the rate of inflation or cost of living index, whatever was the term used at that time. Pensions have never caught up since then. Last year, when we knew inflation was running at over 7 per cent. the pension was increased by 5·9 per cent. This year, with a magnanimous gesture and because the increase was so low the previous year, the increase is 7·6 per cent. but inflation is running at over 8 per cent. and rising. We also know that no compensation was made for the increase in inflation between last April/May and the time of the announcement of this year's increase. Therefore, pensions have never caught up with inflation.
I have not yet been able to calculate the figures on how much that has cost pensioners but it must be a fair amount. We hear of huge sums—billions of pounds— trotted out by Secretaries of State and other Ministries that the Government are spending on this, that and the other; and they always say that the figures are in real terms. However, the Government never say how much has been saved arising from all these measures. In other words, they never say where the money is coming from. It is usually being taken from one pocket to put in another pocket. There is very little new money in these transactions; it is always robbing Peter to pay Paul and we happen to be the Peters that are always robbed. Therefore, I have some apprehension when looking back at these Bills.
The No. 2 Bill in 1980, for example, cut benefits to strikers and their families as the general attack on the trade union movement was mounted. Earnings related benefits were abolished in that Bill. Again, we are talking about hundreds of thousands of pounds being saved. Unemployment, sickness, maternity and industrial injuries benefits were all cut by 5 per cent. We do not need to be mathematicians to obtain a mental picture of the huge sums of money involved in those cuts and the savings made by the abolition or cutting of various benefits. We are therefore able to obtain a rough picture of the savings made by these Bills. In 1982-83 the saving was £1·5 billion and by 1985 the total cuts amounted to £8 billion. By 1987 the saving from breaking the link between pensions and inflation was £12 billion and rising. It is now £18 billion.
That £18 billion is a lot of money, but it has not been put back into the social security services. On the contrary, between 1980 and 1983 sickness benefits were privatised, again, to save money. The industrial injuries benefit was abolished. I referred to the contribution made by the noble Lord, Lord Boyd-Carpenter, when he was at the Ministry of

253
Pensions. I remember one or two discussions because I was a shop steward at that time. We were very much involved in the old Workmen's Compensation Act and the switch to the ensuing Acts. In the same period dousing benefit was substituted for rent and rate rebates, and we all know of the disastrous effects of that change, which are continuing. There are local authorities and departments which have still not caught up with that legislation, yet we have piled more and more legislation on top of it. They will never catch up. The only hope is that the legislation will be abolished before they have to catch up with it. That seems to be part of the ongoing policy —when legislation becomes too complicated abolish it, call it something else and start again.
This year's Bill—annual, biannual or whatever one calls it —should have dealt with some of those problems. In my view they are priorities. Some of the difficulties arising from previous legislation could have been dealt with. There has been no attempt in this Bill to alleviate the hardships caused to millions of people by those policies.
Occupational pensions have been mentioned. My noble friend Lady Turner is an accredited expert on the subject. I fully agree with the Minister on that. I may he hiding behind the noble Baroness but that certainly saves us from having to do too much homework in regard to occupational pensions. It is true that membership of occupational pension schemes is increasing. No doubt it is also true that the pro portion of pensioners' incomes derived from occupational pensions has also increased. It has increased from 15 per cent. in 1974 to 20 per cent. in 1986. There is no doubt about that. However, we must remember that only a small proportion of people receive a substantial occupational pension. The figures are average. Some people will always remain dependent on the state pension. Many people still do not receive an occupational pension and never will.
The figures are interesting. Apparently the people of this country are divided into quintiles, quartiles and percentages, but I think for this purpose quartiles are used. Single men of 65 and over in the first quartile have an average occupational pension of £3·50. The top quarter for men of 65 and over have an average occupational pension of £87·20. If those figures are put together one gets a fairly big average and it is. possible to say that pensioner incomes have increased. That is true if figures are added together in that way and the average is worked out. However, I am still concerned about the fellow who is receiving only £3 50 on top of his meagre and much knocked about retirement pension. He is struggling. I say nothing about the 20 per cent. poll tax that he will now have to pay. I certainly look forward to hearing my noble friend's contribution on occupational pensions.
There are no measures included in the Bill, as my noble friend Lord Carter said, to improve the financial position of the 4·2 million pensioners in the United Kingdom. As far as I can see, there has been very little consultation about some of the other measures in the Bill, welcome though some of them are. I welcome what the noble Lord, Lord
254
Boyd-Carpenter, has said about the attendance allowance. The new measures are long overdue but nonetheless welcome.
The increase in the severe disablement allowance is also welcome. However, it will not be of much use if the allowance is not excluded from the calculations for means tested benefits. Of the 263,000 people receiving the severe disablement allowance, 140,000 also receive income support. Many thousands of others receive housing benefit. Those two benefits will be cut in line with the amount that is received from the increase in the severe disablement allowance. So, as always, the recipient will get it with one hand and have it taken away with the other. Therefore, that measure will not achieve what the Minister said it would. I should like to see the severe disablement allowance raised to the level of the retirement pension.
I wanted also to mention the reduced earnings allowance, but I know that my noble friend Lady Turner is an expert on the subject. I can only claim a slight knowledge of it from my personal experience and of the effect that it will have. I do not have the time to go into the matter in detail.
I also welcome the appointment of the ombudsman. There have been some reservations expressed, mainly by the Consumers' Association. I can do no better than quote its reservations while welcoming the decision to appoint the ombudsman. The association states:
"We welcome the proposal that the Ombudsman's decision should be binding on the trustees, managers and persons claiming under them, except on appeal on point of law … Experience has shown that where an Ombudsman's decision is not binding, some companies are prepared to ignore the decision. A decision against the Cheshunt Building Society by the Building Societies Ombudsman was ignored, and since the inception of the scheme, 89 local authorities have ignored the decision of the Commissioner for local Administration.
However, we are extremely concerned that the consumer should have to give up his right to take a case to court, except on a point of law. Unlike trustees and managers, many consumers will be acting without legal representation. They may not be in a position to put their case to the Ombudsman effectively; even if he is correct on a point of law, the Ombudsman may misdirect himself on the face of the record, or fail to take vital evidence into account".
For those reasons the Consumers' Association hopes that the decision of the pensions ombudsman will similarly not be binding on the complainant. That is a fair point to make.
I could have spoken at much greater length on the question of pensions but there is one other subject that I wish to deal with before I sit down. Young people represent another area of interest for me. I do not believe they are mentioned in the Bill to any great extent. No one can say that young people are not a priority. We have often discussed homelessness. It is mentioned every day; therefore it must be a priority subject. But this Social Security Bill which has been brought forward does not deal with the points that have been raised; it deals with other points that were raised in two other Bills introduced some time ago, particularly as regards hostels.
There are immediate and urgent problems which have to be looked into. We talk about the complexity of Bills. In Parliamentary Answers given in another

255
place I have counted 66 changes which have been made since 1980 in the social security benefits specifically affecting the entitlement of young people and their parents. That is a great number of changes for young people and their parents to consider and understand. Young people have been very seriously affected by these measures.
Recently the Salvation Army made a rough survey and it counted 75,000 people sleeping rough. The London Research Centre adds to that the number of people who are living in bed-and-breakfast accommodation and under awful conditions. It makes the total 300,000.
I am involved with another issue. It is estimated that there are 3,000 convictions each year under the Vagrancy Act 1824. More people are now being convicted because they are homeless and that is now a crime. Certainly in London more people are being convicted for that than for burglary. That is a matter which this Bill could have dealt with.
The Government could have considered the Vagrancy Act and asked themselves how it is acting against youngsters in the present situation. They should have asked themselves whether they should be doing something about the situation instead of allowing young people to be arrested and convicted under the 1824 Act. The Act is not a deterrent and it is not proving anything. It makes a bad situation that much worse. I hope that the Minister will be able to say something on that subject.
At the same time, while these millions of pounds are being saved, the 1988 Budget and others handed out thousands of pounds. I believe that in the 1988 Budget £2,000 million was given to 750,000 of the richest taxpayers. Most of that money came from social security beneficiaries and claimants who did not get their payments. There is no argument about that. Noble Lords can shake their heads, but the facts and the statistics are there. Just up the road from here the people themselves are there to prove it. They are the people who are being deprived. It is almost a unique situation, certainly in Europe, where a government are redistributing from the poor to the rich. I read somewhere that to be old, disabled, unemployed or poor is to be regarded in Britain as a burdensome dependant on the enterprising taxpayers. That about sums up the situation.
The Bill does very little; it certainly does not do anything like what it could and should have done in order to alleviate some of the problems and hardships I have mentioned. We shall try to amend and make something decent out of this year's social security chapter.
12.47 p.m.
The Earl of Buckinghamshire: My Lords, I start by declaring an interest, in that I run an investment management company. Depending on which expert you wish to listen to, the proposals on the pension scheme amendments will either benefit those involved or not. I welcome the bulk of the clauses which are proposed to deal with pension schemes. However, I have some reservations. I wish to speak solely to Clause 11.
256
I congratulate the Government because I believe they have adopted almost all the proposals made by the Occupational Pensions Board. Reference has already been made to the role of the noble Baroness, Lady Turner, in that organisation. I also congratulate the Government on springing a small surprise on us, because not only did they take up the recommendations but they have gone further. It is on the going further aspects that I wish to dwell.
The real question I have is whether the Government have really thought through all the full implications. There are many good parts to the Bill and I can understand why they have introduced these measures. Nonetheless, there are implications that I wish to explore and see what replies I receive. As regards indexation, I am not terribly pleased to find yet another set of initials, LPI, introduced into our business. I am led to believe that the costs of final salary schemes are likely to increase. Experts will differ between 2 per cent. and 5 per cent.
A very good matrix has been produced by Bacon and Woodrow, a firm of consulting actuaries, in one of its analysis documents. I am happy to pass it on to my noble friend the Minister. The matrix sets out what are likely to be the increasing costs resulting from these proposals. I find it slightly worrying that long-established schemes may find themselves facing additional costs. If there is an increase in costs of employers—whether or not they split that increase between themselves and employees is a matter for employers to decide, but generally they do not —have the Government worked out what the impact of the additional costs will be? We are already in an inflationary era and we have to compete in world markets which perhaps do not have the level of occupational schemes that we have in this country.
Secondly, if we are to see an increase in costs there could be a move by employers to cut back on future service benefits. A typical example would be to move from a one-sixtieth scheme to a one-eightieth scheme. I am told that roughly that is a balancing phenomenon or balancing cost in the actual equation. I have worked out on my tables that it would take roughly six years even to get above a benefit which is based on sixtieths if it were moved down to eightieths.
I am also concerned that we seem consistently to be adding to the legislative requirements on pension schemes. If we do not find legislation coming out of the DSS we find it coming out of the Treasury. Employers may be disinclined to start new schemes, particularly final salary schemes. I am concerned that many employees in this country are not covered by pension schemes. I find myself in a slight quandary here because no matter how well intentioned the proposals are they may have a completely opposite effect on encouraging employers to start new pension schemes. Even if they do, they are most likely to go into money purchase arrangements.
The Occupational Pensions Board tried to look at the relationship between a money purchase scheme or a personal pension arrangement and a final salary scheme. It proposed that the impending pensioner should have a choice at retirement between either a reduced benefit with a higher rate of inflation

257
protection or a higher level benefit. That is my understanding of what the Occupational Pensions Board recommended. From the way I read the Government's proposals they have moved considerably beyond that level. There is a cost factor involved. I should like that to be considered by my noble friend.
The concept of surplus is commendable but I am not entirely sure at whom it is aimed. Is it aimed at the pen dons asset stripper who takes over a company with a pension fund in surplus? Is it geared towards preventing employers taking contribution holidays? Is it geared towards giving the whole membership of a pension scheme a larger rate of increase on their pensiors? While the intention here is good I am not entirely sure that the Government fully understand what they are doing in this area. Furthermore, I feel somewhat concerned that we shall introduce yet another definition of "surplus". It is already defined under the accountancy rules. We have a surplus determined by the independent actuary in consultation with employers, and whoever his principal may be. Yet, as far as I can understand it, there now seems to be a possibility of a further definition.
There is a thought —my noble friend can confirm this —that the DSS does not like the current methods of defining surplus and will want to go for a more favourable or a less conservative basis. In this area I should like to remind the House that surpluses are a feature of the 1980s. In the 1970s deficits were more in the mind of employing companies. As we start off in 1990 with horrendous markets I am not entirely sure how we view the 1990s at the moment. There is a considerable debate about what types of markets, we are in.
The surplus will increase the pension cost liabilities of companies which have to be reflected through the balance sheet, particularly under SSAP 24. Company profitability will be adversely affected. The funding assumptions which the independent actuary is likely to recommend on a long-term basis for these funds will be weakened. Companies will seek the lowest costs on a long-term basis, which may well be in conflict with the definitions that will be used for the calculation of surpluses. More importantly, although there are within the Bill strengthening proposals on the wind-up provisions, if one goes for a weaker long-term basis calculated by actuaries one will weaken the security of members' rights. They are linked to the assets within the scheme
The spreading of the surplus over a large number of employees could lead to minuscule benefits being distributed over the membership of the scheme. Membership of schemes can range from 100 to several thousands, whatever are the numbers in the employing company. There are other ways of protecting the rights of pensioners than by using what is the fairly sledgehammer approach of dealing with surpluses, which, as I have said before, have other intentions. One can divide up quite properly within the fund the assets that are linked to pensioners or deferred pensioners. One can then say that those people will have x amount of assets
258
allocated to them and they will participate in the rate of return that those assets earn on their benefits. There are other ways to do it.
We know that in this country we are looking at equal retirement ages for men and women. I am curious to know whether the DSS is considering what impact the proposals of the Bill will have on equality of pension ages. That is also likely to be an additional cost factor, depending which way the department goes.
I find pensions a stimulating and interesting topic for discussion. It is not always a shared interest. But it is a highly technical area and gives rise to much misunderstanding. It is possibly why we need an ombudsman or someone to come along to help individual menbers sort out their pension problems. I have already said that I believe that the Government's proposals are well intentioned but I fear that they have not fully explored—and, if I am not being impertintent, I do not think they fully understand—the implications of the actions they propose. What may well happen is the total opposite of what they intend. One may find a lower coverage of pensioners or a lower coverage of new employers starting pension schemes. We may see a lower level of benefits coming through in the future. We may see a lower level of security of funding. All these factors may well fall within what the Government want. I doubt it, but they may well do if one takes a Treasury view of life. The problems I have mentioned could result from these well-intentioned proposals.
Another area we need to have some regard to is to keep our units costs of labour under control. I believe that in some way there is a degree of interference in the benefits that are agreed between an employer and an employee within these proposals. That is something which is slightly worrying to me personally.
1 p.m.
Baroness Turner of Camden: My Lords, the Social Security Bill which is before the House this afternoon is, as other noble Lords have said, a mixture of provisions dealing with social security benefits and occupational pensions. I should like to thank the Minister for the way in which he has presented the Bill, which is quite complicated. I should also like to thank him for his very kind references to me. Incidentally, I am a member of the Occupational Pensions Board, but I am one of the lay members and would not claim to have any great area of professional expertise, unlike the noble Earl who has just spoken.
My noble friend Lord Carter has dealt with the provisions relating to the disabled, and I propose in the time available to me to refer specially to occupational pensions, with two exceptions to which I shall make reference now. In the last Social Security Bill there was a highly controversial provision to the effect that benefits paid out under social security provisions could be clawed back from common law compensation payments. The net result of this could be that an individual receiving an industrial injury benefit could well end up with no compensation at all for pain and suffering, despite the fact that his

