Lords Sitting of 8 March 1990

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Chester): The CHAIRMAN OF COMMITTEES on the Woolsack.

Hong Kong: Democracy
Lord Wyatt of Weeford Lord Wyatt of Weeford asked Her Majesty's Government:
Why they did not take the advice of OMELCO (Office of the Members of the Executive and Legislative Councils) with regard to the introduction of genuine democracy in Hong Kong.
The Minister of State, Foreign and Commonwealth Office (Lord Brabazon of Tara): My Lords, I refer the noble Lord to the Statement made by my right honourable friend the Foreign Secretary in another place on 16th February. We have decided to introduce 18 directly elected seats in 1991—just two seats below the OMELCO consensus. In return for this we have secured from the Chinese Government the improvements in the draft Basic Law outlined in my right honourable friend's Statement.
Lord Wyatt of Weeford: My Lords, is the Minister aware that there is a feeling of numbness in Hong Kong and that morale in the police force and the Civil Service is at rock bottom? Can he assure the House that the Government will do their utmost to try to improve the amount of democracy in Hong Kong before we leave so that the people in that unhappy place will have some kind of protection, whether or not the Peking Government continue their hard line?
Lord Brabazon of Tara: My Lords, the number of directly elected seats in 1995 remains open. We have not agreed to 20 seats for 1995 but have said that the number will be at least 20. The improvement that we secured in the latest move was a commitment to provide 20 seats in 1997, 24 in 1999, 30 in 2003 and the possibility that full direct elections can be introduced in 2007. That is a considerable improvement on previous proposals put forward by the Chinese Government which provided for no more than 18 directly elected seats in 1997 and no commitment to further progress.
Lord Cledwyn of Penrhos: My Lords, what are the implications of the comments made by the Foreign Secretary in another place and repeated by the Minister: namely, that there should be at least 20 seats out of a total of 60? Is that figure negotiable with the Chinese Government between now and 1997? Secondly, can the Minister say what the reaction of OMELCO has been to the apparent settlement of 20 seats out of 60? Has it agreed or objected to that? What proposals has it put forward to Her Majesty's Government?
Lord Brabazon of Tara: My Lords, the current proposal in the Basic Law as drafted by the Chinese Government is that there should be 20 seats in 1995, the date to which that number refers. We should like to see more and for that reason we have stated a minimum of 20 seats. It will be most important to see the outcome of the 1991 elections. They will be a substantial and important step forward in democracy in Hong Kong and we should not play down their significance. It is important that the elections should be seen to be a success and that they should reassure the Chinese that they have nothing to fear from democracy in Hong Kong. Obviously some people in Hong Kong would have wished to see a faster rate of democratisation. However, there is also a sense of relief that a major uncertainty for the future of the territory has been removed.
Lord Cledwyn of Penrhos: My Lords, the Minister did not answer the second part of my question: namely, what is the reaction of OMELCO to the apparent settlement of 20 seats out of 60? Did it indicate agreement or make another proposal? Have the Government any expectation of being able to negotiate more than 20 seats out of 60 after 1995?
Lord Brabazon of Tara: My Lords, under the terms OMELCO wished to have two more seats in 1990–91. However, there is a sense of relief that a major uncertainty has been removed. As regards the further provision to which I referred in answer to the noble Lord, Lord Wyatt, the draft provides for 24 seats in 1999, 30 in 2003 and the possibility of full direct elections in 2007.
Lord Bramall: My Lords, despite what my noble friend Lord Wyatt asked only in the nick of time, does the Minister agree that we can take some encouragement from the fact that the senior member of OMELCO is on record as saying that the compromise reached with the Chinese Government under the circumstances was sensible and that it would be up to the Hong Kong elected members to show that democracy can develop sensibly and in harmony (not in conflict) with China, which may have moved more in that direction when supreme authority passes in 1997?
Lord Brabazon of Tara: My Lords, the noble and gallant Lord has made a good point, particularly in referring to the statement made by one of the representatives of OMELCO. As I said, it is important that the 1991 elections go ahead and that the Chinese see that they have nothing to fear from the process.
Lord Harvey of Prestbury: My Lords, is my noble friend aware that the island of Hong Kong and a small part of Kowloon belongs to Britain in perpetuity? Was that factor taken into full account during the negotiations, because it was a bargaining point and one does not have the impression that it was used?
Lord Brabazon of Tara: My Lords, with respect, we have had such arguments on many occasions. We believe that we did the best that we could for Hong

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Kong. We do not believe that the island is sustainable on its own and without the mainland territory.
Lord Eden of Winton: My Lords, as the British Government have had negotiations with the Chinese Government on the matter, can my noble friend tell the House exactly what the Chinese Government fear about the progress towards democracy in Hong Kong?
Lord Brabazon of Tara: My Lords, I am afraid that I cannot answer for the Chinese Government; I can answer only for the British Government. However, I take to heart the point made by my noble friend.
Lord Willoughby de Broke: My Lords, does my noble friend agree that the latest less than satisfactory proposals are likely to undermine progress towards democracy in China and make its stated task of anchoring people in Hong Kong more difficult? Does he also agree that, as a result, more people may take up our offer of passports, making it more likely that they will come here rather than stay in Hong Kong under the proposals?
Lord Brabazon of Tara: My Lords, when discussing the move to democracy in Hong Kong there is no point in trying to impose something which will not go beyond 1997. We could do whatever we liked between now and then, but if it is something with which the Chinese obviously do not agree they will just sweep it away in 1997. We want to see something which will continue beyond that date, into the future.

Stamps: Non-Value Indicators
3.10 p.m.
Lord Tordoff Lord Tordoff asked Her Majesty's Government:
Why the value of first and second class stamps sold in books of 10 is not shown on the face of the stamps.
The Minister of State, Department of Trade and Industry (Lord Trefgarne): My Lords, the issue of postage stamps is a matter for the Post Office. I am told that non-value indicator stamps were issued as a temporary measure to supplement normal "value" stamps at a time when the tariff was changing, for greater commercial and customer convenience.
Lord Tordoff: My Lords, I am most grateful for that illumination. Will the Minister confirm, however, that these stamps cannot be used for postage into Europe or other parts of the world as they have no value on them? Is that the case? If so, why are people not informed of that when buying the stamps?
Lord Trefgarne: My Lords, it is the case that the stamps are not intended for international service. However, the Post Office realised that some people were likely to use them for that purpose and therefore asked overseas postal authorities to accept them.
Lord Tordoff: Did they, my Lords?
Lord Annan: My Lords, is the noble Lord aware that the reason the stamps have no value placed on them is that in certain parts of London they are valueless? Is he also aware that in NW8 and W1 postboxes have been locked, bolted and barred for the past 10 days and no mail whatever has been delivered? When will the chairman of the Post Office make a statement in this regard and reassure us that there is some point in buying stamps?
Lord Trefgarne: My Lords, in answer to the supplementary question by the noble Lord, Lord Tordoff, about international postage, I can only say that before I prepared myself to make this reply I posted a letter to a relative in Canada bearing three of these stamps. I have yet to discover whether it arrived. I hope it did.
In answer to the noble Lord, Lord Annan, I understand that there are difficulties in parts of London, as he described. I am afraid I have no information with regard to a solution to that dispute.
Lord Boyd-Carpenter: My Lords, arising from the answer to my noble friend Lord Annan, have the Government in mind waiving the Post Office monopoly if the situation continues?
Lord Trefgarne: My Lords, we have no present plans to do so.
Lord Cocks of Hartcliffe: My Lords, is the Minister aware that in two months there is to be a major stamp exhibition in London to celebrate the 150th anniversary of the issue of the first postage stamp in the world, the Penny Black? Is he also aware that the gratuitous knocking of the British postage service at this time does no good to this country or its benefits from tourist earnings?
Lord Trefgarne: My Lords, it is the case that your Lordships have asked a number of questions in recent months with regard to the performance of the Post Office. I am bound to say that there are areas where the standard of service provided falls below an acceptable level. However, the Post Office authorities are very much aware of that. They are doing their utmost to put it right and there have been a number of recent improvements.
Lord Williams of Elvel: My Lords, will the noble Lord also confirm that the trade union of communication workers arrived at an agreement with the Post Office for the improvement of service throughout the country?
Lord Trefgarne: My Lords, I understand that that is indeed correct, and we look forward to reaping the fruits of that agreement in due course.
Lord Tordoff: My Lords, perhaps I may lead the noble Lord back to the subject of the Question on the Order Paper. Is it not surprising that the Post Office has taken this decision to issue stamps which are not valid in overseas territories? Is it not alarming that, in good conscience, people in this country may stamp letters and find them surcharged on arrival at

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the other end? Will Her Majesty's Government please convey to the Post Office the fact that this was a very foolish step for it to take and that in future it should issue stamps which are capable of being used in all parts of the world?
Lord Trefgarne: My Lords, if I may say so, I do not agree with the noble Lord. The Post Office recognised that these stamps—which were only issued as a temporary measure—might be used for international services. It was that which persuaded it to contact all the overseas postal authorities to ask them to honour these stamps when they arrived in their countries.
Lord Molloy: My Lords, is the Minister not aware that the trade unions involved raised this matter urgently within the past few months? It is absolutely the responsibility of management within the Post Office, which should listen more earnestly to the protestations and advice given by the trade unions.
Lord Trefgarne: My Lords, I am not sure to what matter the noble Lord refers.
Lady Saltoun of Abernethy: My Lords, can the noble Lord say whether the overseas postal authorities agreed to honour the valueless stamps?
Lord Trefgarne: My Lords, I understand that the message was sent comparatively recently and therefore I am not able to say what the response has been. Equally, I understand there has not so far been any difficulty.
Baroness Gardner of Parkes: My Lords, my noble friend said that these stamps were only issued on a temporary basis. Can he confirm that there will be no time-limit on the usage of these stamps?
Lord Trefgarne: My Lords, I can confirm that there will be no time-limit on the usage of the stamps. I can also confirm that this was only a temporary measure and stocks are now running out.
Lord Winstanley: My Lords, is the noble Lord aware that philately will get him everywhere?