259
injury might have been caused by employer negligence. A number of noble Lords at the time opposed that concept, but unfortunately we were not successful.
In this Bill, buried in Schedule 1, we have a carry-over of this idea to motor accidents and, in particular, to accidents where compensation is paid by the Motor Insurer's Bureau under the MIB scheme: for example, payments made to people who are injured in an accident caused by a hit-and-run driver. As I said on the last occasion, I entirely disagree with the concept of clawing back social security benefits in such a case. That is very unfair. I understand that in this instance the Motor Insurer's Bureau pleaded that its scheme could be treated on the same basis as the Criminial Injuries Board scheme. Unfortunately, that plea has not been successful and I think that is something we shall have to explore further in Committee.
The second issue—which is not a pensions issue—to which I wish to draw attention also relates to the Industrial Injuries Scheme. It seems fairly clear to me that the Government do not particularly like this scheme and there have been repeated provisions in previous legislation which are designed to undermine it. Yet it is the only "no-fault" system of compensation that we have in this country. I say again, as I have said before, that there are working environments which are inherently dangerous, no matter what steps are taken to improve them. That is why we need an industrial injuries scheme. Under this Bill the reduced earnings allowance, which is currently payable when an industrial injury has resulted in an inability to maintain pre-accident earnings, is to disappear altogether. The savings are very small: according to the Bill they will be something like £10 million. I see it as yet another attack by the Government on a scheme they do not like. Of course it will be said that other benefits, such as invalidity benefit, for example, are available but that is hardly the point. The special nature of the Industrial Injuries Scheme is that it is meant to provide some form of additional compensation for earnings loss and personal injury to persons who are injured in a working environment. We shall of course need to return to this in Committee.
In turning to the provisions relating to occupational pensions, I must say that many of the proposals are a considerable improvement and are to be welcomed. As has already been said, many of them are based on recommendations made by the Occupational Pensions Board. I do not really think that some of these proposals go far enough and I will say precisely why that is so in a moment. Nevertheless, I am pleased that the Secretary of State has taken on board many of the OPB's recommendations, particularly since the Government's record in the whole area of pension provision is scarcely one that can be commended. My noble friend Lord Stallard has already pointed out that flat-rate state pensions still account for a very large number of pensioners' incomes: I believe that about 60 per cent. of present pensioners are dependent mainly on the basic state pension. However, these have not been increased in line with the wages index, as was originally intended, but
260
only with the retail prices index, thus resulting in substantially lower increases.
There has been the encouragement given by the Government to money-purchase schemes and to personal private pensions, utilising money from the National Insurance Fund to bribe people into taking out private personal pensions and risking a deficit to that fund. In the background, of course, has been the attitude to SERPS-the state earnings-related scheme—which for the first time held out the prospect to low earners and to people with a chequered work pattern, including of course many women, of a reasonable earnings-related pension in retirement.
I do not believe the argument that we could not afford the full SERFS, because we have to meet the costs of supporting the elderly in one way or another: how much better to do it with the dignity of a pension for which contributions have been made rather than through means-tested social security benefits. I have to say unequivocally this morning that our party is committed to restoring SERFS to its full value.
Turning to the proposals on occupational pension schemes, some of these were added at a very late stage in the Bill's progress through the other place. Even though I think the proposal that occupational schemes must in future uprate pensions in payment by up to 5 per cent. per annum or the level of the RPI, whichever is the lower, is very much to be welcomed, it is the view on this side of the House that the proposal does not go far enough and we have already stated that we believe there should be full indexation. I think that perhaps in 20 or more year' time it will seem fantastic to those who are then politically active that we could ever have considered making pension provision that was not fully inflation-proofed. Even so, pensioners are likely not to be so well off as those in work, since for the greater part of the 20th century the earnings index has outstripped the RPI; and that tendency looks as though it will continue.
Furthermore, I welcome what the Secretary of State is proposing about pension fund surpluses. Nothing has given rise to so much controversy among trade unionists and those concerned with pensions negotiations as the questions: "Who owns the surplus?" and "Has the employer a right to take a contribution holiday because after all it's our money?" I have heard such remarks time and time again. The Secretary of State has now virtually settled the argument at least to some degree, by saying in this Bill that the employer cannot simply dip into the surplus or give himself a contribution holiday without increasing pensions in payment up to the 5 per cent. limit. Again, the issue of that limit raises itself, but it is in any event a considerable improvement and very much to be welcomed. However, I understand that all this will only come about as from the "appointed day". There is also a case for ensuring that past social security benefits accruing before the appointed day should be increased, so far as surpluses permit.
I am aware, of course, that it will be said that employers may be frightened off providing pension schemes because of the cost of provisions enabling

261
pensions to be increased on a regular basis in line with inflation or with the provisions in the Bill. However, good schemes already do this and, as has already been indicated, many schemes are now in substantial surplus and could afford to make these payments. Also it is in the interests of employers, particularly those who want to retain skilled labour, to offer a good and reasonable pension scheme. People now live a great deal longer—perhaps 20 years longer on average than they did at the beginning of this century—and provision has to be made for them. In very many cases the money is already available. I support the proposition that, on wind-up, statutory revaluation should apply and any deficiency in a scheme's assets would become a deficit on the employer—although here too I should like to see the revaluation done on an RPI basis.
The OPB report was much concerned with the threat to pensions through mergers and takeovers. There had long been a fear that over-large pension fund surpluses acted as a bait to tempt predators. A number of the board's recommendations clearly had in mind preventing this so far as possible. Hence the recommendation that in company takeovers, bulk transfers should be permitted only if rights and expectations of members were guaranteed as the result of an actuarial certificate.
This is important because in a number of cases considered by the board it appeared that following a merger there had been instances in which discretionary increases which had formerly been paid to pensioners and which they had come to expect had been discontinued. The expectations referred to would be protected by the Bill and it is right and proper that that should be so. That will also be a further deterrent to predators.
The Secretary of State has recognised, as has the board, that there is a need for a speedier and cheaper way of resolving pensions problems than by reference to the courts, although that option should still remain. The board proposed the establishment of a pensions tribunal with a legally qualified chair, supported by two sides-persons with specialist knowledge. The Government instead propose an ombudsman. This is of course an improvement on the present situation and is to be welcomed in that context. However, I should have preferred a tribunal. Many of the issues about pensions are directly linked to employment. A tripartite body would be the best way of resolving such issues as industrial tribunals are now for resolving general employment issues.
Then there is a whole matter of conciliation and the need for some kind of sifting mechanism. I refer particularly to OPAS—the Occupational Pensions Advisory Service—an organisation with which, as the noble Lord has said, I am connected. This body has done excellent work on an entirely voluntary basis. It is run virtually on a shoe-string. OPAS is not mentioned on the face of the Bill but I believe that it has been told that it may expect some financial support. I should be grateful to hear more from the Minister on this subject. I also welcome the introduction of a registry and a tracing service.
Finally, we come to two inter-related issues, one of which has already been referred to by the noble
262
Earl, Lord Buckinghamshire. There is the unresolved issue of unequal state retirement ages and the accompanying problem of bridging pensions introduced by some employers to try to bridge the gap between the ages of 60 and 65 for men where schemes have been introduced equalising the pension age at 60. This was debated when the last Social Security Bill was before us and I think that the Government must grasp this nettle. So many anomalies arise from differential retirement ages. There have been two reports by Select Committees of this House—one quite recently.
The problem about bridging pensions remains. It is a problem which we were told arises because of EC directives. In my view it is absolutely absurd that this should be regarded as non-acceptable on the basis of equality provisions. Will the Minister say something about these issues? When may we expect legislation equalising state pension ages as between men and women? We shall of course return to a number of the points raised by this side of the House when the Bill is in Committee and we have the opportunity of debating the more detailed provisions, some of which are extremely complex.
1.13 p.m.
Lord Henley: My Lords, I think that we have had a useful and wide-ranging debate on the Social Security Bill. In time I wish to cover various points. Because of time limits, I intend to keep largely to Clause 1, the Social Fund, income support limits for residential nursing homes, some of the occupational pension issues and wider pension issues. For example, the points raised by my noble kinsman Lord Russell on Clause 5 are probably best left to the Committee stage. I look forward to explaining to the noble Earl the details of Clause 5.
Perhaps I may briefly answer two short questions from my noble friend Lord Boyd-Carpenter. He asked who would be the authorised complainant to the pensions ombudsman. I can assure him that this is defined on page 37 of the Bill in Schedule 3, new section 59C(6). Briefly, an authorised complainant would be a member of the pension scheme or the widow or widower of a member or a person claiming to be a member of the scheme.
My noble friend also asked what Clause 16 is about. It is purely to strengthen the link between the national insurance contribution and expenditure on contributory social security benefits. In other words, we are removing from the National Insurance Fund those benefits which are not contributory benefits.
Perhaps I may touch on one point made by the noble Lord, Lord Carter. He seems to be of the view that the social security system is designed to reduce the gap between the rich and the poor. Both he and I have already discussed this in the debate on the growing gap between the rich and the poor some weeks ago. I wish to reiterate what I said then: I simply do not agree with him. The social security system in this country is designed to relieve poverty and ease hardship. It is not designed for social engineering.
Perhaps I may turn to Clause 1 and the definitions of what a progressive disease is and which people

263
will qualify as terminally ill. That point was raised both by the noble Lord, Lord Carter, and my noble kinsman. We feel that the removal of the qualifying period is intended to help people with any progressive disease—I shall come back to that later—such as cancer, motorneurone disease and the advanced stages of HIV infection, where the timespan between diagnosis and death is very short.
My noble kinsman also asked about people who qualify but who live longer than six months. We recognise that some terminally ill people live for longer than expected. We have no intention of subjecting them to review or reassessment after six months. As the Bill makes clear, anyone who qualifies as a terminally ill person will be entitled to the higher rate of allowance for life, whether this is a matter of weeks, six months or more. That said, we must recognise that diagnosis is not an exact science. The nature of a person's illness or life expectancy can change. Where there has been such a change, we think it right that the claimant's entitlement should be reviewed and reassessed in the light of new evidence.
Turning to the Social Fund, perhaps I may first refer to the newspaper article which the noble Lord, Lord Carter, mentioned. It concerned an applicant who was homeless and who was offered money from the fund to buy a tent. We are very concerned and are making inquiries about the case. The reason why I feel it is important, as has been mentioned, is that the case appeared in the press this morning and this is the first opportunity for a Minister from my department to make some mention of it. We are in touch with the local authority and the local social services department to see what can be done to help the family. I understand that a meeting of the relevant local agencies—that is, local authority housing, the local development corporation, since the applicant comes from Milton Keynes, and the social services —has been arranged for this afternoon to see what can be done urgently in order to resolve the family's housing problems.
Responsibility for housing homeless families rests with the local authority. Housing benefit paid by local authorities is available to meet housing costs. It is not the function of the Social Fund to meet housing costs, although rent in advance may be available to help people secure accommodation. The local office made the payment which the applicant had requested on the understanding that there would be no help from other local agencies.
Further, the noble Lord, Lord Carter, mentioned capping the Social Fund and the removal of flexibility. He claimed that there was no flexibility or discretion in a cash-limited scheme. As we have always said, most organisations have to operate within a budget. We feel that there is no reason why the Social Fund should be any different. A firm budgetary framework ensures that the available resources go to those who are in the greatest need. Lord Justice Woolf said that, although Parliament intended individual applications to be handled with flexibility, it clearly intended that the scheme should be subject to strict monetary limits, and the Secretary of State needs to be able to give directions to achieve financial control. Operating within a budget is not
264
inconsistent with flexibility. Within the budget. Social Fund officers have the discretion with which to meet a wider variety of needs than was possible under the previous system, and funds can be focused when and where they are most needed.
I shall now turn to the question of residential care and nursing homes which appear in Clause 9. I shall start with the remarks of my noble kinsman Lord Russell, who said that something needs to be done in this area. I can assure him that the National Health Service and Community Care Bill is currently in this House. We had the first day of the Committee stage yesterday and there will be further days in Committee. That Bill is designed to achieve just those objectives that concern the noble Earl. I am sure that he will attend on occasions when the Bill is in Committee and make his contributions.
The noble Lord, Lord Carter, wanted to know what Her Majesty's Government are doing now about people who are unable to meet fees and are being evicted from homes. He also wanted to know at what stage after 1991 the Government will begin to use the powers in the new clause. I wish to make two points. In response to the question about the levels of support that we provide now, I must say that we have to reach a judgment about the level of support that we can provide at public expense. The upratings that have just taken effect and those that will come into effect in August amount to an extra £145 million. We meet the full cost of places for a majority of those on benefit. On the question of the implementation of the new clause, I must tell the noble Lord that that depends crucially on the quantity and quality of information that we can obtain from local authorities as they undertake their new responsibilities. Officials will be talking to local authority associations about that matter.
I shall now turn to some of the pension issues. I wish to start with the whole question of equalisation of pensionable age. The noble Baroness raised that matter, as did my noble friend Lord Buckinghamshire. The noble Baroness will recall that over a year ago we had a debate on this subject and on the report produced by a Select Committee of this House chaired by the noble Lord, Lord Allen. I should start with an apology to the House in that in responding to that debate I said at the time that we expected to produce our response by the end of the year. I am afraid that we failed in that but we have produced our response by Easter of this year. The noble Baroness will know that we published it just before Easter as Cmnd. 1038.
I should make it clear that we fully support the principle of equal treatment and we recognise the force of the argument for the equalisation of state retirement pension age. However, as I am sure noble Lords will realise, there is a great deal to consider before deciding what the common pension age for men and women should be and when that should come into operation. We need to look at how the numbers of men and women will change over the years to come, the costs of changing the pension age and the effect on the labour market. We also need to take account of the expectations that men and women have now about the age at which they will receive state pension and the retirement plans they