Dounreay Prototype Fast Reactor
3.16 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
How much electricity was produced and how much income was earned by the prototype fast reactor at Dounreay in 1989, and how these compare with previous years.
Viscount Ullswater: My Lords, in 1989 the prototype fast reactor at Dounreay generated 43,439 megawatt days net of electricity earning approximately £13 million in electricity receipts. This represents a significant improvement over previous years.
Lord Campbell of Croy: My Lords, I thank my noble friend for that reply, which may include a record in the results. As this reactor is functioning so well and has the special merit of efficiency with fuel, are the Government seeking to continue work in this technology with our EC partners so that the advantages gained from British expertise and success are not lost?
Viscount Ullswater: My Lords, the figure is a record. However, the net cost to the Government of keeping the PFR plant operating is around £25 million a year. To that figure should be added around £25 million to cover the cost of reprocessing and waste management. The Government concluded that they would not be justified in continuing to spend public funds at that rate beyond March 1994 against the likely time-scale of commercial introduction of the technology nor on the acquisition of additional technical information. By 1993 the main design work on the European fast reactor will be complete and operating experience gained from the PFR thereafter will be less beneficial.
The Earl of Halsbury: My Lords, will the noble Viscount confirm that it is essential to keep the prototype fast reactor going at Dounreay with an overlap with the European fast reactor because it represents a materials testing laboratory, among other things? We cannot do accelerated ageing tests on materials. We can only wait until they have been fully tested for their lifetime. Is not the increasing burn-up at Dounreay a credit to the engineers in charge, coupled as it is to the facility for reprocessing which will be adopted for the European fast reactor? Is it not therefore sensible to keep it going?
Viscount Ullswater: My Lords, the Government stated in 1988 that they would continue the work on the prototype fast reactor until 1994 and on the reprocessing plant until 1997, and would scale down the amount of money spent on R&D—mostly as a support to the design team for the European fast reactor—to £10 million for the future.
Lord Williams of Elvel: My Lords, will the European fast reactor be based entirely on French technology or will the experience of Dounreay be used? Will the noble Viscount tell us whether the costings of the fast reactor will be accurate this time, so that we do not have the surprises with regard to decommissioning and other costs that led us to conclude that nuclear power in general is uneconomical?
Viscount Ullswater: My Lords, the design work for the European fast reactor is carried out by design companies in the collaboration countries—that is, the United Kingdom, France and Germany—and is paid for largely by the utilities. It started in March 1988 with the conceptual design phase and it is planned to start the three-year concepts validation phase in April of this year. The European Fast Reactor Utilities Group will review the position in 1993, at which time it will be decided whether to proceed to a detailed site design. That indicates that we are still a long way from the construction of a

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European fast reactor. As for the decommissioning costs, I cannot give any figures on decommissioning costs for Dounreay.
Lord Stoddart of Swindon: My Lords, according to figures given to the House, the Government will in fact save £50 million a year—for a year or two, anyway—by not continuing with Dounreay. Are the Government planning to use that £50 million for further research into renewable sources of energy and for the conservation of energy?
Viscount Ullswater: My Lords, the Government will certainly be saving the initial £25 million—not £50 million as suggested by the noble Lord because £25 million will be required to keep the reprocessing plant going until 1997. Renewables are not being starved of investment.

Non-nuclear Energy Sources
3.22 p.m.
Lord Jenkins of Putney Lord Jenkins of Putney asked Her Majesty's Government:
What is their response to reports in the Guardian and elsewhere that information has been withheld from inquiries which might have had the effect of enhancing the claims of non-nuclear sources of energy.
Viscount Ullswater: My Lords, I do not accept allegations made in the Guardian newspaper that the Department of Energy and others withheld information about the wave energy research and development programme.
As announced to this House on 1st December 1988 by my noble friend Lady Hooper, the Department of Energy is now conducting a review of wave energy and the first progress report will be available soon.
Lord Jenkins of Putney: My Lords, I thank the noble Viscount for that reply and I look forward to receiving the reports as soon as possible. However, I suggest to the noble Viscount that there may be more validity in this complaint than he is apparently prepared to attribute to the Guardian report. Does he recall that Professor Salter, who is closely concerned with wave energy, reported to our own committee on alternative sources of energy—House of Lords Paper No. 88, published last June—when he asserted that the evidence given had been falsified, having the effect of giving less credit to developers of wave energy than was justified? In these circumstances, can we expect the reports to take account of what Professor Salter said?
Viscount Ullwater: My Lords, the noble Lord is quite right. The substance of the recent Guardian newspaper article was examined by this House two years ago. The article contained no new facts. The Select Committee on the European Communities Sub-Committee B made an examination of alternative energy sources in 1988. That
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examination included wave energy. A report was published and renewable energy sources were debated in this House. In my Answer l said that my noble friend Lady Hooper had agreed that a new steering group be set up. That has been done. Names have been put forward for that committee and have been agreed. The committee will undertake to review all the existing technology.
The Earl of Halsbury: My Lords, is it not excellent that the future of energy, both nuclear and non-nuclear, has been and I hope will continue to be in the hands of engineers whose eyes are on the future and not in the hands of accountants whose eyes are inexorably fixed on the past?
Viscount Ullswater: Yes, my Lords, I believe that all the possible renewable sources of energy are being carefully studied. However, they are being categorised into those that are possible or probable and those which are probably not possible.
Lord Williams of Elvel: My Lords, at the risk of being branded an accountant and wishing to establish the true cost of energy, perhaps I may ask the noble Viscount whether the Government have any plans, or negotiations with experts in the field, to achieve standardised assessment of costs between different forms of renewable energy and normal fossil-generated electricity.
Viscount Ullswater: My Lords, I do not know whether that can be done on a standardised basis. Certainly projects are assessed very carefully. At present, renewables are considered to be more costly; certainly more expensive than fossil-fuel generated electricity.
The Electricity Act to privatise the electricity industry provides the opportunity further to encourage the application of renewables. The main feature is the non-fossil fuel obligation which should provide some market protection via a premium price for renewables to enable them to move from the stage of research and development into full commercial competition.
Lord Hatch of Lusby: My Lords, is it not the case that six or seven years ago figures were given by the atomic energy authorities about the cost, particularly of wave power, and that those figures have been found to be totally false—perhaps doubled? Those figures were used in order to enhance the prospects of nuclear energy and to denigrate the opportunities for using wave power and wind power. Both those sources of power, through British technology, have been adopted in countries such as Norway and Denmark.
Viscount Ullswater: My Lords, all I can say to the noble Lord is that the United Kingdom has had a world-leading programme in assessing, the potential of wave-power at a cost of about £17 million up to 1985. Over 300 potential devices were assessed. Between 1982 and 1984 a firm of consultants conducted an assessement which was submitted to the Energy Technology Support Unit and the Department of Energy. A further review by the

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Advisory Council on Research and Development confirmed the consultants' view on the technologies.
Lord Hailsham of Saint Marylebone: My Lords, has my noble friend ever thought of harnessing the surplus energy produced by the noble Lord, Lord Hatch of Lusby, every day?
Viscount Ullswater: My Lords, I guess it would be renewable.
Lord Hatch of Lusby: My Lords, I trust it will be renewable for many years to come.
The noble Viscount has not answered my question nor the Question on the Order Paper. Is it the case that the Atomic Energy Authority submitted figures about costs, particularly of wave power, that were totally false? Judgment was made on those figures on what was to happen at that time to wave power, thus enhancing the opportunities for developing atomic energy.
Viscount Ullswater: My Lords, I think that what I meant to say was that the consultants employed had referred to many figures, perhaps including those put forward by the Atomic Energy Authority. On the basis of their investigations submissions were made to the Secretary of State.