265
have made. Noble Lords will be aware that the requirement to provide for equal treatment in social security is set out in the directives of the European Community. However, those directives currently include specific derogations which permit pension age and some other matters to be excepted from the general rule of equal treatment for men and women.
There was the third draft directive and, as the noble Baroness will know, a report was also produced by a Select Committee of this House. As I have just stated, the Government responded to that report just before Easter. In that response we restated our view that the draft directive covers issues of fundamental importance; that we have strong reservations about a number of aspects of the draft directive; that we do not wish to be rushed into a judgment and that we do not desire to conclude negotiations until we are completely satisfied with the legal soundness of the provisions. As I have said on more than one occasior, we simply cannot make premature decisions on such an important, complex and potentially far-reaching issue as the equalisation of pensionable age. There are major considerations involved and they indicate that any change will need to be implemented over a period of time.
The noble Lord, Lord Stallard, as he has done on many occasions before, attacked the Government for the break in the link between earnings and prices in regard to pensions. In 1980 the link with earnings was broken because the Government felt at the time that to retain it would be to throw an ever heavier burden on the working population. The Government felt that that was not sustainable over a prolonged period. Since that date the Government have met their pledge to maintain the level of pensions in relation to increased prices. As a result pensioners' average total net incomes have increased by over 31 per cent. in real terms during our first eight years in office. That compares more than favourably with the real term increase of only 3 per cent. between 1974 and 1979.
My noble friend Lord Buckinghamshire asked about the cost of pension increases to various occupational pension schemes. Many schemes already give increases. Some 80 per cent. of private sector scheme pensioners get increases. Where schemes do not give increases now it will be open to the employers and employees to review the level of pension provided for future service. We are allowing time for that to take place. My noble friend also asked about surpluses in pension schemes. I readily acknowhidge that this is a highly technical and complex area. However, our officials in the Department of Social Security are already engaged in discussions with the actuarial profession and we have no doubt that a sensible and practical definition of surpluses will be developed. But I do not by any means underestimate the difficulties in doing so.
My noble friend also felt that coverage of pension schemes might decline as a result of this Bill. Our proposals will make occupational schemes more attractive to members. In the light of the ever-increasing difficulties that some employers will have in finding employees over the coming years due to the so-called demographic time bomb, it
266
will certainly be in the interests of a great many employers to offer a good package in the form of a good occupational pension scheme to their employees. We believe that occupational schemes will continue to flourish and give their members an even better deal in the future.
The noble Baroness, Lady Turner, asked about a grant to OPAS. We have agreed with OPAS that we shall make it an immediate grant to cover its committed expenditure to the end of the year. That includes accommodation expenses, staff salaries, production of its annual report and other expenses. We are also seconding to it a senior executive officer from the department to act as the office manager and administrator. We are committed to the support of OPAS and will discuss with it arrangements for the longer term. The noble Baroness also felt that pensions should be fully indexed and not just indexed up to 5 per cent. We feel that requiring increases without a limit would place an open-ended commitment on schemes and would possibly deter the further development of schemes. However, as I have already said, I am sure that there are a great many schemes that already meet that target. Nevertheless we do not feel the time is right to impose such an open-ended commitment on all schemes.
Turning to the question of the noble Lord, Lord Stallard, on the Consumer Associations' concern about the pensions ombudsman, we have to ensure a balance between the interests of pension scheme members and of the schemes themselves. I believe that a general right to appeal against the ombudsman's decisions would not be in the interests of scheme members. Appeal to the courts would be more easily afforded by the schemes themselves than by their members. It might therefore impose an unfair bias against the members in favour of some of the schemes.
In winding up I wish to emphasise that the changes in this Bill represent only one chapter in our continuing development of the social security system. As I said in my opening remarks, next year—and I make no apologies to my noble kinsman Earl Russell for this—we shall spend over £1 billion each and every week on social security. That is a total of over £56 billion, which is more than one-third higher in real terms than expenditure in 1979.
To take that point a little further, social security help for the long-term sick and disabled has already increased by almost £4 billion in real terms since 1978-79. On current best estimates it is now projected to rise still further by the year 2001 to over £12 billion. As the Bill is largely concerned with disability benefits it is worth stressing that over the last 10 years we have doubled our expenditure on the long-term sick and disabled. Perhaps I may give just one example. Since 1979 the numbers receiving help with extra costs through mobility allowance has increased sixfold and through attendance allowance, threefold.
I emphasise again that the total package of measures for the disabled is not designed to save money; far from it. The total net effect by 1993-94, even allowing for savings, will be to add some £300

267
million to the total cost of benefits we pay to the disabled and their carers. As I said earlier, that is over and above the money that we shall pay on account of inflation and the money paid as a result of increased demand.
The Bill is part of our measured and deliberate strategy to prepare the social security system to meet the needs of the new decade. We are primed, ready to debate detailed provisions in Committee. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

The Arts Council
1.33 p.m.
Lord Rees-Mogg Lord Rees-Mogg rose to ask Her Majesty's Government what are their plans for the future of the Arts Council, and in particular whether they intend that it should continue to enjoy independence under its charter.
The noble Lord said: My Lords, I am very grateful for the opportunity to open this debate on the Question which stands in my name. I should like to take the opportunity to thank my noble friends Lord Goodman and Lord Gibson, who joined me in asking for this opportunity.
The Question which we are to discuss arises out of the Wilding Report and out of the statement made in another place by the Minister for the Arts on that report. The Wilding Report has been generally welcomed, although there are obviously points in it which are controversial. It is the Minister's statement, which may well not have been perfectly understood—and the Minister has expressed some anxiety about that—which has led to the difficulties to which we have to refer. It has also led to the resignation as Secretary General of the Arts Council of Mr. Luke Rittner, who has been a most distinguished secretary general of that body and has contributed very great services to the arts. The fact that he felt unable to operate what he believed to be the forthcoming system is a matter of considerable concern to all of us.
What is the difference between what Mr. Wilding—who was himself Head of the Office of Arts and Libraries until he retired—has proposed and what is taken to be the understanding of the Minister's position? Why has one been welcomed and why has the other caused concern?
Mr. Wilding recommended substantial devolution of arts companies from direct funding by the Arts Council to funding by the regional arts associations. However, he recommended that a group of companies, probably amounting in all to about 40 and including those companies which have national status—major companies including all the touring companies and, very significantly, innovative companies—should remain with direct funding by the Arts Council.
The Minister's letter to the Arts Council has been taken to mean something different. It has been taken to mean almost total devolution from the Arts Council to the regional arts associations. It certainly
268
sets up a Minister's steering committee, which will be chaired by the current head of the Office and Arts and Libraries—that is to say, by a civil servant responsible to the Minister—and will report to the Minister, and which is supposed to take the key decisions about devolution.
In broad terms, the Wilding proposal would amount to devolution of about 75 per cent. of the companies which are now directly funded by the Arts Council, but the other proposal, if indeed that is what is in the Minister's mind, would amount to devolution of about 95 per cent. In practical terms, the nub of the matter is whether there is supposed to be 75 per cent. devolution or 95 per cent. devolution.
It would certainly be my view that 75 per cent. devolution would leave an effective and strong Arts Council with genuine and sufficient knowledge of what is happening in the country. On the other hand, 95 per cent. devolution, leaving the Arts Council with only a strategic role plus oversight of the regional arts associations and of the five major national companies—the Royal Opera House, The South Bank and so on —would leave an Arts Council which was not sufficiently strong to be able to do the job it was left with.
Why should one prefer the Wilding Report to the further proposals which appear to be put on the back of it? The first point is the very ability and quality of the regional arts associations themselves. There is a tendency to look at such questions as drawings on a map, as though all the regional arts associations were identical, all equally capable of bearing the burden of responsibility. That is not so at all. Some of the regional arts associations are very good, well organised institutions. In general they have certainly been getting better. However, some of them have had very considerable and persistent problems. In particular, and this is a real difficulty, the largest of the regional arts associations —Greater London Arts—is also the one which has had the greatest problems.
Greater London Arts used to be a sister to the arts operation of the Greater London Council. That operation, under the guidance of my noble friend Lord Birkett, was a very good operation. However, since the Greater London Council was abolished, Greater London Arts has found it very difficult to find any secure base on the London boroughs and has gone through a succession of difficulties. It would be ironic if the administration which abolished the Greater London Council and the Inner London Education Authority were now to give great new responsibilities to the Greater London arts association, at least until it had proved itself far stronger than it yet has. The first point, therefore is that the regional arts associations are not all equally capable of taking on the responsibility.
However, there is also the question of cost. There is the basic, simple point that the Arts Council is a single insitution and 10 regional arts boards are proposed. On the face of it, to reach the same level of capacity to deal with clients, there will have to be 10 enhanced bureaucracies as against one at the present time. The overheads of the regional arts associations are already far higher than the overheads of the Arts Council. The last year for

269
which those figures are available is the year 1987-88. In that year the Arts Council had an overhead —an internal spend—of 4-·5 per cent. of its total expenditure. The regional arts associations in total had an overhead—an internal spend—of 18·5 per cent. of their total expenditure, so the overheads of the regional arts associations are no less than four times as high as the overheads of the Arts Council itself It is no wonder that the arts companies are worried. They think that money which goes through the regional arts associations to them will have an overhead deducted on the way and it is difficult to see that they will necessarily be wrong on that. I am afraid that, if the proposal for complete devolution were to be implemented the probability is that a good deal of money would be lost to the serious arts.
The third objection is that the Arts Council would be left as a shell. One suggestion is that it would have only 20 staff against the present staff of about 160. That staff would not have the range of experience and skill to undertake the tasks that would be left to the Arts Council. In my view, it would not be possible to persuade the experienced people in the arts who work for nothing for the council itself or its panels to continue their work. I cannot see what appeal there would be in joining a body which had been diminished to that point. Nor do I even think that it would have much to contribute where it retained responsibility. I do not see it as being able to be effective in imposing accountability on the proposed regional arts boards. I do not see it as being able to make much of a contribution to supervising the funding of the Royal Opera House and the other major national companies which would be left to it, so it would be destructive of the Arts Council.
There is a fourth objection; namely, that most of the arts companies do not want it. During my seven years as chairman of the Arts Council, I never had a single arts company which did not object to a proposal that it should be devolved from central to regional funding. Let us take the case of symphonic music. There are four major national symphony orchestras, all of which, if the proposal were to be put into full effect, would be devolved to Greater London Arts. I have not asked all of them, but I know that most of them view that prospect with considerable concern and dismay.
There are four regional symphony orchestras, all of which tour widely outside their own regions and none of which regards itself as purely local in character. One of them, the Birmingham Symphony Orchestra, under Simon Rattle, has been one of the great artistic successes of the 1980s. They include the Halle Orchestra which is an absolutely first-class orchestra. They would be put against their will into regional arts association funding, in which, I am bound to say, they seem to have inadequate confidence. It would not be right to conscript those great orchestras into a system against their will.
However, there is a broad principle with which this House is particularly concerned because it goes wider than the Arts Council. I am glad to see that the noble Lord, Lord Bonham-Carter, who has been very much concerned with this principle in another
270
area, will speak later in the debate. That principle is the so-called arm's length principle—the principle of the independence of the Arts Council.
Starting with the BBC, we have had a principle in this country that governments should keep out of the operation of broadcasting and the operation of the arts. In the case of the BBC, it is just as importnat that it should have its independence in respect of the creative art that it produces and shows as that it should have its independence in respect of its journalism. The two things go together.
The independence of the Arts Council is not something which should be regarded as a selfish benefit for the Arts Council itself It is the separation between the creative artist, the performing arts company and the government of the day which must be maintained. In this case, we have had the steering committee manned by the Minister's man and reporting to the Minister. What has the Arts Council itself, which has so far been pretty mild in its responses, said about that? It has said that it runs counter to the historical tradition of an arm's length policy.
If we could have them—and they would be of great benefit to the arts and would remove many anxieties—I should like three assurances. They would fit not too badly with the statement that the Minister for the Arts made in another place.
The first assurance would be that at every stage serious consideration will be given to the wishes of the arts companies themselves. By that that I mean the major arts companies. I do not say that every small arts company can have a permanent right to be funded directly from the centre whether or not that is a reasonable way to do it, but that the wishes of the major arts companies, as defined by Mr. Wilding, should be given the greatest possible weight.
The second assurance that I should like is that devolution will leave a strong and independent Arts Council. I am sure that, if one cuts too far, nothing useful will be left. The third assurance that I should like is that the Government remain as committed to the principle of the independence of the Arts Council as I believe the great majority of Members of this House are.
1.47 p.m.
Baroness Elliot of Harwood: My Lords, it is with some diffidence that I take part in the debate as I have had some experience of working with the arts and the Arts Council, but nothing compared with that of the noble Lords, Lord Rees-Mogg, or Lord Goodman.
My experiences have been provincial. I was chairman for a number of years of the Georgian Theatre in Richmond, Yorkshire. It was only a small theatre, but one of the oldest in the country. It was restored by my sister, Lady Crathorne, who raised the money to restore it. It has now been working successfully and happily for some 40 years in the Yorkshire region. I feel strongly in favour of the proposed devolution as we should never have been able to achieve that in Yorkshire unless there had been proposals to encourage local people, regions and enterprises. I would not at any point criticise or

271
make any comment about what the noble Lord, Lord Rees-Mogg has said about devolution. I can speak only from experience.
I am in favour of devolution to regions. It encourages local support and local interests and it can develop local enterprises. I have seen that happen. I have seen local theatres, picture galleries, orchestras and plays encouraged and developed by co-operation with the local authorities through the Arts Council. I hope that that will not in any way be reduced under the new scheme. I think that it should be increased. The Arts Council will remain the governing body but the regional councils will be free to organise whatever they believe that the public will enjoy.
As we all know, finance is the vital item. There will never be enough money for what those who love the arts want to have. On the other hand, we should congratulate the Arts Council on having managed to obtain an extra 24 per cent. this year to distribute. I know that is limited but it is a step in the right direction.
I understand that under the new proposals there will be 10 regions instead of 12. Provided that they cover well all the areas, that should not hamper the work. I am impressed and delighted that the director of the Scottish Arts Council, Mr. Mason, is to be the managing director of the new body. Scotland is honoured by that choice. I wish him well. He has a tremendous task to fulfil.
I also approve of the suggestion that the Scottish, Welsh and Northern Ireland arts councils should co-operate together. That would help lead to further developments. I have had some connection with the Crafts Council, and I was interested to learn that that council should remain independent. I am sure that that is right. I hope that as much support as possible will be given to that organisation.
The suggestion made by the noble Lord, Lord Rees-Mogg, about the British Film Institute and films is an interesting one. I hope that it will work. It is a good idea that the British Film Institute should co-operate with the Arts Council in greater use of films and videos which can be made available to individuals and groups. It could lead to good propaganda for the arts. It would spread the interest over a wider field and encourage people to attend plays, and hear orchestras and music in general.
In the development of national arts there are encouraging signs. A total of 2,500 British museums are open and 100 million people went to museums in 1989. That is an increase from a figure of 80 million in 1987. I understand that the new British Library building will be completed in 1990. It will have the greatest collection of books and will cost, as noble Lords will know, some £400 million. We owe that great enterprise to the noble Viscount, Lord Eccles, who planned the project and secured the money for it.
As I mentioned previously, money is always in demand. However, I was glad to read that grants from private bodies and private sources—business and so on—have increased enormously in recent years. They are the people who can truly help the great national organisations such as the Royal Opera
272
House, Covent Garden, the Royal Shakespeare Company, English National Opera, and the National Theatre. All those organisations are dependent on the Arts Council but they could also find enormous encouragement in grants coming from private sources. Grants have increased—not enough, as we all know —and public support has been encouraged.
Unfortunately, for all these things, like everything else in life, costs increase. It is very difficult to cover all that is needed for the future. These great institutions attract people from all over the world. I do not look upon that money as money that is just spent and given out; it is an investment. It means that thousands of people can come to this country for our arts, music and museums; they would not come if those facilities were not available. They bring a tremendous number of people to this country and that is very valuable for us.
We all support the Arts Council and wish it well in the reorganisation. Mr Luce is to be thanked and supported by us all. He is doing a splendid job. It is up to us to try to help in every way we can to make this work as successful as possible.
1.55 p.m.
Lord Jenkins of Putney: My Lords, we are all very glad to hear again from the noble Baroness, whose record of interest and support for the arts in this country is quite unrivalled. No doubt she will agree with me that the contribution that private investment can make to the arts must always be the icing on the cake. It cannot and is not intended to replace the fundamental role of the state. I am glad to note from the Minister's report (which is basically what we are discussing today) that he does not take the view anywhere in his statement that there is any considerable possibility of replacing the role of the state with private investment. The discussion is a different one.
There are those who see the changes proposed not as leading in themselves to the destruction of the Arts Council or to the disappearance of state support. Rather they see the situation as one from which at some later stage that might develop. In other words, it is a beginning and a step by which, gradually over a period of time, the role of the Arts Council would be whittled down and eventually we should find ourselves without the vital part which state support plays in the arts today.
My view is that that is not the case; or perhaps I should say not necessarily the case. Indeed, it could become the case. Almost anything that one does could become something else. It would be perfectly possible to whittle down the role of the state without abolishing the Arts Council. All that one has to do is starve the Arts Council. After all, for all its vaunted independence the Arts Council is the creature of the Government. All the people on the Arts Council are place men of the Government. The Government maintain in it a degree of independence because it is necessary that the Arts Council should be seen to be independent, even if it is not as independent as it seems. But if one wants to whittle down the role of the state any government can easily do so without going through the laborious procedure of decentralisation.