London Underground (Safety Measures) Bill [H.L.]
3.29 p.m.
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move that this Bill be now read a second time.
Moved, that the Bill be now read a second time.—(The Chairman of Committees.)
Lord Underhill: My Lords, it is not my intention to delay the business of the House for more than a few moments. I gave notice that I wished to raise matters relating to this Bill. I also gave notice to the promoters, through their agents, of the two matters which I intended to raise.
This Bill seeks to authorise improvements at three very congested Underground stations; namely, London Bridge, Holborn and Tottenham Court Road. The whole House will welcome the fact that we are having such safety improvements at those stations.
I wish to refer to the works to be carried out at London Bridge and Holborn which will naturally have consequential effects above ground. I understand that, although not objecting to the principle of the work at London Bridge, the trustees of the Borough Market are concerned with the serious effect that the Bill will have on the market and are petitioning against it. However, when consideration is given to the Bill and to the Petition, I urge that attention is also given to the views of the 23 market traders who are the trusteees' tenants.
I understand that the market traders do not feel able to petition against the Bill, but they have vital
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interests which will be affected by the Bill in respect of the works at London Bridge.
The other matter concerns the works at Holborn. I am informed that Red Lion Square will be used for workshop and depot purposes in connection with these works. I understand that about 200 persons live or work in premises overlooking the square and they believe that their conditions will be badly affected. I have been informed that alternative sites would be available if desired. I ask that these two matters be considered by the Select Committee when the Bill comes before it.
3.31 p.m.
Lord Boyd-Carpenter: My Lords, before the Bill goes to the Select Committee there are two points that I wish briefly to raise. First, I hope that it will look at the Title which describes itself as the London Underground (Safety Measures) Bill. Given past experience that is a reassuring Title. However, inspection of the Bill indicates that it contains a good deal of material and its connection with safety seems to be somewhat remote. I hope that before the Bill returns to your Lordships consideration may be given to giving it a Title which is more appropriate to its content.
The other point is that Clauses 5 to 8 grant powers to undertake the digging-up of streets. Your Lordships know that traffic in London now suffers from the activities of various public bodies which seem to dig up streets with impunity while generally selecting a moment to start the work when another authority has just completed resurfacing. In giving the powers which are sought in this Bill to this particular authority, and perhaps extending them afterwards to others, some restraint or restriction should be imposed on the authority so that it does not necessarily have the power to do what it wants exactly when it wants, but reference should be made either to the Department of Transport or the local authority concerned, or perhaps to both, before quite serious and substantial street works are undertaken involving all their effects both on traffic and on those who live in those streets. I hope that some thought will be given to this matter. When the Bill returns to your Lordships' House we may be simply asked to give these wide and unfettered powers to one particular organisation.
3.34 p.m.
Baroness Phillips: My Lords, the two noble Lords who have just spoken made very valid points and I shall not waste time repeating them. I find it very ironic that the Bill is entitled in the way that the noble Lord, Lord Boyd-Carpenter, has mentioned. As regards the terrible accident at King's Cross, I understand that part of the problem concerning the breakdown in safety provision was due not to the fact that there were insufficient escalators but that they could not be used. There were insufficient staff to give proper directions or to find the fire-fighting appliances.
I wish to touch on a slightly different area but a similar point. As noble Lords know, Oxford Street is the heart of the tourist trade and it is also very

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much loved by English people. At one end of Oxford Street, Tottenham Court Road station is to have a new ticket hall and subway including an escalator subway. That necessitates quite a number of small shops—I emphasise "small shops"—having to be acquired by compulsory purchase in order that this work may be carried out.
As an historian, I find it interesting that when the Metropolitan Line was built across London it was constructed in a totally different way with the work being done below ground with hardly any disturbance of the surface at all. We are supposed to have advanced, although in a good many ways it seems that we have gone backwards. Part of Oxford Street will not only to be changed in character but it will also be out of action for a very long time. There will also be stoppage in the streets.
When the debate took place on traffic, I would have liked to have made the point that we do not need to ban the car but rather to look at all the works which are being carried out by builders and people repairing roads. That is causing congestion and stopping people from moving about. I make a plea to the Select Committee, in the same way as both noble Lords have done, to consider this matter. It is a very powerful Bill. Unless we watch this legislation carefully, it will pass rapidly through this House and these measures will be put into effect before we know it. I make another plea that our London should not be tampered with too much unless it is absolutely necessary.
3.37 p.m.
The Chairman of Committees: My Lords, I have listened very carefully to what has been said by the noble Lord, Lord Underhill, my noble friend Lord Boyd-Carpenter and the noble Baroness, Lady Phillips. I thank the noble Lord, Lord Underhill, for giving me notice of the points he wanted to raise. I would not wish—and I am in no position—to comment on the merits of the Bill. I certainly confirm that it is to authorise improvements at three very congested Underground stations: London Bridge, Holborn and Tottenham Court Road.
No fewer than 35 Petitions have been deposited against this Bill and they will be considered by a Select Committee of your Lordships' House which I have no doubt will have to sit for quite a considerable time. As the noble Lord, Lord Underhill, said, the trustees of the Borough Market in Southwark, who are concerned with the proposed works at London Bridge, have deposited a Petition against the Bill. My impression is that it is wide-ranging and covers the matters raised by the noble Lord.
As regards the works at Holborn, I do not believe that a Petition has been deposited by those living or working in and around Red Lion Square. If that is so, it will not be possible for the Select Committee to consider their particular concerns because, as the House will know, the proceedings before Select Committees on Private Bills are limited to the matters raised in Petitions before it.
However, as the noble Lord may be aware, all three London boroughs affected have petitioned
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against the Bill and the matters raised by the noble Lord are, I understand, covered in the Petition of the London Borough of Camden. In addition, those concerned will, if necessary, be able to petition in another place when the Bill has finished its passage through this House.
The noble Lord, Lord Boyd-Carpenter, raised two matters. With regard to the digging-up of streets, I can assure my noble friend that that matter is already covered in the Petitions of the London boroughs. I have not had time to refer to all 35 Petitions, but, as I understand it, the London Borough of Camden makes a point concerning the problems associated with the digging-up of streets.
The noble Baroness, Lady Phillips, referred to the difficulties concerning Oxford Street. The Oxford Street Association has already deposited a Petition against the Bill and so its concerns will certainly be aired before the Select Committee. In addition, I can assure all three Members of this House who have spoken that the Select Committee will see what has been said here this afternoon.
On Question, Bill read a second time, and referred to the Examiners.

Civil Aviation Authority (Borrowing Powers) Bill
3.40 p.m.
Viscount Davidson: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Viscount Davidson.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Borrowing powers of Civil Aviation Authority]:
The Earl of Kinnoull The Earl of Kinnoull moved Amendment No. 1:
Page 1, line 16, at end insert:
("(4) The Authority, as a condition of exercise of the powers given in subsection (2) above, shall provide an annual report to the Secretary of State, to aircraft operators and to representatives of consumers to cover, inter alia—

(i) the basis of computation of all charges on aircraft operators,

(ii) efficiency indices, as defined by the Secretary of State in consultation with aircraft operators and representatives of passengers.").

The noble Earl said: I understand that the noble Lord, Lord Underhill, and my noble friend Lord Davidson are happy that the three amendments on the Marshalled List should be taken at the same time. They are directed very much to the same point of accountability.
My amendment is a probing amendment. Its purpose is to give my noble friend a chance to answer perhaps more fully the points raised at Second Reading. The amendment seeks to impose on the Civil Aviation Authority what I would term proper accountability, which in many people's eyes is not

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at present satisfactory. I refer to accountability to the Minister responsible to the Government, to accountability to Parliament and not least to accountability to the users who pay for the authority's services.
I think I am correct in saying that in the Civil Aviation Acts of 1971 and 1982 no mandatory accountability was laid down as a duty on the Civil Aviation Authority other than reporting once a year, as it does, on the services for which it is responsible. In practice I believe that the Civil Aviation Authority consults users—the authority says that it does in its book—about both the quality of its service and the costs of it. How effective and satifactory that consultation is is open to criticism but we know that in the case of airlines the charges made come to more than £200 million per annum. It is a very large budget, but there is little knowledge about how exactly the money is spent or how efficiently it is spent.
It would seem at the moment that only one body, the Monopolies and Mergers Commission, can challenge matters. The commission investigated certain of the services of the Civil Aviation Authority in 1983 and matters were again referred to it in December of last year. The specific reference—perhaps my noble friend can confirm this—covers the responsibility of the National Air Traffic Services and in general the efficiency of the CAA. That report will be read with great interest by users and those interested in the Civil Aviation Authority.
One has to recall that in 1983 the Monopolies and Mergers Commission was very strong in its criticism of the National Air Traffic Services. It commented that at the time there was weak management and poor long-term planning resulting in manifest inconvenience to many air travellers. Those were pretty strong words. It has been suggested, not just recently but for some time, that NATS should be hived off from the CAA, or even perhaps privatised, to make it more efficient, to provide competition and to show it in its true and I hope proper and good colours. What I am trying to say in my amendment is that there should be proper accountability.
My noble friend said at Second Reading that the Civil Aviation Authority is shortly to present to the Government a review of its operations—I believe in about June of this year—with advice on action that should be taken. This will be an important and helpful document when it is published. Can my noble friend say when it is likely to be published? Does he consider that the Civil Aviation Authority should be asked to look into accountability at this stage of its review so that more information can be given to the users who pay for the services? I beg to move.
Lord Underhill: I am perfectly happy that my amendments should be considered along with Amendment No. 1. It may be recalled that at Second Reading on 19th February I mentioned that in the debates in another place there had been a number of complaints and criticisms of the work and functioning of the Civil Aviation Authority. It was not my intention then, nor is it my intention today,
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to follow that path. I know that some airlines and others, although appreciating much of the work of the Civil Aviation Authority, particularly in the realm of safety regulations, nevertheless are very concerned about the way that the CAA does its work and determines its charges.
The first reason for the amendments in my name is to seek accountability. That appears to be the same reason put forward by the noble Earl. A substantial sum, as much as £750 million, is involved. We are told that the new en-route centre will account for some £200 million of the £600 million investment of the CAA to improve United Kingdom air traffic control. The centre will accommodate some 600 staff. As the noble Earl said, there must surely be some accountability as to how this borrowing is handled and whether the desired improvements are being achieved. My amendments seek to provide that accountability, as does the amendment of the noble Earl.
Secondly, the noble Earl referred to the reference to the Monopolies and Mergers Commission. It may be recalled that I raised that matter at Second Reading. I questioned why it appeared that only the work of NATS, the National Air Traffic Services, was to be the subject of the reference. I expressed concern about suggestions made in another place concerning the possible separation of NATS from the CAA. I stressed then, and I repeat it now, that I support the view of the opposition spokesman that any such proposal would require the most careful consideration not only of NATS but of the work of the CAA. That is another reason why accountability is so important.
In his reply at Second Reading the noble Viscount, Lord Davidson, stated that the reference to the Monopolies and Mergers Commission,
"is essentially concerned with navigation and air traffic control services, but it will look in particular at the management of the CAA's investment programme and the CAA's system for improving efficiency".—[Official Report, 19/2/90; cols. 98–99.]
Since that Second Reading debate I have looked carefully at the actual reference by the Secretary of State to the Monopolies and Mergers Commission. I find that it goes a little further than the noble Viscount indicated. I shall read the first part of the reference:
"The Secretary of State hereby refers to the Monopolies and Mergers Commission the questions set out below relating to the efficiency and costs of and the service provided by the Civil Aviation Authority in supplying navigation and air traffic control services to civil aircraft".
It goes on to refer to three questions which must be considered.
When I look at those three questions they seem to relate in the main to the navigation and air traffic control services. It may well be that the general position of the CAA will also come into question. However, the reference seems mainly to be concerned with the work of the CAA in air control services. That being so, I believe that it is vital that we look carefully at these two amendments and listen with care to what the Minister says in reply.
I think that everyone will agree that the responsibilities of the CAA are essential and vital to the development of our aviation industry, our

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airports and safety regulations. As the MMC reference will not do this in the way that I believe it should be done, Parliament should adopt either the proposal contained in the noble Earl's amendment or the one contained in mine so that we can have this complete accountability and a complete review of the work of the CAA before other matters are considered.
The nature of the efficiency audit is set out in Amendment No. 3. I hope that in reply the noble Viscount will be able to give us the Government's general view on the matter, although I appreciate, as did the noble Earl when he moved his amendment, that we may not be able to get a clear decision this afternoon. We merely wish to know exactly where the Government stand on the points which have been raised.
Lord Boyd-Carpenter: I suppose I should begin by declaring an interest, as I was, as many noble Lords will know, the first chairman of the CAA when it was set up in 1972. Therefore, I approach the matter in a somewhat different way from my noble friend Lord Kinnoull. There seems to be implicit, and indeed in his speech perhaps explicit, criticism of the authority. I hope that whatever else my noble friend the Minister does, he will make quite clear what I believe to be the fact: namely, that the authority has done and is doing an extremely good job in what is an extremely difficult and responsible area.
I do not wish to weary the Committee with the details of such responsibility, but being responsible for the well-being of an industry in the immensely competitive world of civil aviation, with responsibilities for safety and for the licensing of air services, is an extraordinarily difficult and delicate task. My impression, gathered from what I still hear about the authority, is that it is doing the job extremely well. I hope that my noble friend the Minister, whatever his attitude towards these amendments—and I have no idea what it is—will make it clear that he will not accept them in any sense as a censure or criticism of the authority and the way in which it undertakes its work.
I should like to pick up the point made by the noble Lord, Lord Underhill, about the proposal to divorce the National Air Traffic Services (NATS) from the authority. I think that that would be a great mistake. First, it would deprive the authority of contact with a certain aspect of its own responsibilities and, secondly, it would very much narrow the background to the vital work carried out by NATS. The two organisations work extremely well together under a system whereby the chairman of NATS is a member of the Civil Aviation Authority, whether he be, as he is alternately, an air marshal or a very distinguished man in civil aviation. The working together of the two organisations has, and indeed does, work to the benefit of their effective operation. Moreover, the reference to the MMC in respect of NATS to which the noble Lord, Lord Underhill, referred makes it particularly inappropriate at this moment to impose a further
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type of inquiry or investigation in this area. I am inclined to suggest that the system is best left alone.
I take the point made by the noble Lord, Lord Underhill, about accountability. However, accountability can operate in a whole variety of ways. Certainly at the time when I was responsible it operated very much through close liaison with the Department of Trade and Industry. It did so under two governments. Mr. John Davis and Mr. Peter Shore were respectively the Ministers responsible for us at the Department of Trade—not the Department of Transport. I can say that both of them were extremely helpful and that close and informal contact between the chairman and the Ministers concerned seemed to work extremely well. I have no reason to doubt that it still works extremely well. I am at least dubious about the necessity for further amendment of the law.
I take the point about the airlines and the costs to them of the authority. The main cost is in relation to payments for air traffic control services. Given the complexity of those services, the importance of them and the fact that unless they are perfectly operated in an area such as Heathrow a disaster will most certainly happen, I think that on the whole the charges are reasonable. In any event, so far as concerns airline complaints, I believe that they relate to something which is nothing to do with this Bill or the Civil Aviation Authority. I refer to the charges made by the British Airports Authority to the airlines, which are undoubtedly high. However, as I said, that is absolutely nothing to do with the Bill or these amendments.
I hope that, whatever else my noble friend the Minister says, he will pay due tribute to the work of the present chairman of the Civil Aviation Authority, Mr. Christopher Tugendhat, whom many noble Lords may know. I think that he does an immensely good job with the aid of his very great experience in public life in this country and in Europe. It would be a great pity if even by implication or accident this Chamber were to appear to suggest that he was doing other than a first-class job. I shall be most interested to hear what my noble friend has to say, but until he has spoken I must say that I entertain considerable doubts not just about the general approach of the amendments but as to whether there is any need for them.
Viscount Davidson: I am indeed grateful to my noble friend Lord Boyd-Carpenter for the remarks he has made. He has made a valuable contribution to the debate. I can confirm to him straight away that the Government believe that the CAA is doing a first-class job in a very difficult sphere of operation. I should also like to pay tribute to the work carried out by the chairman of the CAA. I do not believe that these amendments reflect in any way upon the work of the authority.
I have listened with interest to the speech of the noble Lord, Lord Underhill, and that of my noble friend Lord Kinnoull. I note the points they have made. I think there is perhaps rather less in principle between us than these amendments might indicate since we are all concerned with efficiency. It seems right to make that point at the outset, even though

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I do not feel able to accept the amendments. Perhaps I can explain why.
The Bill is about money for the CAA; and of course it is essential that that money is spent efficiently and wisely. We are agreed on that point. We have to remember that ultimately the cost of the CAA's investment and its day-to-day running costs as well are paid for by the aviation industry and that means further down the line still that some of the cost is met by each of us every time we buy a ticket.
But we also need to remember that the CAA has a job to do—for example, to provide air navigation services and to ensure safety standards throughout the aviation industry. Indeed a main purpose of the Bill is to facilitate the CAA in its £600 million investment programme, which will mean the installation of new systems and equipment, much of it technically very advanced, to a tight schedule. The traveller keen to avoid delays at Gatwick at the start of his holiday or the businessman keen to get to his appointment and not waste time at Heathrow need to be sure that the CAA will be getting on with the job of putting the new systems in place.
With every public body a balance has to be struck between proper checks and accountability and proper pressures to efficiency, on the one hand, and proper freedom to get on with the job, on the other hand. With great respect, and while recognising the thinking behind the amendment, it seems to me that the amendment of the noble Lord, Lord Underhill, veers too far towards interventionism and thus too far towards inhibiting the CAA in its very necessary tasks. Even at three-year intervals such a comprehensive review as is proposed, covering not just, say, air traffic control systems but also areas such as the personnel or office services departments, would be a far from negligible burden on the CAA. Indeed, I am afraid that such a comprehensive review would even be counter-productive. The CAA would need resources to respond to these reviews and if they were to be more than token superficial examinations or glances by the parliamentary committee there would, I submit, be problems of disruption and resultant inefficiency. The amendment would tend to cause the very problems which I entirely accept it aims to cure.
It must also be remembered in passing that such a review would be quite a burden for the parliamentary committee itself. There may even be those prepared to doubt whether such a committee, however, learned and expert its members, would be the best way of carrying out what would seem to be in effect a management consultancy role.
Having said all that, I stress that the CAA is by no means without checks and pressures to efficiency. I do not just mean its auditors or its use of management consultants from time to time or its own internal efficiency unit, important though these undoubtedly are. We also have the Monopolies and Mergers Commission, which carries out efficiency investigations of aspects of every nationalised industry's work every few years, under Section 11 of the Competition Act 1980. Indeed, National Air Traffic Services, and particularly its major capital investment programme and systems for improving
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efficiency, is being examined in exactly that way at present. I hope the noble Lord, Lord Underhill, takes reassurance from that, as I felt he did when I answered the same point at Second Reading.
In addition, my right honourable friend the Secretary of State for Transport, with the agreement of the Chancellor as necessary, approves all the CAA's capital investment over certain limits, and his department keeps in close touch with the CAA to monitor investment appraisal generally. The department is also involved in the CAA's corporate planning procedure, annually conducts the investment and financing review and administers controls such as the external financing limits, just as is done with all nationalised industries. As to parliamentary scrutiny, the Transport Committee in another place can and does conduct inquiries into aspects of the CAA's work. Finally, the Secretary of State appoints all members of the CAA board, including the chairman. The Secretary of State is of course ultimately accountable to Parliament for these appointments.
As to the CAA's income, increases in charges, where his powers are involved, are approved by my right honourable friend the Secretary of State for Transport. In the case of certain all-important air traffic control charges, they are actually fixed by statutory instrument and those are subject to parliamentary as well as ministerial scrutiny. I also venture to remind my noble friend Lord Kinnoull—for I know he is very well informed on aviation matters—of what is done already in the spirit of his amendment. Those who use the CAA's services are able to make their views known not only to the CAA but also directly to Ministers. I can assure your Lordships that they certainly do that.
The CAA already consults the aviation industry about any increases in charges which it wants to put forward. This is done by letter, setting out the details of what is proposed with background information. Nearly 1,000 such letters are sent out on regulatory charges alone and the CAA works hard at covering all relevant interests, including manufacturers and indeed user groups, as well as operators. This year, for example, a proposed increase was reduced in the light of consultation.
Regulatory charges are also considered by the Safety Regulation Group Finance Advisory Committee, the Operators Advisory Committee and the Air Registration Board, on all of which the industry is represented. In addition, the CAA also holds meetings with organisations representing the aviation industry, including the major airlines, to discuss its charging policies and its costs. Such consultation is carried out both directly and through the Eurocontrol consultation procedure when the air traffic control charges, which are collected through the international Eurocontrol mechanism, are concerned.
Turning to the question of efficiency indicators, there is already a considerable amount of information published in the CAA's annual report and accounts. This includes not just aggregate financial information—what I might call the usual bottom line figures—but also breakdowns for