273
Noble Lords will be relieved to hear that I shall not make so long a speech as I had first thought I might have to make. The reason that I have been able tC' dispose of most of my speech is that I did not hear from the noble Lord, Lord Rees-Mogg, the broad attack on the whole proposition of devolution that I thought I might hear. The noble Lord shakes his head and is agreeing with me. In other words, he says—and I think I can join with him—"I am not against devolution as such. I am worried about the consequences of the proposal that the Minister has put before us". I can go along with that proposition. I cannot go along with the general proposition that devolution in itself is wrong and that the Arts Council must continue to be controlled centrally by the state. That would fundamentally be contrary to something in which I strongly believe.
Recently I looked again at Jennie Lee's first White Paper in 1966. Indeed, it is the only White Paper on the arts that has ever been prepared. It is perhaps high time that that lacuna is filled. I noticed that from the beginning the Minister was concerned that the tendency of the capital city to absorb the arts and, as it were, become the only seat of artistic excellence in the country should be fought against. So long ago at the very beginning, in the White Paper the importance of decentralisation was emphasised. It may have been because the then Minister saw that the action of the Arts Council, when it was first established immediately after the war, in getting rid of its regional offices was a mistake.
It was the first stage in a process of centralisation under which for many years the Arts Council became more centralised and "Londonised". That was not entirely the fault of the Arts Council. To some extent it was the inevitable consequence of London's growth and emergence as a capital city rather than simply one of a number of important cities as in pre-war years. At that stage the Minister was driving against such centralisation. One has constantly to do so because London is over-centralised.
I warmly welcome the Minister's decision to introduce the proposal of decentralisation of control and responsibility, although I recognise almost as clearly as the noble Lord, Lord Rees-Mogg—perhaps not quite so clearly because his experience in the matter is much more recent than mine—the dangers in the process of devolution. That nearly always sets the minds of people who have been closely involved in central activity against the proposition of devolution because generally speaking one devolves to people who are less efficient than oneself.
I refer to the dissolution of the British Empire, the disappearance of the British Commonwealth and the devolution of those areas to national governments. Some of the national governments were pretty disastrous, were they not? However, will anyone argue that because of that factor that event should not have happened and that we should have kept the Commonwealth centrally organised? That cannot be done. Devolution has come about. One has to ensure that it is done properly.
I have read the Minister's letter to Mr. Palumbo. I have read the speech. On the whole I believe that the Minister intends well. He deserves the praise
274
that he has received. To that extent, I join in it. However, dangers might arise from devolving the authority of the Arts Council upon a number of regional bodies of varying efficiency and experience. They might not be able to be relied upon in all cases to exercise the skill and integrity that has characterised the Arts Council as the state's main distributor of its patronage. Can the regional bodies resist not only the tendency but the strong temptation of politicians at a local level to impose their will upon regional bodies as successfully as the Arts Council has resisted the temptation nationally? Possibly not so. There is a danger that a local councillor, being close to the regional body, may seek to have a greater influence upon the activities in the arts at a local level rather than at national level.
The proposition of the arm's length principle must not be thrown away. I has to be strengthened. One has to ensure that is adopted at a regional level to the same extent or to an even greater extent than it exists at national level. The preservation of that principle has been responsible for the excellence of the British artistic scene since the war. It is vital that it is retained. Politicians must keep their fingers out of what happens on the stage and elsewhere.
As Arts Minister, I tried unsuccessfully to introduce an element of devolution some years ago. Among the proposals that I put forward was that the regional associations should be funded directly from the Ministry rather than through the Arts Council. It was a somewhat more drastic proposal than the relatively mild suggestions put forward by the present Minister. Whether the proposal was right or wrong, I received much less support from my Cabinet than Mr. Luce has from his for this proposal.
On the other hand, I never wished to lose the Arts Council. I believe that I am the only Arts Minister who has ever been a member of the Arts Council before becoming Arts Minister. I had the privilege and pleasure of serving under the chairmanship of the noble Lord, Lord Goodman. He and I have seen eye to eye on arts matters for a very long time. This afternoon there may be a difference between us on this point but I hope that it will prove only a difference of emphasis, such as may exist between the noble Lord, Lord Rees-Mogg, and myself, and not a total difference of view. It would be a disaster to open the door to the horror of direct government control of the arts. That is no more desirable than to open the door to government control of the media of communication.
I therefore hope that the noble Lord, Lord Rees-Mogg, will be reassured about the future of the Arts Council. The charter should be altered or replaced in order to admit the introduction of selected or nominated members of the council. I do not believe that the proposals should be opposed in principle. They should be submitted to Parliament, examined in detail, and amended where necessary with due regard to the interests of the staff of the council whose work has not always received the credit that it deserves.
I regret the decision of the secretary of the council to submit his resignation on this issue. There may be reasons behind that which are not apparent to us.

275
I cannot believe that his resignation was a result of the ministerial statement. As I understood it, the decision that he was going to resign had already been made prior to that—I am wrong about that. However, there must have been something else behind it.
It is also my view that the recommendations of the steering group should be the subject of parliamentary debate in government time in due course. I recommend doubters to read again Jennie Lee's White Paper in 1965, A Policy for the Arts. The emphasis on the importance of developing the regional associations is no less important today. Indeed, one might say that with a highly centralising Government in office it is even more important.
As regards the question of devolution and what must stay in order that the Arts Council remains a credible body, I do not know whether the answer is 90 per cent., which I agree is too small, or 75 per cent. It is a question which should be considered carefully because it is important that the Arts Council should still feel that it is doing a worthwhile job.
I see a difficulty arising in respect of personal assurances. The noble Lord, Lord Rees-Mogg, suggested that organisations should have the opportunity of opting out. It is natural that a single organisation which is asked to change its master should be doubtful about doing so. However, in making a change it might be difficult to allow one body to opt out while allowing another to remain. I am not sure therefore whether the suggestion is practical.
There is total agreement between us on the noble Lord's final point. No change that is made shall make a fundamental difference. The changes must not have the effect of reducing the total financial input to the arts from the state and its organisations; that is whether we mean the state nationally, regionally or locally. The total input to the arts must increase at a greater level because inflation in the arts rises faster than anywhere else. That is because the arts are heavily dependent upon labour and it is in the nature of things that labour costs rise quicker than others. In deciding to subsidise the arts one is climbing onto an escalator and there is no possibility of ever getting off. Everyone must reconcile themselves to that fact. If anyone considers that there is an opportunity of reducing the state input they are much mistaken and that must be resisted.
There must be no erosion of the principle of the arm's length of the state keeping its finger out of the pie. It is vital that that should be preserved, extended and made general throughout the whole arts scene.
2.10 p.m.
Lord Donaldson of Kingsbridge: My Lords, I can follow the noble Lord, Lord Jenkins, on a number of points, particularly on the arm's length principle which I am sure all noble Lords will be steady in supporting. Indeed, some of us believe that there are risks in the present arrangements but I shall deal with that matter later.
The noble Lord, Lord Jenkins, has always been much more devolutionist than I. I agree that the
276
Minister intends well and thank goodness he has not gone as far as the noble Lord wished some years ago. He will realise that that is a perfectly fair comment.
The main criticisms of the Minister's approach to the Wilding Report were put well and forcefully by the noble Lord, Lord Rees-Mog, and I have little more to add. However, the problem of funding the arts is not in deciding whether the money should go to London or to the regions. Anyone who takes any interest in the subject will be aware that there must be sufficient money for both. The problem is that there never has been sufficient because over the years the Arts Council has been so successful in stimulating demand from all classes in the regions that the need for more money steadily rises. There has never been enough money to do full justice all round.
It is natural that any regional organisation concerned with the arts should believe that it is neglected; and inevitably that is sometimes the case. It is a general problem in no way confined to the arts. Therefore it is not surprising that those in the regions tend to resent the central council, nor is that disturbing. However, I agree with the noble Lord, Lord Jenkins, that it is disturbing to see no sign of more cash thereby allowing both to flourish. There can be no priority between central and regional excellence; neither can flourish without the other.
One of the recommendations put forward by the Wilding Committee is to save £2 million as a result of reorganisation. In that connection two points arise. First, it is extremely doubtful that such savings can be made because the number of RAAs is being reduced only to 10 and not seven and much of the suggested saving was to come from that. However, Mr. Wilding said that the money saved should be used further to assist the arts. Does the Minister think that the Treasury would ever agree to earmarking the use of savings in that way? I am afraid that I do not.
While entirely agreeing with Wilding that local government associations must work very closely with the RAAs, which in general is the present position, the chance of getting any more money out of them is very remote after the Government's prolonged attack on their expenditure with rate capping, poll tax capping and so on. A reduction seems more probable than an increase from that source.
I find myself broadly in favour, as are the noble Lord, Lord Rees-Mogg, and the noble Baroness, Lady Elliot, with the Wilding suggestion of federation. However, that was based on a specific three-tier organisation hinted at by the noble Lord in his opening speech. The first tier is to be all the major institutions looked after by the Arts Council, and that includes local orchestras as the noble Lord pointed out. The second tier concerns decisions with the RAAs and the Arts Council about the most important matters in the regions' areas. The third tier involves the regions making their own decisions on all smaller issues. That is roughly what is recommended.
However, the Minister's policy—which seems to be a decision and not just a proposal—is to leave out the middle tier thereby leaving the Arts Council with no more to do than to allocate an agreed share

277
of the whole to the major institutions. That is emasculating the Arts Council to an extent which is certainly not acceptable to me nor indeed, as we all know with regret, to the council's very able secretary-general. All decisions as to details are to be left to a steering departmental committee. Therefore, we have only the most sketchy idea of what they will be.
I do not wish to be beastly to the Government but I have a feeling that I have been here before. It is certainly not a new situation in this House but is rather one which we have seen far too often over the past f'ew years. The Government think up a scheme almost invariably based on a perfectly reasonable desire to save money and they then force it through in the teeth of those best acquainted with the practical realities.
It is really an abuse of the English language to call the Tory party "Conservative". It has always claimed that the word means saving the best of the past in a changing world, which indeed it does. However, time after time we have been presented with ill thought-out schemes which ruthlessly disregard the damage which may be done as part of the reorganisation and by Bills which had to be written as they went along and by reorganisations which, even if they contained the possibility of improvement, invariably left the people on the ground with too little money to run matters properly.
On this side of the House we are becoming tired of constantly being told that our only solution to problems is to throw money at them. The Government's delusion is that reorganisation is good in itself and that matters will somehow be worked out with a bit of luck and the help of a departmental committee even without adequate funds to do so.
However, we agree that the arts is a subject beyond politics and my objection to the Minister's approach is not political but is against its ineffectiveness. I remind your Lordships what Keynes said at the founding of the first Arts Council which noble Lords of my age or order will remember was a post-war transformation of CEMA—the Council for the Encouragement of Music and the Arts. That was founded during the war by the Board of Education. Keynes' triumph was to arrange that it should be funded directly from the Treasury. He said:
"I do not believe it is yet realised what an important thing has happened. State patronage of the arts has crept in. It has happened in a very English and informal way—half-baked if you like … At last the public Exchequer has recognised the support and encouragement of the civilising arts of life as a part of their duty".
I believe that the Arts Council has now reached the stage where that idea of Keynes could be further developed throughout the whole country. If the Wilding suggestion of federation is accepted in its entirety, that will be a proper and effective development. But let us have no more half thought-out schemes which are left to a departmental committee to work out.
The second half of the noble Lord's Question is of the greatest importance and everybody has spoken of it. The Arts Council must continue to enjoy independence under its charter, but the work of the proposed committee reporting to the Minister must
278
be scrutinised in a hostile rather than a friendly way. The arm's length principle is fundamental to the council's success. My noble friend Lord Bonham-Carter will deal more fully with that argument later.
I hope that the Minister can persuade his right honourable friend to read the report of this debate very carefully and allow himself to be influenced by the doubts and criticisms so widely held and stated here.
2.20 p.m.
Lord Goodman: My Lords, may I at the outset say how grateful I am to the noble Lord, Lord Rees-Mogg, for suggesting that this discussion should take place? It is a discussion of considerable importance and the fact that our Benches are not full of people avid to discuss it is a disappointment. Many years ago when I was chairman of the Arts Council one of my few principles was that an essential freedom of any Englishman was freedom from culture. If I may say so, that is sometimes unhappily reflected in the composition of our Chamber.
The only other person to whom I wish to convey thanks is the noble Baroness, Lady Elliot of Harwood. She made a remarkable speech, although I do not entirely agree with her emphasis on the local interest in regional associations. If one examines that point, the local public are not interested in the association; they are interested in individual institutions. In Manchester they are interested in Halle; in Stratford-upon-Avon they are interested in the Shakespeare theatre. Very few people even know what the constitution of their arts council is, and I do not believe that making this change will encourage support for the arts. In some ways it might discourage support for the arts, but that is a question which requires rather longer discussion than we have time for this afternoon.
I should like, in the few minutes available, to convey to the House the exceptional reputation which the Arts Council has enjoyed, not merely in this country, despite the constant criticism which, needless to say, comes from dissatisfied applicants who have either had their grant application refused or inadequately supplied, or from people who do not like the arts at all. I am sorry to say that one finds an element of that kind in every party. It is not a situation where any chairman of the Arts Council could say that it was easier to do business with a Conservative council rather than a Labour council. My experience was that on the whole it was slightly more difficult to deal with Labour councils.
Whatever the justice of that situation there is not the slightest doubt that the one hallowed principle that needs to be maintained is the so-called arm's length principle. I am disappointed that the previous speeches treated the infringement of that principle with such gentleness. It is the most flagrant and brutal infringement of the arm's length principle that we have encountered on the basis of a report from one civil servant. I know nothing about the gentleman, but I am sure he is highly competent. That report was confirmed by one Minister, who is relatively inexperienced but a very nice man. The fact remains, however, that on the basis of those two

279
opinions it is proposed to invade a principle which is regarded with admiration and almost hallowed both in this country and in other parts of the world.
I should like to recommend to the House a symposium that was published by Encyclopedia Britannica Inc. in 1977. The symposium represented the views of art experts and practitioners in five countries. Perhaps I may be permitted to incorporate in my speech one or two observations made about England in the publication. They would be useful for the Government and the House to consider. One section is headed "Great Britain: patronage and passivity". I shall not read the whole of it because it is much too long but I give two extracts. I should point out that this was written and published abroad. The writer refers to the creation of an arts council and states:
"The new agency was to be the principal vehicle for distribution of official support for the arts; at the same time, elaborate measures were taken to ensure its formal independence. The council is composed of private citizens who are appointed by the government but who have complete authority for setting policy and for distributing the funds it receives. The politicians leave the council free to spend as it thinks fit. Parliament provides the funds but does not lay down purposes or priorities for which they must be spent".
That is directly at variance with the suggestion that there should be a steering committee answerable to Parliament. If anyone cares to write to me I shall be happy to secure a copy of this publication for them because it is basic reading for anyone concerned with the administration of the arts in this country. I quote one more passage which I hope will sink in:
"Whatever the particular contours of Arts Council policy, British cultural life in many fields has flourished during the period of its existence. London has regained its position as a world center of drama, music, opera and dance. Its actors, actresses and directors have given it a leading position on the international stage. The country has made a remarkable record in finding new playwrights and choreographers. For the first time since Purcell, Britain has produced composers who have attracted international admiration. The least that can be said for the government's aid to the arts, therefore, is that it has avoided the danger of official stultification".
All I wish to say about that is that anyone reading that on the morning when the Minister's letter appeared would be in a state of total bewilderment. One would find it difficult to believe that this was the view of the Arts Council taken by informed experts in another country and contrasting with a view of an Arts Council which is on the verge of total destruction. If I may say so, if this policy is put into effect one would have great difficulty in finding an insurance company to issue a policy for the survival of the Arts Council.
My noble friend Lord Rees-Mogg put forward a proposal for compromise. I support that proposal only in the sense that it is better to have something than nothing. The Government should think again about pursuing this policy in the way that they have. One has an unhappy feeling that people organising this policy know very little about the Arts Council. They do not appear to know anything about its diverse functions that have nothing to do with money. On my journey here this morning I prepared a short list of those activities. I am sure it would astonish the Minister to learn of them. For example, the Arts Council advises the Government on copyright situations. It advises the Treasury. I took
280
two deputations to the Treasury in regard to income tax on authors, which is of crucial concern to the Arts Council. The Arts Council has a committee on and has published an elaborate book on matters of censorship. It has established the new activities committee. It has been prominent in establishing and lobbying for public lending rights. Who will do all that if we have 10 regions with responsibility divided between them? It is an absurdity.
I have an unhappy feeling that whoever devised this plan knew nothing whatever about these extra-mural activities which have been carried out so industriously and quietly by the Arts Council over the years. It would be a very great pity if the Arts Council were deprived of the capacity to do these things because of a governmental review.
I could continue for a very long time but I know that we are all anxious to return to our country homes and so, in mercy, I conclude by saying that my hope is that the debate will draw the attention of those in charge of these matters to the fact that there are a great many imperfections in what is proposed which need to be rectified.
2.30 p.m.
Lord Sainsbury of Preston Candover: My Lords, I too am grateful to the noble Lord, Lord Rees-Mogg, for opening this debate and I agree with a very large part of what he said. Among other things he spoke about his fear of increasing bureaucracy. Any of us who have had to deal with the Arts Council or with arts management share that fear of bureaucracy. About 10 years ago I was invited by the Arts Council to join a working party under the chairmanship of the noble Lord, Lord Hutchinson. There were four of us who were invited to look into the structure and management of the Arts Council.
As a member of that working party, I was amazed at the amount of detailed work that went on in the Arts Council and at its extraordinarily clumsy, awkward and difficult structure. I counted no less than 45 committees in the Arts Council at that time, about half of which appeared to report to the Arts Council itself The load of paper, the load of work, the amount of talk and the little decision taking of the 45 committees surprised me greatly.
Much has changed since then. I believe that many of the recommendations of our small working party were adopted. I am perfectly certain that the number of committees and the efficiency of the Arts Council, in terms of its bureaucracy and decision-taking process, is greatly improved. However, recent experience with something which is rather ironically called "incentive funding", which is to be a reward for enterprise, was handled, regretfully, in a most bureaucratic, unimaginative and unenterprising manner. When an Arts Council has such a broad spread of responsibilities and such a vast variation between the largest and smallest of its clients, it is very difficult to give the attention which that very early Keynesian Arts Council was able to give to all its clients. It tried hard, as did its dedicated Secretary-General and his staff. I very much regret that they have resigned.
In principle I share the view of the noble Lord, Lord Rees-Mogg, that there should be devolution. I

281
believe that his figures are much more likely to be right than perhaps the implication that the figure should be 95 per cent. I read what was said in another place. I read that the associations will be responsible "for most clients". When I came to read the Minister's letter the emphasis seemed to be very different. He said in that letter:
"I believe that in principle all regionally based organisations should become the day to day responsibility of the regional arts boards'.
As someone who is innocent of the ways of ministerial decisions, there seems to be a very marked contrast of emphasis between what was said in another place and what was said in the letter written to the Arts Council. What should govern the question of who is a client of the Arts Council as opposed to a regional board should be the decision of the Arts Council and not of the Minister. I do not think it should be a question of what the client would like; it should be a question of where the Arts Council, taking into account that much of its work should be devolved, thinks it can bring special expertise to a decision. There are the kinds of examples which the noble Lord, Lord Rees-Mogg, gave and I agree with them.
There is another point which has not been mentioned yet. As I understand it, the right of the Arts (Council to nominate members to the regional boards—I believe that it does so now to the extent of two in each association —is being ended. That is very sad. The Arts Council is very well placed to suggest members of regional boards. I urge the Minister to reconsider that decision. In the end the way in which the Arts Council works so greatly depends upon the money that the Government give it.
As a client —I declare an interest as chairman of the Royal Opera House—I find it easier that the principle of arm's length is upheld and there is enough money to go around. When there is not enough money to go around I would consider it most important to complain not only to the chairman of the Arts Council but also to his paymaster, the Minister.
For a structure to work well it must be properly funded. I have to give the House the example of how badly it has worked lately. The Priestley Report was a thorough and lengthy assessment of the needs of the Royal Opera House and the Royal Shakespeare Company. The year after the report had been accepted by the Government and funds had been voted in acordance with its recommendations the report was forgotten. To all intents and purposes it was forgotten by the Arts Council. The formula that it suggested was ignored. As a result, in the five years that followed, the grant to the Royal Opera House was reduced in real terms every year. By last year we had experienced a 15 per cent. reduction in grant in real terms.
We have been told of the marvellous recent Vote that the Minister has been able to achieve for the arts. We received an increase in grant of about 11 per cent. In the current year it is substantially more than inflation. But last year's very small grant of 1·7 per cent., taken with 11 per cent. in the current year, makes a total of 12·7 per cent. That still represents a
282
reduction over that two-year period of 3 per cent. in real terms.
We are commissioning an independent survey of opera houses throughout Europe. I shall not be surprised if it shows that the Royal Opera House is the most underfunded major opera house in the whole of Europe. If the Minister is going for a new structure he should so arrange funds that it is possible that the major institutions of this country are funded adequately. The very worthy wish of the Arts Council through its policy the Glory of the Garden, which turned out to be a disaster at Covent Garden, to obtain more funds for the regions should not be at the price of the major art institutions in the centre. They serve the nation as a whole and not just those who go to the actual performances. Private funding cannot bridge the gap. We have increased enormously our private sponsorship, by 60 per cent. in two years, but we still have a huge gap which is conservatively estimated at £2 million this year against what the objective Priestley Report would have suggested.
I support devolution. I hope that as a result a better balance is kept between the great and largest institutions and the important mass of institutions around the country. I hope that we do not get more bureaucracy through spreading the load to the different regions. Being smaller they should be carefully controlled to avoid any increase in bureaucracy.
2.39 p.m.
Lord Annan: My Lords, I wish that I could be as sanguine as the noble Lord, Lord Goodman, that the Government will listen to what is being said in this debate. The almost unanimous approval in another place when the Minister made his statement gives me great grounds for fearing that whatever is said here will not cut much ice. Of course we know why there was such unanimous approval. Every Member of another place representing a constituency naturally supports a set-up which he thinks will reward the interests of his constituents.
I myself think that the Government's policy follows almost inexorably from the famous publication of the noble Lord, Lord Rees-Mogg, The Glory of the Garden. We should also remember that it is 50 years since Maynard Keynes set up CEMA, which was the forerunner of the Arts Council. During that time enthusiasm for the arts has spread over the whole country and it is natural therefore that there should be some devolution to regions. The sheer number of candidates clamouring for funds means that it must really be beyond the capacity of one body sitting in London, however dedicated, lively and contentious its committees may be, to judge between different claimants.
How big is this devolution to be? There the point made by the noble Lord, Lord Rees-Mogg, is fundamental to this debate. Is it to be 75 per cent. or 95 per cent? And, for example, what is to happen to that superb orchestra in Brimingham under the leadership of Simon Rattle? Is it to be considered a national orchestra or merely a provincial orchestra?
However, let us be under no delusion: under present proposals this is the end of an era. Keynes'

283
vision was never realised until the noble Lord, Lord Goodman, became chairman of the Arts Council, and that was a singularly glorious chapter in its history. From now on, the Arts Council is going to be like the old University Grants Committee; and how odd it is that the Government, having abolished that committee, now create a body that is in almost exactly the same relationship with these regional arts boards as the University Grants Committee was with the universities—but with a difference. No single vice-chancellor ever sat on the University Grants Committee, whereas here it is proposed that five out of the 10 regional arts boards should have direct representation on this award-giving body. That really seems to me, organisationally, to be mad. Either you have none or you have the lot. Of course I am in favour of none because I think that anyone who is chairman of a regional arts board is bound to want to paddle his own canoe and to take biased decisions.
May I issue a warning here? It follows immediately from what the noble Lord, Lord Sainsbury, said a moment ago. Unlike West Germany and Italy, where no single city is the cultural capital of those countries, in both France and in Britain the capital city is also the cultural capital. Tourists come to London to see the theatre and hear opera and concerts; and it is London that sets the artistic standards for the rest of the country. If those standards decline, Britain will be elbowed out of what might be called the cultural contest. What is worse, the whole country's standards will fall.
I am lost in admiration for the vitality of Glasgow's cultural life when I go there. I remember very well touring in the 1950s the provinces with the committee set up by the Gulbenkian Foundation under Lord Bridges to support the arts. I remember how struck I was with the determination of Newcastle to extricate itself from virtual cultural bankruptcy; and it has done so, of course. However, the success of the arts in the regions depends on London. The Welsh National Opera is a marvellous company and it has had the good sense to employ the dazzling German producer, Peter Stein. However, Cardiff will never be a rival to Milan's La Scala. So let us remember that London needs the subvention because the whole of the cultural life of the rest of the country depends on it to some extent.
I hope that when he comes to reply the noble Lord will tell us a little more about what is called the strategic role of the Arts Council. I do not quite follow the noble Lord, Lord Goodman, in thinking that the Arts Council will disappear. As I understand it, it will certainly remain but it will be given a strategic role. That is a fine phrase, but what the devil does it mean? I remember when the noble Lord, Lord Gibson, was chairman of the Arts Council. I once asked him at a meeting whether the council regarded itself as responsible for rationalising artistic activities. He replied that in his view part of the council's role was, if it could, to drop pennies into the hats which clients held out. Has there been a change of policy? That is the point to which I should like the noble Lord to address himself.
In the view of some good judges, there are too many orchestras in London and musical standards
284
have suffered as a result. I used to hold the view that there was at least one too many ballet companies in the country supported by the council. Is the council now intended to review the role of the major companies—the Royal Shakespeare Company no less than the orchestras?
May we also hear a little more about the so-called strengthening of accountability? The Minister referred to forward planning and budgeting by the regional boards. Does that mean, for instance, that a regional board will require a theatre to submit budgets for all future productions in that theatre? That great impresario at H. M. Tennent, Mr. Hugh Beaumont, was an old friend of mine. He once told me that he was astonished at the laxity of control in our great state opera and theatrical companies. He could put on "My Fair Lady" and keep it within budget only by exercising the most rigid personal control. He had to ensure that none of his leading ladies could declare that the costume or hat she has to wear in Act III should be disposed of and another garment or headgear more suitable to her taste be substituted for it. If he could keep those people in control, why can companies financed by the Arts Council not do the same?
Of course imperious renowned producers of international reputation may refuse to come to this country to produce operas or plays unless they are given carte blanche. But there are ways of meeting their demands without giving way on the point of principle that budgets for productions must not be decorous garlands but should be regarded as fetters that can only be struck off in exceptional circumstances.
Lastly, I am bound to say that I regard with Stygian gloom the Minister's enthusiasm for substantial representation on regional boards by local councillors. As the noble Lord, Lord Alexander of Potterhill, often says when we discuss education in schools, the politicisation of education in the 1950s was a disaster. I predict that we shall see an increasing politicisation of the arts by local councillors when they set their minds to it.
Do noble Lords remember the noble Lord, Lord Boyd-Carpenter, reassuring the House in the most dulcet tones that the infamous queer-bashing Clause 20 in the Local Government Act, which was inspired by the very proper desire to stop the circulation of books in schools advocating homosexuality, would never be used to censor works of art? However, last year Kent County Council, with immense self-righteousness, managed to stop its schools from seeing a production of Benjamin Britten's "Death in Venice". Does the noble Lord regard that as a splendid achievement in the promotion of the arts?
It is not clear who will appoint members to the regional boards. Can the noble Lord tell us whether it is to be the Minister himself, and whether anyone will advise him on that matter? Noble Lords have been trying to put the view to the Government that no one really expects the Minister himself to begin to interfere personally in the grant to this organisation or that company, but they are worried that in some subtle way the membership of these boards, and perhaps of the Arts Council itself, will tend to be drawn not necessarily from a political