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different areas of the authority's activities. This means, for example, that in the 1988–89 accounts one can see how much went on staff costs, or research and development, for air safety services or United Kingdom airspace traffic services.
The accounts also give non-financial statistical information, such as traffic handled or licences granted. They also include key performance indicators, very much in the spirit of my noble friend's amendment, such as the cost of safety regulation work as a percentage of UK civil aircraft production, or a capacity-manpower index showing the number of air movements against operational manpower.
However, I can go further and say that my right honourable friend the Secretary of State is already discussing with the CAA what more could be done. A much longer and even more comprehensive list of performance indicators is being drawn up. The intention is that they will be published in the CAA's annual report and accounts for 1990–91. I hope that my noble friend will feel that this is an important step forward.
I have sought to indicate what is already being done and what more it is intended to do. I hope, against the background of what I have said, that your Lordships will agree that it would really not be appropriate for this small Bill, which focuses only on a particular though important point of financial mechanism, to have put into it a much broader policy requirement not directly related to borrowing.
I am honestly not persuaded that these amendments, which would entail arrangements going beyond those for any other nationalised industry, are the best way to achieve efficiency. Nor am I convinced that the Civil Aviation Authority is the unaccountable monolith some would have us believe. I hope that the noble Lord, Lord Underhill, and my noble friend will feel that the present arrangements to promote efficiency and responsibility are, after all, appropriate to their purpose and that, recognising that we largely share the same objectives, they will feel able to withdraw their amendments.
The Earl of Kinnoull: I am grateful to my noble friend as I am sure he is grateful to my noble friend Lord Boyd-Carpenter for his powerful defence of the Civil Aviation Authority. The discussion which we have had this afternoon is no criticism of that authority and the noble Lord, Lord Underhill, went out of his way to state that. It is a question of accountability. I add that I am delighted that my noble friend Lord Boyd-Carpenter was able to intervene because he was the distinguished first chairman of the Civil Aviation Authority and brought great lustre to that position when the authority was set up.
I am sure that my noble friend would not defend the Civil Aviation Authority to such an extent as to say that there is no weakness at all in it. It is a large and efficient organisation. In many ways it does a wonderful job but there are weaknesses. If I may say so to my noble friend, with respect, there
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is a continual weakness over the air navigation services. He may have read the independent report of the committee chaired by my noble and learned friend Lord Rawlinson which looked into the Civil Aviation Authority. The report specifically referred to the air navigation services and said that there was no reason why it should not be healthy to have competition with those services. There was no reason why individual airports should not use the public sector ATC agency.
I know that my noble friend is aware of this and I hope something may come out of it because competition would help efficiency. That is a fair comment and it is not a matter necessarily of divorcing air navigation services which carry out a tremendously responsible job for the major airports in our country. It is at the smaller airports where this might be put to private use.
I am grateful to my noble friend. I feel that he has gone some distance in showing his sympathy for the spirit of the amendments. I am grateful to learn that his right honourable friend is seeking to ensure that in future the Civil Aviation Authority will put more information into its annual report which will give better accountability. For those reasons I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 2 and 3 not moved.]
Clause 1 agreed to.
Remaining clause agreed to.
House resumed: Bill reported without amendment: Report received.

Pensions (Miscellaneous Provisions) Bill
4.10 p.m.
The Paymaster General (The Earl of Caithness): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(The Earl of Caithness.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Qualifying conditions]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 1:
Page 1, leave out line 27 and insert:
("(c) in subsection (8), for the words "or (3)(a) above, or in both," there shall be substituted the word "above".").
The noble Earl said: This amendment. corrects a minor drafting omission. It is self-explanatory. I beg to move.
Baroness Turner of Camden: We on these Benches accept the amendment.
On Question, amendment agreed to.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 2:
Page 2, line 2, leave out ("subsections (10) and (11)") and insert ("subsection (10)").
The noble Baroness said: This is in the nature of a probing amendment. I make no claims to technical excellence for it. The Bill as it stands seeks to meet the demands of equality by removing from women a condition which allows the payment of pensions increases to pensioners under 55 with dependants. We were told on Second Reading that the number of women involved is small. I believe it is only eight. We have also been informed that their accrued rights will be protected. That appears to be provided for in the Bill. However, I am not happy about provisions designed to bring about equality between the sexes on the basis of the less favourable rather than the most favourable provision. In my view there should be a levelling up rather than a levelling down. That is also the view, as I understand it, of the National Union of Teachers. That is one of the unions affected by the measure and its staff have written to me on the subject.
It appears that the NUT approached the Department of Education and Science some time ago seeking a change in the regulations to include men under age 55 with dependent children. The Department of Education and Science referred the matter to the Treasury and the subsequent provision in the Bill, which now causes the NUT concern, is that the Government propose that women under age 55 will not qualify for their public service occupational pension to be index linked after 1st January 1993. In other words, the department went along to the Treasury to try to obtain an improvement which would enable men to benefit from the slight advantage but now the provision is to disappear altogether.
The Minister said on Second Reading that if a levelling up process were adopted it would result in heavy expenditure because it was estimated that the numbers involved would be very great. I should like to explore this matter a little further. It seems to me to be a bad principle that equality must be achieved at the lowest cost and by adopting the lowest provision rather than the better one. Although only a few women are affected at the moment, that does not take account of what could happen in the future. As we all know in this House, we are facing demographic changes. I suspect that in the future there will be far more women who at some time during their working lives will have to adopt the role of carers, and who will therefore need support because they have dependants. For those reasons I should like to explore the matter further through my amendment.
As I said earlier, I am not wedded to the wording of my amendment. I do not claim technical excellence for it. Nevertheless, I simply wish to explore further a situation which reduces a good provision for women instead of transferring that better and more advantageous provision to men in the cause of equality. I beg to move.
Lord Rochester: On Second Reading I said that it must be recognised that the elimination of
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discrimination by removing the benefit now enjoyed by women amounts to a levelling down rather than a levelling up. It should not be thought that because we accept the proposal in this case, the Government would obtain the agreement of Members of the Committee on these Benches if they sought to use this Bill in any way as a precedent for further legislation stemming from European Community directives and covering other aspects of social policy.
In that connection I instanced on an earlier occasion the matter of equalising retirement ages. The noble Earl, Lord Caithness, will recall that. I said that any inclination on the part of the Government to level down by fixing a common retirement age as high as 65 should at least be balanced by an increase in the level of the basic state pension. In his reply to the debate the Minister said nothing, if I may say so, to reassure me on that point. I shall be interested to hear whether he can add anything today to the non-committal statement that he then made.
4.15 p.m.
The Earl of Caithness: I am grateful for the clarity with which the noble Baroness introduced her amendment. It may help the Committee if I briefly define the purpose of the clause. This clause of the Bill provides for the phasing out of Section 3(2)(c) of the Pensions (Increase) Act. This section provides for women pensioners under 55, not disqualified on ill-health grounds, to qualify for a pensions increase if they have a dependent child. Very few women qualify under that provision. As the noble Baroness reminded the Committee, as far as we know only eight women come into this category in the centrally administered schemes for which details are available.
However, this discrimination must be ended to comply with the EC Directive No. 86/378 which requires member states to introduce equal treatment for men and women in occupational pension schemes. Levelling up—that is, giving the same concession to men and women pensioners under 55—would be costly for schemes with normal retirement ages under 55. Equal treatment can only therefore be secured by removing this provision. That is done in the Bill in a way which fully protects the accrued rights of female scheme members and pensioners. That was a point that the noble Baroness raised. I hesitatingly confirm what I said to her on Second Reading. The existing rights are protected.
I must tell the noble Baroness that her amendment is not technically correct, but I do not wish to go into that matter because there is the argument she raised about cost. It is for that reason that I have to advise the Committee that this amendment should be rejected. As the noble Baroness intimated, the cost would be large.
The initial cost would be about £6 million per annum for the police scheme and, if analogous arrangements were made, about £75 million per annum for the armed forces schemes. These costs could reach £14 million per annum at today's pension levels for the police schemes and, if analogous arrangements were made, about £100 million per annum for the armed forces schemes. That is a quite considerable chunk of taxpayers'

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money, and whatever government were in power would have to consider that among their other priorities because inevitably we all have to live on a budget.
Those who have retired on ill-health grounds or who are physically or mentally disabled already receive pensions increases below the age of 55. When other pensioners in these schemes reach 55, which is still five years younger than the normal retirement age for most public service schemes and 10 years below the age for state pensions, their pensions are increased and the increase that has built up since they retired is paid. I am sure the Committee agrees that we could not give priority to targeting additional benefits on a group of public service pensioners who already enjoy some of the best pension provisions of any groups of public sector employees. It is for that reason that the Government consider it is appropriate to level down and phase out this concession which benefits, in practice, only a small number of women.
I must say to the noble Lord, Lord Rochester, that I cannot add anything more to what I have already said. However, if I can add anything, having had further thought on the matter, I shall let him know.
Baroness Turner of Camden: I thank the noble Earl for that explanation. It is not my intention to press the amendment this afternoon. As I said when I introduced the amendment, it is a probing amendment to explore further the Government's view on the proposition that there should be a levelling up rather than a levelling down.
However, before I withdraw the amendment, I should like to put one further point to the Minister which was raised at Second Reading by the noble Lord, Lord Rochester. In principle we on these Benches, and I believe the noble Lord, Lord Rochester, are not in favour of achieving equality by choosing the lowest level rather than the better condition. Will the Minister let me know his view as to whether the Bill will be regarded as a precedent for the future? There are bound to be occasions in the future, particularly arising from European directives, when we have to take steps to equalise pension provisions. Situations may well arise where conditions are similar and men may not have benefited in the past while women have received a slight concession, and so on. I should hate to think that we should regard levelling down as an appropriate way of achieving equality within the directives emerging from Europe.
The Earl of Caithness: I fully understand the concerns of the noble Baroness. She will understand that I cannot give her the cast-iron guarantee that she would like me to give. However, I can assure her that every scheme will be considered on its merits, because every scheme will be different. One has to look at the entire picture. In this particular case, after a great deal of thought, we decided that it would be right to deal with the matter as we have. I am not in a position to judge at the moment whether similar circumstances apply to other schemes.
Baroness Turner of Camden: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 and 4 not moved.]
Clause 1, as amended, agreed to.
Clauses 2 and 3 agreed to.
Clause 4 [Employers' contributions towards cost of pensions increase for teachers and persons engaged in the health services etc.]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 5:
Page 4, line 42, at end insert:
("(3) Regulations under subsections (1) and (2) above shall only be made after consultation with appropriate bodies as provided for by section 9(5) of the Superannuation Act 1972.").
The noble Baroness said: Again, this is an attempt to probe beyond what was said by the Minister in the Second Reading debate. I have put down the amendment because I was not altogether happy with the reply that I received from the Minister when we discussed Clause 4 on that occasion. It seemed to me that the only way in which I could raise the matter in Committee was by putting down an amendment in these terms.
The amendment calls for consultation with the appropriate bodies before regulations under the clause would be brought into operation. I am sure that the Minister will say that it is entirely unnecessary because the 1972 Act compels consultation and there is no point in stating it again in the Bill. However, there is genuine concern among the teaching organisations about the Government's intentions under this clause. Although there has been an assurance that there will be consultation, there is a need to know more about the Government's intentions at this stage.
I have been told by the teaching organisations that they would like to know the precise circumstances in which Clause 4(1) will be activated for the first time. Is there any prospect of the clause being activated for the first time before, first, there has been an agreed revaluation of the teachers' superannuation scheme notional fund and, secondly, agreement has been reached on a method of ensuring realistic returns on future excesses of income over expenditure for the teachers' superannuation scheme notional fund? It may be recalled that the issue of the teachers' superannuation scheme notional fund was raised earlier when we discussed the matter at Second Reading.
I should like the Minister to say what the situation is in relation to those two points. Although he has said that there will be consultation, and I am sure that he will do so again this afternoon, it is within that context that the organisations most concerned with this part of the Bill are seeking some reassurance. I beg to move.
Lord Rochester: At Second Reading I said that my understanding was that, although the working party on the funding of the teachers' superannuation scheme had reached agreement on how the scheme

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could be credited with sufficient funds to meet its future commitments, no agreement had been reached on the means by which the scheme could be compensated for past deficiencies in funding. Therefore I asked the Minister whether he would give an assurance that before the relevant regulations were introduced there would be adequate consultation with the interests concerned.
In reply the noble Earl said that there would be full consultation with staff and employers before the power was used. The noble Baroness has already made that point this afternoon. However, I suggest that that is not quite the same as engaging in consultations before the regulations are introduced. As I understand it, the amendment seeks to oblige the Government to do just that and to have such a requirement written into the Bill. I hope therefore that the noble Earl may feel able to accept the amendment.
The Earl of Caithness: The effect of the amendment would be to require consultation with staff and employers' representatives in teaching before regulations were made covering either the teachers' supperannuation scheme or the NHS scheme. However, I understand from what the noble Baroness said that she also wished to ensure proper consultation with the appropriate bodies in the NHS scheme although her amendment does not cover that point. I take it that that was her intention.
Clause 4 of the Bill inserts new subsections into Sections 9 and 10 of the Superannuation Act. However, Sections 9(5) and 10(4) of the 1972 Act, as the noble Lord, Lord Rochester, has reminded us, already provide for consultation with representatives of persons likely to be affected before any regulations are made under Sections 9 and 10. Those provisions will cover any regulations made under the new provisions conferred by the Bill. Therefore, I say to the noble Baroness and the noble Lord, Lord Rochester, that their concerns are already taken care of.
However, it may be helpful if I enlarge on the matter. The clause has been included to allow the Secretaries of State responsible for the NHS and teachers' superannuation schemes in England, Wales and Scotland to make regulations to permit the cost of pensions increase to be taken into account in determining employers' contributions. At present the Pensions (Increase) Act generally precludes pensions increase from being regarded as a benefit of the schemes. Since pensions increase is not a benefit of the scheme its cost cannot be taken into account in setting the rate of contributions which pay for scheme benefits. The costs of pensions increase are therefore borne by the departments which administer the scheme.
The teachers' and NHS schemes are unfunded but accounts are kept of expenditure and income, including income from the notional investment of balances in the account. The Government Actuary advises the Secretaries of State on the appropriate levels of employers' contributions on the basis of quinquennial valuations of the assets and liabilities
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attributed to the schemes. For that purpose the Government Actuary makes various assumptions.
As the noble Baroness reminded us at Second Reading, union interests in teaching have argued strongly in the past that the basis on which notional investment income is credited to the scheme is unrealistic. They consider that a different method of calculating investment returns would increase the assets attributed to the scheme and might therefore make possible lower contribution rates or improvements in benefit. I understand that the teachers' superannuation working party has agreed on a report which proposes an alternative method of assessing investment income credited to the notional fund.
The Government recognise that there are arguments for change in such matters as the investment assumptions which might be seen as giving greater realism in building up the assets of the schemes. However, we believe that there must be corresponding realism in treating pensions increases as a liability of the schemes. I understand that employees' and employers' representatives in the teachers' superannuation working party recognise and accept that. Without Clause 4 it will not be possible to take forward work on the package of changes in the operation of the notional fund which the teachers' unions support. That is not to say that final decisions on those issues have been taken. There is further work to do and there will be careful consultations with all the interests concerned before any change is made.
The noble Lord, Lord Rochester, was concerned about the costs which might fall to local authorities. Let me assure the Committee that the Government are also mindful of that point. We want to be sure so far as is possible that the net effect of any changes will not add unacceptably to the costs of employing authorities. On Second Reading the noble Lord asked why any changes could not be incorporated in primary legislation. He has raised that point again today. As I explained, the changes that we are considering would form part of a package. Once the package was agreed, it would be necessary to make the necessary changes in primary legislation to implement the proposals. The power that we are now seeking is an enabling power which the Government can use after full consultation with the interests concerned. It is natural to take the power in the Superannuation Act which provides the legislative framework for the schemes concerned and to use the existing arrangements for consultation with employer and employee interests.
I hope that the recognition which I have given to the need to contain additional costs for employing authorities and the need for full consultation before any changes are made will allay any of the misgivings which noble Lords may have. I hope that on that basis the noble Baroness will be able to withdraw her amendment.
4.30 p.m.
Baroness Turner of Camden: I thank the Minister for that explanation which is extremely helpful. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave withdrawn.
Clause 4 agreed to.
Clause 5 [Guaranteed minimum pensions: abolition of double indexation for surviving spouses]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 6:
Page 5, line 8, leave out from ("be") to ("and") in line 10 and insert ("taken to be one half of the rate of the deceased spouse's guaranteed minimum pension at that time").
The noble Earl said: Unfortunately, paragraph (b) as originally drafted may be ambiguous. The purpose of the amendment is to ensure that that ambiguity no longer exists. In order to enable us to do that, we have changed the wording to specify the rate of notional widows' or widowers' guaranteed minimum pension as one-half of the rate of the deceased spouse's guaranteed minimum pension. I can explain further if the Committee would like me to do so. I beg to move.
Baroness Turner of Camden: We are prepared to accept the Minister's explanation.
On Question, amendment agreed to.
The Earl of Caithness The Earl of Caithness moved Amendment No. 7:
Page 5, line 13, leave out from beginning to ("or) in line 14 and insert ("subject to any directions under section 59A below (whether made before or after the coming into force of this subsection), be accordingly reduced under that subsection by an amount equal to the rate, as determined under paragraph (b) above").
The noble Earl said: Amendment No. 7 puts beyond doubt that the existing direction and any directions made in the future will, where appropriate, apply equally to the notional guaranteed minimum pension calculated under Section 59(5ZA). I believe that that is appropriate. I beg to move.
On Question, amendment agreed to.
Clause 5, as amended, agreed to.
Clauses 6 to 9 agreed to.
Clause 10 [Restriction on election that regulations shall not apply to persons whose service has terminated]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 8:
Page 8, line 6, after ("employment") insert ("or office").
The noble Earl said: This is a drafting amendment. I beg to move.
On Question, amendment agreed to.
On Question, Whether Clause 10, as amended, shall stand part of the Bill?
Baroness Turner of Camden: I gave notice of my intention to oppose the Question that Clause 10 stand part of the Bill largely because I raised the matter at Second Reading as a result of representations that I had received from local government pensions advisers. Although I received an explanation from the Minister at that time, I am still unclear as to whether it meets the points that were made by the advisers.
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As I understand it, the clause as it stands would result in something being removed from people which they had hitherto enjoyed without there necessarily being any reason for it. If that is so, I feel justified in exploring the matter further by this means.
I am informed that the change in the law effectively nullifies most of the advantages conferred on such persons under the Superannuation Act 1972. Moreover, I am also told that there has been no consultation about the matter. If that is the case, it seems to me rather unwise to proceed in that way. People are generally reluctant to relinquish an advantage that they have. If that is the case, I cannot see that there is any good reason for so doing. With those few words, I ask the Minister to make some further comment.
Lord Rochester: I too am concerned that there has apparently been no consultation with interested parties about the effect of the clause on the rights of re-employed members of local government superannuation schemes. If that is the case, I hope that the Minister will be able to give us a satisfactory explanation as to how that has come about and will tell us what he proposes to do about it.
The Earl of Caithness: The aim of Clause 10 is to rectify an ambiguity in the provisions of the Superannuation Act which protect the pension rights of members of certain pension schemes if changes are made to scheme rules after they have left the scheme. The clause clarifies those provisions in their application to re-employed scheme members; namely, those who have left but subsequently re-join the pension scheme. It places the re-employed scheme member in the same position as a retired scheme member or a scheme member who has left and has a preserved pension until his last break in service. It places the re-employed scheme member in the same position as a serving scheme member who has not had a break in employment so far as his current and future service is concerned.
However, it may be helpful to the Committee if I set out in a little more detail why the Government consider it is appropriate to make this amendment to Section 12 of the Superannuation Act 1972. Pension schemes today are necessarily very complex and it is inevitable that the rules have to be adapted as circumstances change. The general tendency is for pension benefits to improve or for new arrangements, such as the ability to make additional voluntary contributions which could benefit scheme members, to be introduced. Nevertheless, it may sometimes be necessary in order to meet changed circumstances to make changes to pension scheme rules which could adversely affect some scheme members, for example, as part of a package of changes whose overall effect is advantageous.
In the schemes covered by Section 12, scheme members who have left are protected against detrimental retrospective changes in scheme regulations by a requirement that they must be given a right of election that the new regulations do not apply to them. That is a proper protection for retired scheme members and for those with preserved