285
party but from people who hold similar views to that party. I should like some reassurance that there will be a diversity of views on the boards. That is all I have to say and I apologise for having detained the House so long.
2.51 p.m.
Lord Birkett: My Lords, I can happily be brief as so much has been said so eloquently already. I, too, am grateful to the noble Lord, Lord Rees-Mogg, for introducing this debate. He asked for reassurance from the Government on three points but the debate has brought up two vastly important points of principle. One concerns independence and the other concerns the degree of devolution in this matter. Everyone seems to welcome devolution, and indeed it looks reactionary and undemocratic not to do so. However, the exact degree of it depends, as the noble Lord, Lord Rees-Mogg, pointed out at the beginning of this debate, entirely on the quality of to whom one hands over. The noble Lord, Lord Jenkins of Putney, was brave enough to point out that it is often the case that devolution involves handing over responsibility from a reasonably efficient body to a series of inefficient bodies. At any rate that has been known to happen. Of the two principles I have referred to, obviously independence is by far the most important and any erosion of that principle would be by far the most dangerous.
I do not regard the matter with quite the same view as the noble Lord, Lord Goodman, who was severe in his condemnation of the Minister's Statement because he thought it eroded the principle of independence. I may be naive in my thinking and I may have mistaken the intention of the Minister's Statement, but it seems to me that the steering committee that was referred to in the Minister's Statement in another place is a steering committee which is designed to make the working nuts and bolts of this devolution come together.
The arm's length principle is surely designed to prevent governments from influencing the arts and, above all, from influencing the content of them, lest any interfering or domineering government should be tempted to start down the path which decades later could end in the kind of censorship that we have seen under totalitarian governments. We may think that is unlikely in this country, God willing, but it is the start of a path which should never be followed. It seems to me that that is what the arm's length principle enshrines and what it defends.
If I understand the matter correctly, I do not think that principle is endangered by the steering committee. However, the minute the steering committee starts to determine in what way the newly organised regional arts boards should spend their money and upon what clients and in which particular cultural climate and temperature they should operate, I shall share every moment of the alarm of the noble Lord, Lord Goodman. However, at the moment I do not share that alarm. I am more inclined to share the alarm of the noble Lord, Lord Annan, about the presence of local councillors. I cannot join the noble Lord in Stygian gloom, but I am prepared to stand beside him in a light shadow on the matter.
286
In my experience politics is as rife in local government as it is in central government. It can be as dangerous. Above all, it is twice as changeable if that is possible. Therefore I am enormously relieved to see embodied in the Minister's statement an absolute embargo on local councillors of any political complexion being in the majority on the local arts board. I am dismayed to find that they may nevertheless be its chairman. Although there are many exceedingly bright and wise local councillors, for a local councillor belonging as he invariably will to one political party or the other to be the chairman of a board seems to me to be dangerous. I am surprised that the Minister turned his face against the suggestion that they should be banned from the boards.
It seems rather churlish to say such a thing in view of the many bright and intelligent councillors I know, but I believe that the principle is probably wrong. I urge the Minister to make sure that the local arts boards do not take on the political complexion that the noble Lord, Lord Annan, so graphically feared. If they did so I believe that they should be reformed and their constitution changed forthwith.
On the question of the extent of devolution, I share the view of the noble Lord, Lord Rees-Mogg, regarding the equation; namely, that 75 per cent. might be tolerable but 95 per cent. would be a mistake. I say that for two reasons one of which is the capability of the regional boards to cope. It is a cliche that the Arts Council is a remote and central temple of mandarins incapable of understanding small local needs and that local arts authorities —the regional arts associations that we have at the moment —are incapable of understanding anything else and are composed entirely of reactionary community arts people bent upon saw-toothed local drama and little else. Those two cliches foolish though they are, are very widely accepted in my experience. Simply because they have been accepted there is a certain edge of truth. The two animals are different. The central Arts Council and the regional arts associations comprise different kinds of people.
In view of the extent of devolution which is contemplated—even if it is 75 per cent.—the new regional arts boards must be capable of understanding national needs. It is a difficult point to argue. The noble Lord, Lord Rees-Mogg, and others have mentioned the orchestras, particularly our much admired Birmingham orchestra. There are other instances—Opera North, in London the Royal Court, the Whitechapel Art Gallery and Sadler's Wells. All of those are at once local and national. Whichever way one cares to place one's argument one can use those instances. They can be local if one's argument is local and they can be strategic if one's argument is strategic. However, I suggest that with such a degree of devolution any regional arts board must be capable of assessing the wide, general and even national needs of such bodies as well as the purely local needs which it has already experienced. Unless that happens we shall find ourselves with no Arts Council and no substitute for it either. If the regional arts boards are to become merely the Arts Council sliced up neatly and apportioned, wisdom and all, around the country there would be not so much alarm.

287
Therefore I tend to share the view of the noble Lord, Lord Rees-Mogg, that about 75 per cent. devolution would be about right. I also share the confusion which the noble Lord, Lord Sainsbury, expressed between the Minister's statement and his letter. The statement refers to "some organisations" while the letter refers to "almost all".
I believe that the notion of the 40 or so additional organisations—even if it means the tier system that the Minister said that he had rejected—would represent a good balance, and I believe that he should reconsider. I sense that most noble Lords in this House share that view. Devolution is to be welcomed with all the reservations that we have about freedom and about the remaining clients of the Arts Council.
3 p.m.
Lord Gibson: My Lords, perhaps I may be allowed to say that I think we have made up in quality for what we have lacked in numbers of audience. Almost everyone has spoken of the importance of the arm's length principle and almost everyone, if not everyone, has spoken in favour of the principle of devolution.
Let me begin by saying that I am totally ranged on the side of devolution for every reason, including that which has not perhaps been mentioned; namely, the enormous size to which the Arts Council has grown. I was Chairman of the Arts Council, a post which I left 13 years ago. One cannot handle sensibly and without a frightening bureaucracy the amount which the Arts Council now handles without devolving, so there is no choice in the matter; there must be devolution. The question is one of degree.
When I retired from the Arts Council, I had the privilege of following the late Lord Clark as the president of the South-East Arts Association —one of the regional arts associations—until I retired from that post last year. I watched with great admiration as it grew under its excellent committee. It has a first-class arts administrator whom it recruited from the Arts Council and it does excellent work all over the South East.
It is obvious that, as time passes and as such associations grow and become more qualified to take over the funding in the regions, the Arts Council must devolve more and more of its work to them, as it has done. There is not much disagreement about that.
As has been mentioned by a number of noble Lords, the questions that should be asked are what the Arts Council should retain and why it is necessary for the independence of the council that it should retain direct funding of anything in the regions. Those questions should first be considered from the point of view not of those who fund the arts, but of the artists themselves and those who run the orchestras, theatres, opera companies, picture galleries and so forth in the regions. It is they who produce the arts and it is what works for them that matters most, not what seems tidiest and politically easiest for those who provide the subsidies.
I have no doubt that it will work best if major regional theatres, orchestras and so on retain a direct link with the Arts Council in London. The regional arts boards, as they are to be called, are fine, but the
288
link with a national body able to make comparisons with what is going on all over the country and, through its international links, all over the world, is essential for the major arts companies.
Furthermore, when the Arts Council directly funds a major regional company, it is able to counterbalance through its national position the influence of local politics to which the noble Lord, Lord Birkett, and other noble Lords referred. That inevitably follows the presence on regional boards of local politicians representing local authorities' funds. Local councillors are often on the boards of the regional arts companies, and why not? It does not fill me with Stygian gloom, provided that the Arts Council is there to counterbalance it. One cannot expect to get the money out of local authorities and not have them represented on the boards. I hope that the Minister will accept the Wilding recommendation that, for the reasons given by the noble Lord, Lord Birkett, councillors should not be chairmen. They will certainly be there, but they must be counterbalanced. A national body is best able to achieve that end.
Above all, what is so important to the major arts companies is the direct link with the officers of the national arts council—officers whose standing and experience will hardly be repeatable in each of the 10 boards which it is proposed should take over the Arts Council's responsibilities. So, from the standpoint of those who run the major arts companies in the regions, that direct link is a very important source of support. I know that they themseves believe it to be so. For instance, I know that the chairman of the Arts Council has had many requests from such companies in recent weeks that that direct link be maintained.
Last week I took the chair at an address given by Mr. Palumbo at the Royal Society of Arts on his first year's work as chairman of the Arts Council. It was a very good address. The place was packed. There was an audience overflow downstairs. His address was followed by an hour's questioning, which he handled with great knowledge and skill. But it was Sir Ian Hunter, possibly the most experienced administrator of arts festivals in the country, who stressed at that meeting the important part which he considered the direct participation of the Arts Council to have played in the success of the festivals which he organised.
That is why I feel that the Minister's Statement that the big regional companies are—to quote his words—"essentially a regional resource", though perfectly true, misses the point.
So much for the point of view of the regional arts companies. From the Arts Council's own point of view the direct link is also very important. The Minister claimed that, after these proposed changes, the Arts Council would still be in what he called "the driving seat". That is a much more theoretical than real statement. It is rather like what the noble Lord, Lord Annan, said—what does "the strategic role" mean? It does not mean just dropping pennies into hats —which the noble Lord, Lord Annan, said was how I described the Arts Council's role in my early days—although of course that is part of it. But we have been told that it is the regions' accountability

289
to the Arts Council which will keep the council in the driving seat and that the power to increase or diminish the regional grants will give it the authority that it needs. Authority, yes; but knowledge, no. It will be much too remote from what is going on.
The power to grant money to or withhold it from an organisation which itself then decides how to allocate that money does not lead to a real understanding of the problems of the ultimate recipients, nor to the power to influence the solution of those problems. In practice all that the Arts Council will have, if these proposals are followed, is a power of veto. That is not the best foundation for a constructive relationship.
The role of the Arts Council will be restricted to a broad assessment of the quality of the arts in the regions—an assessment of results without any close contact with the processes that have produced them. I fear also that a region which feels that it has a grievance that it has suffered perhaps in comparison with another region may be tempted to appeal to the Minister. If he agrees to intervene—which I hope that he would not, but some ministers may be tempted to do so—that would put him right in the middle of questions that he ought not to be asked to resolve, because then the arm's length principle would finally have been destroyed. Incidentally—and this has been referred to certainly by one: noble Lord and perhaps by more—I was more than a little dismayed to note in the Statement that, in finally determining what was to be devolved, the Minister would have to be satisfied that the excellence of what was to be devolved would be maintained or enhanced.
Why do we have an Arts Council if that judgment is to be made by the Minister? Why cannot he trust the Arts Council to carry out his plans—it has given him considerable support—without appointing a steering group headed by the no doubt admirable director of the Scottish Arts Council, instead of leaving it to the Arts Council to do? I find that that is a most extraordinary move. I must say that, if I were the chairman or indeed the secretary-general of the Arts Council, and had that imposed upon me, I should not stay. That alone would be sufficient to cause me to walk out. I believe that a most extraordinary misunderstanding of the position must have led to this proposition, whatever the merits or demerits of the remainder of what is proposed.
However, the most important point still remains; namely, that the major arts organisations need the direct link with the Arts Council for the reasons that I have given; and, conversely, the Arts Council needs the direct contact with them. Only a direct funding role can secure that. If the Arts Council does not play that role, its usefulness will be seriously curtailed and it will gradually be found quite easy to dispense with it.
Mr. Wilding, whose report the Minister largely rejected, clearly understood that position very well. He was a thoroughly experienced and intelligent observer. He talked to every conceivable interest before making his recommendations. He devised the
290
three-tier system to which the noble Lord, Lord Donaldson, referred. In my view that would largely have overcome the difficulties. The Minister dismissed that recommendation as confusing and liable to lead to confusion, in particular with regard to the middle tier. It is true that in an ideal world such proposals would not have been necessary and would have been ridiculously confusing. But we do not have an ideal world. Those recommendations recognised the facts as they are and attempted to reconcile them. It is a great pity that Mr. Wilding was not heeded.
However, I understand the Minister's difficulty. I do not think that it is reasonable to blame him, or that it is not his duty to examine and call for a review of the structure of arts funding. That does not mean that he wishes to become involved in what money should go to whom. The structure of the funding is his business.
There is no perfect solution to these problems. In every nationwide organisation, whether in business, in the public service, or in any large-scale administration the same problem always occurs. What is the right relationship between the centre and the periphery? No one is ever quite satisfied with the answers and the search for them is permanent; it goes on forever. If one devolves too much, one eviscerates the centre and there is no common goal. If one over-centralises, bureaucracy prevails and morale at the periphery disappears. It is a difficult problem. I agree that Mr. Wilding's solution left certain unsatisfactory aspects unresolved. But at least he understood the danger of leaving the Arts Council—which is the successful embodiment of the arm's length principle —with too little to do. It is that which makes me fear for the future independence of the council.
I do not believe that the proposals represent some 'sinister intention to breach the arm's length principle. However, I believe that such a breach would in time have that effect unless we can build on three very important words in the Minister's Statement. I beg the Minister to consider this. He said that the Arts Council's direct funding should be restricted to the four national companies, the South Bank, education, touring, one or two other aspects, and "some other organisations". I urge that those three words be built upon to preserve the direct link between the council and the 40 major arts organisations in the regions. There seems to be some agreement, and it was certainly Mr. Wilding's view, that there would be some 40 major arts organisations in the regions. I take it that that is the 75 per cent. figure to which reference has been made, although I have not worked it out. There would then be some chance of retaining effective contact with the arts over the country as a whole and thus of retaining the services of the council's experienced officers—certainly its most valuable asset and one which it may otherwise lose. If that is not done, the Arts Council is in danger of becoming a mere talking shop and, sooner or later, a talking shop about the arts will be dispensed with.
3.14 p.m.
Lord Bonham-Carter: My Lords, I am happy to follow the noble Lord, Lord Gibson, in this