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pensions, since Section 12(1) of the Act explicitly provides for retrospective regulations to be made. Serving scheme members are protected by requirements that staff representatives must be consulted before any regulations are made and of course by the negative resolution procedure which applies to regulations covering those schemes and which means that objections to new regulations can be raised in Parliament.
Unfortunately Section 12 as it stands does not make clear how re-employed scheme members are to be regarded. Are they treated as having left or are they serving members? If the former is the case, they are placed in a very advantageous position vis-à-vis serving scheme members. Each re-employed scheme member would be able to freeze the pension scheme rules in the most advantageous form so far as he himself is concerned, not only in respect of any benefits already accrued by past service but also in respect of any benefits that he may accrue from future service.
The result could be a wide range of different provisions applying to individual re-employed scheme members. That would be very difficult to administer as well as being manifestly unfair to those scheme members with continuous unbroken service, some of whom could actually have joined the scheme before the re-employed scheme member joined for the first time. But it would also be inappropriate to treat re-employed scheme members differently from other former scheme members who had left but not rejoined the pension scheme so far as concerns the pension rights that they had accrued before they left.
Clause 10 ensures—and I think that this will resolve some of the fears of the noble Baroness—that those rights will continue to be protected. I can also assure her that there will therefore be no impediment to the re-employment of pensioners in jobs where their experience can be put to best use. I am sure that all Members of the Committee will welcome that.
The clause is intended to secure a proper balance between the interests of pensioners, those with preserved pensions, current employees and scheme managements. It ensures an appropriate degree of protection for pension rights of those who have left and rejoined the pension scheme, while providing greater flexibility for scheme managements to adapt the provisions of pension schemes to meet the needs of current and future employees.
Baroness Turner of Camden: I thank the Minister for that very clear explanation. I still have some concerns because it seems to me that there will be a worsening for some people. I do not see how that can be avoided. I should like to ask him one question to make sure that I have it quite right. Did I hear him correctly to the effect that if people are required to rejoin the service because their skills are needed, the better conditions will still be available to them? Is that what he said?
The Earl of Caithness: What I said was that the amendment that we are making, which clearly applies to the re-employed scheme members, will not be a deterrent to managements re-employing
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previous employees because if every previous employee who wanted to be re-employed could freeze his scheme in such a way that there were a multitude of schemes, that would inevitably put off managements. The noble Baroness has a point that in some cases there might be disadvantages but one must look at the scheme as a whole, which overall is advantageous.
Baroness Turner of Camden: I thank the noble Earl very much for that extra clarification. Obviously I do not intend to press the matter at this stage. I tabled the Motion because I wanted to secure from the Minister a detailed explanation of what the clause really meant in the light of the advice and recommendations I had had from the people who have been advising me. I shall look very carefully at what the Minister said and perhaps take some further advice if I need to do so. In the meantime I beg leave to withdraw my Motion.
Clause 10, as amended, agreed to.
Remaining clauses agreed to.
House resumed: Bill reported with amendments.

Government Trading Bill
4.45 p.m.
The Earl of Caithness: My Lords, I beg to move that this Bill be now read a second time.
The primary purpose of this short Bill is to extend the enabling powers to create trading funds under the Government Trading Funds Act 1973. In preparing for this debate I looked back over what my noble friend Lord Gowrie said in introducing the Second Reading of the 1973 Bill. In spite of the passage of time the basic objectives of creating trading funds remain the same. He said:
"This is a short Bill, almost entirely concerned with finance. It provides that a restricted range of government organisations may be financed through trading funds rather than from Votes. This change in the method of financing is not an end in itself. With a number of other changes which are being introduced in the management of the organisations, it is designed to enable them to carry out those activities more effectively".
What has changed is the context. The impetus for this Bill comes from the Government's Next Steps initiative. This stemmed from a report by the Efficiency Unit entitled Improving Management in Government: the Next Steps.
My noble friend Lord Belstead, repeating a Statement made by my right honourable friend the Prime Minister in another place, announced to this House on 18th February 1988 that the Government accepted the main recommendations of the report and in particular that,
"to the greatest extent practicable the executive functions of Government, as distinct from policy advice, should be carried out by units fairly designated within Departments referred to in the report as 'Agencies'. Responsibility for the day-to-day operations of each Agency shall be delegated to a chief executive. He will be responsible for management within a framework of policy objectives and resources set by the responsible Minister in consultation with the Treasury".
This concept is not so very different from that which gave rise to the 1973 Act—the Fulton Report's

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"units of accountable management". The difference is one of scale. Perhaps units of accountable management were a concept ahead of their time. Certainly they never really took off. All that is left are the few remaining trading funds set up under the 1973 Act. With Next Steps we already have, with the launch of the Patent Office last week, 11 agencies and 43 announced candidates, with a clutch of launches planned for the next couple of months. Taken together agencies and agency candidates already cover one-third of the Civil Service.
The main aim of Next Steps is to deliver services more efficiently and effectively within available resources for the benefit of taxpayers, customers and staff. It does so by identifying suitable units—the agencies—and for each agency setting out its responsibilities, setting performance targets, delegating the authorities—particularly on financial and personnel matters—necessary to make the targets achievable and making the chief executive accountable for the results achieved.
At this point I should draw your Lordships' attention to the White Paper published by my right honourable friend the Chief Scretary to the Treasury and entitled The Financing and Accountability of Next Steps Agencies. It was designed to accompany this Bill when it was introduced in another place. It has two main purposes. First, it sets out the full range of intended financing and accountability arrangements for agencies—whether they are financed by the normal process of parliamentary supply or as trading funds. It thus sets this Bill in its context. Secondly, it considers the changes proposed in this Bill, the reasons for them and how the Government would intend to use the new powers if they are granted by Parliament.
Annex A to the White Paper lists the agencies and agency candidates as they were when the White Paper was published. As your Lordships will see from this list, such agencies come in all shapes and sizes and cover a range of widely differing activities. There is not standard blueprint and the arrangements for each agency have to be tailored to suit its particular nature and circumstances. This is as true of financing as other matters. As the annex indicates, many agencies and certainly the vast majority of staff employed will not be suitable to become trading funds and will continue to be financed with the normal processes of parliamentary supply. Not all those agencies that fall within the enabling powers of the Bill will necessarily become trading funds but for some agencies trading fund status confers a genuine prospect of improved value for money.
A trading fund is designed to encourage a much more businesslike approach to the delivery of government services where their cost is principally financed by receipts from those services. It is this requirement of financing by receipts that restricts the range of government bodies suitable to be financed by means of a trading fund. The mechanism is summarised in paragraph 4.2 of the White Paper:
"A 'trading fund' provides a financing framework which covers operating costs and receipts, capital expenditure, borrowing and net cash flow. It has powers to borrow to meet capital
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requirements, and to establish reserves out of surpluses. Within this framework, it can meet outgoings without detailed cash flows passing through vote accounting arrangements".
A trading fund addresses the fundamental problem that the cash-based vote and appropriation account system for services wholly or mainly funded by parliamentary supply does not well suit operations financed by receipts. It is designed, so far as is possible within a public service, to bring the method of financing for trading activities into line with the best public and private sector methods of managing organisations which have significant capital assets. By giving a standing authority to apply receipts to expenditure, it allows management to vary expenditure up or down in line with receipts rather than being constrained by cash control on inputs. The fact that all the costs entered in the trading account will correspond to actual outgoings, especially the servicing of the capital, should help to focus management's attention on the trading and management accounts and on the return which it is obtaining on the capital employed. That will be reinforced by the requirement to meet a financial target.
It follows that the detailed cash flows of trading funds will no longer be within the full control processes of parliamentary supply. The 1973 Act addressed this issue in two ways. First, it required that no trading fund could be set up without Parliament debating each proposal on art affirmative resolution order. That principle is maintained by the present Bill. Secondly, it laid down for trading funds statutory requirements for accounting to Parliament stronger than for the remainder of the Civil Service. Those requirements are strengthened by the Bill.
I turn now to the Bill itself. Clause 1 substitutes four new sections for Sections 1 and 2 of the 1973 Act and adds a fifth section. New Section 1 contains the new enabling powers. It extends the powers under the Government Trading Funds Act 1973 to set up trading funds to a wider range of bodies, including those which form a statutory and monopoly service with fees paid by the public and fixed under statute. That is achieved by the new enabling powers and by the widened definition of "services" in Section 1(7). The powers would allow a trading fund to be established where operations of a department of government are suitable to be financed by a fund and in particular the revenue of the fund would consist principally of receipts in respect of goods or services provided in the course of those operations; and where it would be in the interests of improved management efficiency and effectiveness. The administrative tests that the Government would intend to apply using the enabling powers are essentially concerned to ensure that the setting up of a trading fund would lead to greater efficiency and effectiveness and are described in the White Paper.
New Section 2 deals with the appropriation of assets and liabilities for a trading fund, with their financing and with related matters. New Section 2A deals with public dividend capital in relation to trading funds. New Section 2B deals with borrowing by trading funds and sets a new limit on all such borrowing of £2,000 million which may be increased