291
interesting and important discussion. He is the third former chairman of the Arts Council to participate in the debate. I wondered in the course of the debate whether any of those three former chairmen of the Arts Council were consulted by the Minister before he made his Statement or before he issued his letter. I find it difficult to believe that he consulted them because, had he done so and had he paid any attention to what they had said, the form of the Statement and of the letter would have been very different.
I join other noble Lords in thanking the noble Lord, Lord Rees-Mogg, for introducing the debate so powerfully and for providing the House with an opportunity to discuss an extremely important matter. In one way or another all noble Lords have referred to the arm's length principle, to which I shall return.
I agree with the emphasis placed by the noble Baroness, Lady Elliot, on the economic benefits gained from the arts by the country as a whole. I also agree with the analysis given by the noble Lord, Lord Sainsbury, of the way in which funding has been delivered to the institutions. I hope that the Minister heard and understood those comments and that he will not tell the House once more that during the next three years funds will be increased by 22 per cent., which is an act of great generosity. Having regard to the inflation from which we are now suffering, it is nothing of the kind. As all noble Lords have said, the most important aspect in dealing with the arts is the funding that they receive.
The issue raised by the noble Lord, Lord Rees-Mogg, is a matter of principle and practice in connection with the arm's length relationship. I have always had doubts about the wisdom of appointing a Minister for the Arts, although I am sure that, the noble Lord, Lord Goodman, would disagree. I believe that there are few topics on which politicians are less qualified to pronounce. It is an area in which their direct intervention is almost always destructive. Of course if you are a Minister for the Arts you feel bound to do something and to say even more.
Hence the importance of the Arts Council. It acts as a kind of buffer between the Minister and the Government —between their words and deeds —and the activity of artists, who need government money but who cannot afford to be directed by them.
The classic quango is the BBC. As the noble Lord, Lord Rees-Mogg, said, unless it is seen to be independent, it loses all its authority. Another classic quango is the Arts Council, which cannot do its job unless it is independent. The independent centre of power—that is to say, independent of government—is an important element in the unwritten constitution of this country. I regret to say it is an element for which this Government have shown little understanding and scant respect. They have made too many political appointments and indulged in too much bullying.
I respect the efforts made by Mr. Luce on behalf of the arts. However, he should not be surprised if his Statement and his letter to Mr. Peter Palumbo are examined with a degree of scepticism. I agree
292
with other noble Lords that the two are not synchronised; there are substantial differences of emphasis between one and the other. At times it appears as though two different voices are speaking, or that it is one voice in very different tones: first, for example, in respect of the relationship between the Office of Arts and Libraries and the Arts Council itself The Office of Arts and Libraries is part of government and part of the Civil Service. While it has responsibility, as I understand it, for proposing that grants be given to its clients —the Arts Council, the Museums and Galleries Commission, the British Film Institute, and so on—it does not have responsibility for seeing how that money is spent. That is a responsibility of the bodies which receive the grants.
In the case of the Arts Council —and this is the point raised by the noble Lord, Lord Gibson —it is for the council to be satisfied that the bodies it grant-aids maintain standards of artistic excellence. That is the situation as it always was but no longer will be if the Minister's letter goes through unchallenged.
In paragraph 4 of the letter he writes in the last sentence:
"I will need to be satisfied that standards of artistic excellence will be maintained and enhanced in the regions as a result of any changes".
That puzzles me as it puzzled the noble Lord, Lord Gibson. That does not seem to me ever to have been the job of the Minister. That has always been the job of the Arts Council. It is a gross violation of the arm's length principle for the Minister to start interfering and taking over a responsibility which has never heretofore been his.
Again, the Minister established a steering committee. In his Statement he said:
"I am establishing a steering group to be responsible for implementing the changes. This group will report to me. I am pleased to announce the apointment of Mr. Timothy Mason … to manage these reforms". —[Official Report. Commons, 13/3/90; col. 156.]
That group is to report not to the Arts Council but to the Minister. Mr. Mason and not the director of the Arts Council is to manage the reforms. In the light of that, it does not seem to me to be surprising that Mr. Rittner felt unable to continue to be director of the Arts Council. His responsibilities had been taken away from him by the Minister and handed over to other people. I do not know whether the chairman of the Arts Council was consulted but I am sure that if former chairmen of the Arts Council who have spoken had been consulted they would have predicted precisely what happened.
Secondly, there is the relationship, which has been touched on on many occasions in this debate, between the Arts Council and the regional boards. The latter are to be responsible for the day-to-day administration but accountable to the Arts Council. That is the federal principle about which we have heard so much. There are to be 10 regional arts boards but only five are to be on the council. That seems to me to be in defiance of any federal constitution of which I have ever heard; namely, that the elements of the federation are not represented on

293
the body which runs the federation. That seems to me to be a constitutional deformity of a gross and unnatural nature.
There are those who say—and I think that the noble Lord, Lord Annan, said this—that there should be no members of the regional boards on the council. That is a possible drastic and rather dictatorial solution. However, if you are to have any boards on the council you should have all of them. Those which are not on the central council will have no hand in policy-making and the excuse that that would increase the council membership from 20 to 25 seems to me to be totally inadequate.
We then come —and this has also been mentioned by many of your Lordships—to the extended responsibilities of the regional boards. That matter is set out in paragraph 5 of the letter. Those responsibilities are extensive. I should have thought —here I speak without personal experience—that inevitably if they are to carry out those responsibilities properly they will require increased numbers of staff. If they have that increase in staff and if the Arts Council's responsibilities are as important as the Minister suggests, the idea that there will be any saving in the overheads of the whole organisation is extremely unlikely. I should expect an increase in staff and increased overheads as a -result of the changes.
We then come to the last question, which is what, in the name of fortune, under this reorganisation will 1 he Arts Council do? The question was asked by the noble Lords, Lord Rees-Mogg, Lord Annan and Lord Gibson. None of them was capable of giving a satisfactory answer. The council's revised responsibilities are set forth in paragraph 2 of the famous letter, which states:
"A; I have indicated in my statement, the Council should also retain [in addition to its strategic role] its leading responsibility on matters such as broadcasting, education, training, research and international affairs".
I know that national strategy is difficult to define. I know that the monitoring of arts boards is relatively easy to understand. But I do not understand the responsibilities which the council is to retain. I thought that touring and international promotion were the responsibility more broadly of the British Council than of the Arts Council. I never knew, though that may be ignorance on my part, that the Arts Council had any responsibility for broadcasting or, if it did, how it would carry it out and in what direction. How it is to do that I cannot tell.
Those are some of the questions which require an answer. The basic anxiety which is shared by many noble Lords and which has been expressed today is that the Minister's response to the Wilding Report, which purports to be about devolution and the dispersal of power, is window dressing and conceals what, in the result, will be a centralisation of power not in the Arts Council, but in Whitehall. By elevating the Arts Council to have responsibility for strategy; by giving it responsibility for the "glamour" companies (which, let us face it, arouse the most envy); and by leaving five out of the 10 regional arts boards off the council, in my view the Arts Council will find itself emasculated, just as the Nature
294
Conservancy Council was emasculated by being split into three in the name of devolution. The Government's power will be less fettered; opposition will be more muted from an emasculated Arts Council.
Those are the anxieties which some of us have tried to express today; those are the anxieties which the Minister must address and that I trust he will be able to allay.
3.28 p.m.
Baroness Birk: My Lords, one of my worst nightmares is that I shall wake up and find myself answering on this side of the House, being the last speaker in an arts debate which up till then has been entirely taken up by the great and the good; with people who have had experience as past chairmen of the Arts Council, ex-Ministers of the Arts and so on. There are practically no Indians here today; it is practically all chiefs who have spoken in the debate, apart from the noble Baroness, Lady Elliot, and myself, if she does not mind being classified in that way.
I should like to start by saying that the devolution proposals are very attractive and I welcome them. On this point I am sorry to differ with the noble Lord, Lord Goodman, whose experience is so great and whose partnership with Jennie Lee in the 1960s was the golden time of the Arts Council. We should perhaps be a little more patient. Listening to this debate I have the feeling that we are not sufficiently taking account of the fact that the Statement was made only five weeks ago. After all, the regional arts boards are not already in operation. There must be time for the new system to shake down. There are obviously many corners which need to be smoothed. Many questions have been put to the Minister and it is clear that a considerable amount of clarification needs to be given.
As regards representation of the regional arts boards on the Arts Council, I believe that unless all the regional chairmen are members of the council, inevitably there will be a feeling that some regions will get a better deal than others. As the Arts Council is to be even more fully in charge of providing finance for the regional arts boards than it has for the associations, the worry must be acknowledged to be genuine. Equally, unless the Arts Council, having lost many of its detailed funding responsibilities, includes all the regional bodies as a basic part of its decision-making process, the opportunities for divide and rule by government —a fear expressed by almost every speaker this afternoon —will be dangerously increased.
I do not share the great fears that have also been expressed about participation of local government and local councillors. This is very important. For example, after the abolition of the GLC it was pointed out time after time and night after night during our debates on the arts component that the local authorities would take on a great many of the responsibilities in this respect. Some did, some did not; some could and some could not. Nevertheless, one cannot try to draw in people and say "We require your help both financial and in encouragement" and

295
at the same time refuse to let them participate, saying "You are too political" or "You do not know enough about the subject".
I have found, as I am sure have other noble Lords who sit on committees outside this House, that politics are not the monopoly of politicians and do not occur only when political matters are dealt with. There are, for example, medical politics and politics on almost any body on which one sits. The same applies to the arts and will apply to the regional arts boards.
Of particular concern is that the gap between the Arts Council and the Government is becoming disturbingly narrow. The Minister said in another place:
"How one interprets arm's length is a matter for debate. How far it is taken is a matter for argument and discussion". —[Official Report, Commons, 22/2/90; col. 1168.]
I share the strong feelings of the noble Lord, Lord Goodman. I agree that this is a matter of great concern. If it were the intention of the Government to create a fully-fledged interventionist ministry of culture in the Continental tradition, which they have never given any indication of wanting to do —and this is not the time to discuss the merits or demerits of that —they should do that properly by bringing forward a White Paper for debate.
These changes are so far-reaching and go so deep that I feel —a feeling that has increased as I listened to the debate—that this matter should be brought before Parliament. It should not be dealt with by way of a Statement and correspondence between the Minister, the Arts Council and other people. At the same time that is what we should be investigating and probably asking for.
The management of the changes is not to be handled by the Secretary General of the Arts Council as one might reasonably expect. The point has been made by practically everyone else. The management is to be by a committee headed by a civil servant which will be responsible to the Office of Arts and Libraries. That lends further credence to the suspicion that the Government are significantly lengthening the arm's length policy and almost getting to the point that if they take it any further the arm will be amputated.
Why is it necessary to bring in an outside manager, Timothy Mason, who has done an extraordinarily good job in Scotland? It is no personal reflection on him. However, why is it necessary for an outside manager to be brought in to dictate the manner of reforms to the Arts Council? Can the Minister say why the Minister for Arts does not believe that the Secretary General of the Arts Council is competent to run the affairs of the council rather than to have them located in the Office of Arts and Libraries? That fact is causing us all a great deal of concern.
In that situation it is very understandable why the present secretary general, Mr. Luke Rittner, had decided to resign. Whatever the strength and weaknesses of the present system there is no possibility of it working without proper funding. We have talked around the subject and a great many wise and sensible things have been said about the future of the regional arts boards. At the end of the
296
day, we return to the question of whether there will be sufficient resources.
We have heard graphic examples from the noble Lord, Lord Sainsbury, of what happens when funds are too small. I have had experience of that in other parts of the arts field including in particular the British Film Institute. At best these bureaucratic arrangements are just a distraction from the real problems facing the arts whether regional or national. Shifting the burden of grant-giving from a large and poverty-stricken institution such as the Arts Council which is also being starved of funds, to a smaller regional arts board which is just as impoverished, will not help the theatres to remain open, the orchestras to give innovative programmes or galleries to acquire new works.
Even more damaging is the unavoidable administrative cost of the upheaval which will transfer resources to the bureaucracy at precisely the moment when they are most needed by the arts companies themselves. The basic issue that worries me is how far any artist, performer or musician will benefit from this structure. If they are to benefit and there are extra resources to make it possible, we should feel happier about the situation.
The money for this restructuring is expected to come from the Arts Council's existing budget. Despite the Government's assertion that the council's budget has been increased significantly, the optimism is illusory as the National Campaign for the Arts has recently pointed out. The increase of 12·5 per cent. for the first year is fine and that is what we all applauded. There will be 5·1 per cent. for the next year and 3·9 per cent. for the years 1990-93. They represent an actual fall in the real level of the grant when set against inflation. I shall not trouble noble Lords with the figures though they are plain to be seen and quite simple.
The Arts Council has already had to find extra money to compensate English National Opera and English National Ballet for the disappearance of their support from Westminster City Council. That is the final chapter in the saga of the abolition of the GLC. I say in parenthesis that whatever the GLC did or did not do—I do not believe that it was perfect —the loss to the arts and to many other areas of our national life since its abolition has been extremely great. The failure of the Government either to accept all the recommendations of the Priestley Report or to tackle the Arts Council's calls for what it needs leaves the arts weakened and renders the change irrelevant. None of this will help the Arts Council to deal with the crippling deficits of the national and regional companies. The housing of the arts will not be improved unless extra funds are made available.
The Wilding Report suggested that local authorities would be able to relieve the regional arts boards of much of the present Arts Association responsibility for community projects. But with the poll tax eating into local government funds and with the capping of local authorities, they have little room for manoeuvre—even those local authorities that would like to do more for the arts. They will not be in a position to expand their services for some time

297
to come. Many have taken on arts officers and some would like to have done so but could not because of lack of funds.
How is this wonderful strategic function to be financed? The Arts Council does not have the money to do its present job. A bureaucratic shuffle will not solve the problem. Without the injection of new investment how can this devolved system achieve anything? In a press release of 10th April the PSI gave figures for 1987 for direct public expenditure on arts and museums. We come at the bottom of the list. It is something of which we should be ashamed. In Britain we spend £9·8 per head, compared with £27·8 in Sweden, £20·5 in the Netherlands, £21·4 in France, £24 in Germany and £17·4 in Canada. Internationally we have a very bad record. It is not for lack of people like ourselves trying to nudge this Government, and indeed all governments, to do something for the arts.
I hope that the Minister will offer some illumination and light when he answers the questions put to him. Is there any possibility that all the chairmen of the regional arts boards will be on the Arts Council? There would then be 10 instead of the seven suggested. That would make an enormous difference because it would also deal with some of the problems raised by the noble Lord, Lord Goodman, and others. If they were there as part of the Arts Council they would have an opportunity to work together instead of feeling remote and having to fight for their own region.
3.44 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh): My Lords, it is very rare that I am envious of the Minister in another place, but today I think I can truly say that I am envious of the position my right honourable friend was in the other day when he made his Statement. If I might carry the allusion of the noble Baroness, Lady Birk, a little further, I believe I am the third Indian in this debate today in your Lordships' House.
I am grateful to the noble Lord, Lord Rees-Mogg, and to the other noble Lords for their thoughtful contributions to the debate. I am very conscious that the noble Lord and other speakers today are able to bring a great deal of knowledge and personal experience to the subject of the funding of the arts and the role of the Arts Council. I hope nevertheless that I shall be able to give them some reassurance about the particular concerns that have been raised.
Before turning to those concerns in detail, it might be helpful for the House if I were to set out briefly some of the background to the noble Lord's Question. As noble Lords will know, the last decade has seen a major expansion of the arts economy. Increased levels of central and local government support for the arts and greater private affluence have enabled arts organisations to increase their turnover to record levels. The Arts Council of Great Britain and the 12 English regional arts associations, which are responsible for funding some local arts organisations, have played a major role in this expansion. Over a long period a situation has
298
developed, however, whereby in any one region a theatre or gallery might be funded by a regional arts association but a similar organisation a few miles away might be funded directly by the Arts Council. This reflects the haphazard way in which over 30 years or more the regional arts associations have established themselves to met local arts needs without ever being fully integrated into a national system of planning and decision-making.
That is why in December 1988 my right honourable friend the Minister for the Arts set up the first major external review of the role of the Arts Council and the regional arts associations since the council was established in 1946. The review was undertaken by Mr. Richard Wilding, the former head of the Office of Arts and Libraries. In his report Mr. Wilding was asked to pay particular attention to four specific objectives.
First, there was the need for greater accountability by the regional arts associations. Currently some £35 million of the Arts Council's £175 million grant is allocated to the regional arts associations, which are responsible for the development of the arts in their regions. But although the officers of the council and the associations have worked closely together, the associations are not directly accountable to the council for the ways in which they allocate and spend council money within the region and for the value which they get for it.
Secondly, there was the need for a more coherent funding policy. I have already described the way in which both the Arts Council and the associations might both be funding arts organisations in the same area. As a result, local authorities have to deal with both the Arts Council and the regional arts associations, and they may find that the two tiers have different policies and priorities.
Thirdly, there was the need for improved structures for the handling of business. In the past it has proved difficult to combine the effective handling of business with due recognition of the multiplicity of interests which have a legitimate claim to be represented in the decision-making process. Meetings are often attended by large numbers of people, and the pressure of immediate business makes it difficult to see the wood for the trees. The Minister for the Arts acknowledged that some associations were already tackling this problem and he now wanted to consider whether these improvements could be disseminated more wisely.
Fourthly, the Minister for the Arts asked Mr. Wilding to consider the administrative cost of the whole system so that he could be satisfied that the taxpayer was getting the best value for money from the arts funding structure.
After consulting widely all the interested parties, Mr. Wilding submitted his report to the Minister for the Arts in September 1989. Copies of the report, entitled Supporting the Arts, were placed in the Libraries of both Houses. Following receipt of the report, my right honourable friend initiated an intensive period of consultation during which he received over 6,000 written responses. He also held discussions with all the interested parties and met a

299
number of delegations of MPs and regional representatives.
My right honourable friend announced his response to the report in another place on 13th March. In it he accepted the thrust of many of Mr. Wilding's recommendations. In particular, he accepted the need to distinguish more clearly between the complementary but distinct roles of the Arts Council and the regional arts associations. He also accepted that the way to achieve this was by devolving many of the council's grant-giving responsibilities to the associations, which would be strengthened and reconstituted as regional arts boards. In return, the boards would become more accountable to the Arts Council for their spending of central government funding and for their delivery of national policy objectives.
In reaching his decisions, my right honourable friend has stressed that his primary objective has been to establish a system of arts funding which is best for the arts and for the public which is served by those arts organisations. The Government are not in the business of making change for change's sake, nor do they want to undermine the excellent work which the Arts Council has achieved over many years. Like Mr. Wilding, the Minister for the Arts concluded, however, that there was an urgent need for a better integrated system of planning and budgeting which could deliver a coherent policy for the arts and which takes full account of regional as well as national needs.
This is what led the Minister for the Arts to announce a major shift in funding responsibilities from the Arts Council to the regional arts associations. It is his view, which I share, that decisions about the funding of arts organisations can best be taken by the people who are in day-to-day contact with those organisations. In the majority of cases it is the regional arts associations, with their knowledge of local circumstances and their close working relationship with local authorities, which are best equipped to fulfil this role.
Moreover, it is in the regions that many of the most exciting developments have taken place in the arts in recent years. A few years ago the idea of Birmingham as a major artistic centre would have been greeted with hollow laughter. Yet the City of Birmingham Symphony Orchestra has now built for itself an international reputation. Later this year it will be joined by the Sadler's Wells Royal Ballet which will be re-named the Birmingham Royal Ballet when it moves into its new home in the Birmingham Hippodrome. The orchestra itself will be moving into a new concert hall which promises to be one of the finest in the country.
The same story can be repeated in many of our great regional towns and cities. Last month saw the opening of the new West Yorkshire Playhouse which is another addition to the excellent facilities that are already available in Leeds. In Liverpool, Manchester, Bradford, Newcastle and in many other centres we have witnessed in recent years a renaissance of the arts. This has not only been a stimulus for civic pride but also a major force for
300
economic regeneration, as my noble friend Lady Elliot pointed out. Many of these developments have been the result of local authority investment working in partnership with other government agencies and with the private sector. It is these partnerships in the arts that the Government now want to build on with their reforms.
Nothing in these reforms is intended to diminish the role of the Arts Council. On the contary, they will enable the council to develop its key strategic role of determining national arts policy. That role is of crucial importance. First and foremost, the council will remain the national body with sole responsibility for determining the overall direction of arts policy. The framework for that policy will be a national strategy for the arts which the Arts Council has been charged with producing by April 1992. The council will also be responsible for ensuring that the strategy is implemented through a system of forward planning and budgeting and by monitoring its delivery.
In addition to its strategic role, the council will retain and develop a wide range of specific responsibilities which can only sensibly be handled at the national level. It will continue to fund directly the four national companies—the Royal Opera House, the English National Opera, the Royal Shakespeare Company and the Royal National Theatre —as well as the South Bank Centre and some other organisations, still to be determined. It will also retain responsibility for other major policy issues such as touring, innovation, broadcasting, international affairs, research, education and training.
Within the exercise of its responsibility for planning and accountability, the council will also need to satisfy itself in future that standards of excellence in the regions are being maintained. Indeed, devolution will not take place until my right honourable friend the Minister for the Arts is satisfied that there are satisfactory arrangements in place to maintain and enhance standards of excellence.
As I have already described, the regional arts associations will be re-constituted as regional arts boards. They will be reduced from 12 to 10 in number to ensure that they are of sufficient size to take on their enhanced responsibilities. They will continue to be responsible for determining the shape of their decision-making structures provided that local authority representation is not in a majority. The Minister for the Arts has not, however, accepted Mr. Wilding's recommendation that all the boards should in future have an automatic place on the Arts Council because this would risk making the council unwieldy. Instead, regional representation on the Arts Council will also be increased from three to five places.
The Minister for the Arts also announced that the Crafts Council would remain an independent body and would not be merged with the Arts Council. He has, however, asked the two councils to explore ways of co-operating more closely so that there is no duplication of funding at the regional level. He has also defined more clearly the complementary roles of the Arts Council and the British Film Institute in the funding of film and video work.

301
I should record at this point that the announcement by the Minister for the Arts received strong support from all sides in another place. I know that the noble Lord, Lord Annan, made reference to that point, and I shall return to it at a later stage. It has also received the personal support of the chairman of the Arts Council and has been endorsed by the lull council at a specially convened meeting. It has been welcomed by the regional arts associations.
Nevertheless, the Minister for the Arts has recognised that, following his announcement, there are concerns on the part of some of those who are directly affected by the changes. To some extent this is inevitable. It is not possible to implement a set of proposals as complex and wide-ranging as the ones I have described without creating some uncertainty. This was one of the reasons why the Minister announced the appointment of Mr. Timothy Mason, the director of the Scottish Arts Council, who commands wide respect in the arts world, to manage the changes resulting from his announcement. It will be Mr. Mason's job to advise the Minister for the Arts on the detailed implementation of his decisions, having taken account of the concerns raised by interested parties whom he will consult. He will be working with a small steering group that has been set up by the Minister.
My right honourable friend intends that the Arts Council will remain a strong and robust organisation as a result of these changes. I hope and believe that the noble Lord's fears on this score are misplaced. The council's overall responsibility for arts policy and funding will be enhanced.
The noble Lord is also concerned that the arm's length principle of arts funding, and with it the independence of the council, is being eroded. Nothing in the changes that the Government have announced will compromise the council's independence. Decisions about the allocation of the council's grant-in-aid, about artistic priorities and about the funding of individual arts bodies will continue to be the sole responsibility of the council and regional arts boards. The structure of arts funding and the mechanism for ensuring the accountability of taxpayers' money are, however, properly a matter for the Government and the Arts Minister, who must demonstrate that accountability to Parliament.
Concern has also been expressed that these changes will threaten the standards of excellence being achieved by leading arts organisations when they are no longer funded directly by the Arts Council. Excellence is not of course the sole preserve of the Arts Council. Nevertheless, the Minister recognised that it was important to ensure that the position of these organisations would be protected in any new arrangement. As I made clear earlier, he will therefore want to be satisfied that standards of excellence will be maintained and enhanced before devolution of funding responsibilities can take place. In particular, where the Arts Council has agreed a level of three-year funding with an arts organisation this will be maintained by the regional arts board.
Beyond that, the new planning and monitoring arrangements will require the Arts Council to
302
approve in advance the funding of major organisations. Each autumn the council will indicate its provisional grant allocation to each regional arts board. The board will then assemble a detailed programme for the coming year which will include its allocation to major arts bodies. The programme will need to be submitted to the Arts Council for its approval and the board will be subsequently held to account by the council for the delivery of that programme. To enable it to maintain its knowledge of regional organisations, the Arts Council will also retain its responsibility for undertaking in-depth assessments of leading arts organisations and their funding bodies.
Various points have been raised and I shall try to answer some of them. Other points will only be answered as the working party proceeds in the months ahead. The noble Lord, Lord Rees-Mogg, mentioned the increasing costs and bureaucracy that devolution could bring about. That point was in turn returned across the net, so to speak, by the noble Lord, Lord Jenkins, who referred not only to devolution but to dissolution. Whatever the outcome, he made the very respectable point that when the British Empire came to an end the question of whether the system that succeeded it was more efficient was offset by the de facto coming of that end.
The noble Lord, Lord Annan, questioned the meaning of "strategic role". The Arts Council has been charged with producing a national strategy for the arts and holding the regions to account in delivering it. If they do not deliver it the Arts Council will ensure that they do not receive any money. That is what we mean by the Arts Council having a strategic role.
It was, as always, a privilege to hear the noble Lord, Lord Goodman, speak in your Lordships' House this afternoon. He raised the point that there are activities that the Arts Council engages in of which the Minister may not be aware. I had the privilege many years ago of discovering some of the good work that the noble Lord was doing when I led a small delegation to the Treasury. I thought that there was a unique and unshakeable case for special treatment for a group of individuals who had a very short life-span and career—namely, racing drivers. It was pointed out to me by an official that the Arts Council had been making the case for years in the case of authors. Therefore I am aware of what was written on the back of the envelope which the noble Lord, Lord Goodman, brought with him this afternoon.
Regarding the broader aspects of the important items which he mentioned, which if I recollect correctly included copyright, we believe that if the Arts Council is freed from having to deal with hundreds of small regional organisations it will have more time to attend to important issues which are not commonly brought to the attention of the public.
The noble Lord, Lord Jenkins, and many other noble Lords, referred to the beginning of the end. In his case the noble Lord referred to the finger being taken out of the pie. That is far from the case. The Government have increased expenditure substantially in recent years and are totally

303
committed to the Arts Council and its successful future.
The noble Lord, Lord Rees-Mogg, raised three principal points which he wanted answered if he was to be convinced that the Government were dealing with the case with sincerity. The first of those points was that arts organisations should be consulted before being devolved. I hope that I have made it very clear from my reference to the steering group that that will certainly be the case.
The noble Lord then referred to the need for the Arts Council to remain a strong organisation. The Arts Council will continue to be responsible for arts policy nationally, as I pointed out earlier. I believe that it will be unfettered by a number of small issues. That will allow it to concentrate on the larger issues and to have more time effectively to lobby the Government of the day on behalf of the arts.
Thirdly, the noble Lord wanted an assurance that the Arts Council would remain independent. As I said earlier, the Arts Council will continue to be responsible for decisions about art. The Government have no desire to be in any way involved. They have an interest only in answering to Parliament for expenditure undertaken on behalf of the taxpayer.
Arts expenditure has been referred to. The subject was not dealt with in great detail, although it could form the subject of a separate debate in your Lordships' House. However, I should point out that in the lifetime of this Government expenditure on the arts has risen in real terms by some 40 per cent.
The noble Lord, Lord Birkett, raised a very valid point with regard to the intentions of the steering committee. He described the position perfectly when he said that the committee would deal with the nuts and bolts of the devolution changes as they took place. That is correct. I should add that that committee consists of five people, of whom three are from the Arts Council itself. That ensures that the Arts Council will have a majority on the steering committee.
The matter of local councillors was raised. In some ways I was rather surprised because I am often accused at the Dispatch Box of not having the needs of local councillors to the forefront of my heart and desire. We have insisted that local councillors will not have a majority on any board, but it should be recognised that many local authorities give a considerable amount of money to the arts. It would not be practical to say that local councillors could not be represented on the boards, although I know that that will not satisfy the noble Lord, Lord Annan.
Baroness Birk: My Lords, given the way that the Minister looked at me when speaking about local councillors, I thought that he had perhaps misunderstood me. I was arguing that local councillors should be involved. For those few minutes I was on his side.
Lord Hesketh: My Lords, I agreed with the noble Baroness. I am sure that, when she inspects Hansard, she will find that I was in agreement with her on that occasion.
304
The noble Lord, Lord Annan, and the noble Baroness, Lady Birk, referred to appointments to the regional boards. Again, we were divided on that issue. I have to say—I am often assaulted in this respect when speaking at the Dispatch Box for the other department which I represent —that one of the Government's principles is a commitment to local democracy. One of the ways in which we shall achieve that is through having local councillors on regional arts boards.
The noble Lord, Lord Bonham-Carter, drew attention to what he believed was the compromise of the arm's length position. The key point to remember is that the Government hold a responsibility for the structure of the arts in terms of funding. There must be some connection between the Government and the arts because the Arts Council itself was a government creation, but we do not have any intention of involving ourselves in the arts.
The noble Lord, Lord Gibson, raised the reasonable point of why we need a steering group. The Wilding Report makes some 80 detailed recommendations. The Minister felt that he could not prescribe all the answers without further consideration and advice and he has therefore set up that steering group which has a majority of Arts Council members. I hope that that satisfies the noble Lord up to a point.
The noble Lord then drew our attention to three crucial words—"some other organisations". One of the reasons for setting up the steering group was to consider that matter. It is too early to say whether there will be 40 organisations, as he believes is correct, but those words are there and the noble Lord is quite right: there will be other organisations.
The most important point about this afternoon's debate was that first raised by the noble Lord, Lord Donaldson of Kingsbridge, and by many other noble Lords later. The noble Lord, Lord Annan, pointed out that the Statement received a welcome response in the House of Commons for reasons which he felt were obvious. He felt that there was a different interest for elected Members of Parliament than for Members in this House who have shown their interest in and experience of such matters this afternoon. I had frequent discussions with my right honourable friend in the days preceding this debate. I can assure noble Lords that he will read the entire debate with great interest because a great deal which is of interest has been said this afternoon. I hope that in the limited time available to me this afternoon I have been able to give some reassurance that the concerns raised by noble Lords are being taken on board by the Government.
We are concerned that the artistic features of this country should be the best. I have to say to the noble Baroness, Lady Birk, that if I were given a choice of going to Sweden, Canada or the United Kingdom for the benefit of a creative week, I should choose the United Kingdom every time with regard to the arts.
We believe that the Arts Council will not only survive but will thrive. It is the Government's firm view that the council is set fair to meet the challenges that lie before it in the 1990s.
Lord Annan: My Lords, perhaps before the noble Lord sits down I could make clear my point about local councillors. Of course local councillors should be on these bodies. It was simply the enthusiasm of his right honourable friend who said, "I should like far more, though they must not go over 49 per cent." that I thought was perhaps a little questionable.
House adjourned at ten minutes past four o'clock.