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to £4,000 million by affirmative resolution order. New Section 4A provides for the winding up of trading funds.
Clause 2 requires the responsible Minister to prepare and publish accounts and reports of trading funds in such forms as the Treasury may determine. It also makes minor and consequential amendments to the 1973 Act.
Clause 3 widens the powers contained in the Exchequer and Audit Departments Act 1921 so that the Treasury may require the preparation of statements of account in respect of any operations of a government department. As the White Paper explains, those would cover the production by agencies other than trading funds of commercial-style accounts.
Clause 4 repeals the now obsolete Borrowing (Control and Guarantees) Act 1946 and makes certain consequential repeals of other enactments. Clause 5 deals with transitional arrangements.
It is a short Bill but one that I believe will have important benefits for the more efficient and effective conduct of business within government. I commend it to the House.
Moved, That the Bill be now read a second time.—(The Earl of Caithness.)
4.55 p.m.
Lord Bruce of Donington: My Lords, I am most grateful to the noble Earl for having introduced the Bill. It arises from the declared purposes of governments over a number of years to try to separate the executive functions of departments of state from those which are more concerned with policy determination and general implementation and for the responsibility of advising Ministers. From the Fulton Report and the Ibbs Report onwards, there has been a progressive, and so far as I can see an agreed, programme of proceeding further in this direction.
As the noble Earl stated, in her announcement on 18th February 1988 the Prime Minister introduced the report of the Efficiency Unit, Improving Management in Government: the Next Steps. However, she also stated at that time at col. 1154 of the Official Report on 18th February:
"I do not anticipate that legislation will be required for the proposals that I have announced".
It appears that on reflection the anticipation of the Prime Minister was not realised and that legislation has proved necessary in order to tidy up, or indeed implement, certain financial implications of the carrying out of the recommendations of the Efficiency Unit. Otherwise Parliament would not have had an opportunity in your Lordships' House of monitoring or interfering in any way with the profound changes in the form and functions of government that are implicit in the proposal to set up these agencies.
As the noble Lord said, there are two kinds of agencies. Both are covered in the Bill. There are the Next Step agencies which are to be involved in trading. They are defined in the White Paper to which the noble Earl has referred as those in respect of which the greater part of their revenues are
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financed by receipts from the customers of those agencies. At the time of the report nine of those trading Next Step agencies had been established and a further 27 were recommended as being likely candidates. At the date of the original proposals put forward in the White Paper a further 15 were proposed. That gives the total number of trading agencies either in existence or proposed as 24. I shall give examples of those presently.
The other agencies, which will be headed by executives responsible to the Minister and ultimately responsible to Parliament, amount to 28. One non-trading agency has already been established. A further 27 are candidates for inclusion at a later stage. I am told that there may also be a further two which have since been added. A total of 30 will be non-trading agencies. That gives a total of 54 governmental agencies. As the Minister said, that will result in the departure of well over one-third of the total number of civil servants from the main body of Civil Service departments.
The principles upon which all those agencies were conducted are set out in the report of the Efficiency Unit. I shall summarise them because it is important that at some time we should give fundamental consideration to the far-reaching principles involved. The findings of the original Efficiency Unit report, to which the Prime Minister referred in her speech on 18th February were:
"First, the management and staff concerned with the delivery of Government services (some 95 per cent. of the Civil Service) are generally convinced that the development towards a more clearly defined and budgeted management are positive and helpful".
We on this side of the House do not wish to dissent from that general proposition.
"Second, most civil servants are very conscious that senior management is dominated by people whose skills are in policy formulation and who have had relatively little experience of managing or working where services are actually being delivered".
Once again, we on this side of the House would associate ourselves generally with that finding. Then we find a further conclusion:
"Senior civil servants inevitably and rightly respond to the priorities set by their Ministers which tend to be dominated by the demands of Parliament and communicating government policies".
That also is a tendency that has been evident over many years. We agree in general with that finding. As a result there has frequently been ministerial overload. In current circumstances, where Ministers have not only a responsibility for a great department of state but have responsibilities connected with their membership of the European councils, it must be clearly understood—we on this side of the House agree—that there is a considerable overload. The other finding was that too little attention had been paid in the past to the results of the expenditure and other activities of the various great departments of state. We do not dissent from that finding. Those findings are all generally acceptable to those of us on this side of the House.
The normal constriction imposed upon the Opposition in your Lordships' House of not opposing a Government Bill on Second Reading, is fortified by the fact that the Opposition in another place did not dissent from the Second Reading.

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Therefore on this side of the House we wish to be as co-operative as we can be in assisting in that general forward process, subject of course to certain safeguards which have not yet been dealt with entirely. Therefore in Committee we may well submit amendments from which the Government may dissent. They will probably dissent from at least two of them which were moved in another place because the Official Opposition, supported by others, objected to the continued agency formation process (in so far as it affected those which were going to use trading funds) and the threat of some privatisation in the future. The Opposition in another place did not like that idea. I shall not press the matter at this stage in your Lordships' House because it is likely to be some years before such a privatisation takes place and the prospect of it being achieved by the Government at present in office after the next general election is likely to be pretty remote. I shall not press the point because it would be unkind at the moment.
There is of course the question of public accountability. When the activities of government departments are hived off into separate agencies there is always the question of public accountability. By that I do not mean only accountability to the other place—the requirement to submit accounts to the Comptroller and Auditor General, and so on; to appear before the Public Accounts Committee; and the responsibility of Ministers to continue to answer questions which may affect their agencies—but the rights of the public. It has not yet been successfully established that the quality of public service can be measured by its profitability in trading terms. That, I am afraid, still remains to be proved.
I do not want to go into too much detail at this stage because this is only a Second Reading, but among the trading fund agencies that have been formed is of course Her Majesty's Stationery Office. The prices it charges for Government publications of which it has a monopoly have sharply increased over the years. Profit targets will be set for Her Majesty's Stationery Office. It will set a return on capital requirement. To put that public monopoly, now of course to be a trading fund next-step agency, in the same category as a private enterprise firm is at any rate open to doubt.
There is always the possibility that, where such a government hived-off organisation is a monopoly which sets itself financial targets of profitability, the profitability factor may outweigh service to the general public. Over the years it has become common knowledge that the price of documents issued by Her Majesty's Stationery Office has accelerated by an amount considerably in excess of the RPI. A point can arise where the public, through being unable to acquire documents because of financial restriction, may not be as well informed as had the documents been available at a lower price.
I am given to understand that the report into the activities of the Al Fayeds, for example, costs £45. I do not want to evaluate costs against the activities of crooks but the price will not enhance the report's circulation. The problem of whether the pursuit of
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profit-determined efficiency is always the best way to serve the public has still to be resolved.
The Minister may have observed in today's Financial Times a current commentary on the result of the establishment of the new agencies to which he referred. It stated:
"A more likely result is buck passing. The minister will take the credit for successes while blaming the chief executive for failures. When things go wrong, the chief executive will say: I pressed the Government for more resources, but could not get them. Ministers will seek to distance themselves from agencies, but if a chief executive seeks to blame the Government's financial stringency and the minister's position is threatened by inefficiencies, he will intervene, and nothing will be achieved by devolution".
The same feature also deals with the problem of the general public.
Ultimately freedom in a democracy depends not merely on the right to vote once every five years or at a by-election but also upon the continued flow of accurate information to the general public. My view, which I shall not press in Committee but now give for your Lordships' consideration, is that we in the United Kingdom will never have a free democracy until we have a freedom of information Act roughly in conformity with that in the United States. Indeed the Swedish Government, who follow the same policies as Her Majesty's Government in relation to the devolution of executive functions of government to the trading or non-trading agencies, have established a successful ombudsman to cover exactly those matters to whom the individual citizen can complain.
We are also concerned about the accounts. Paragraph 5.9 of the White Paper to which the noble Earl has referred states:
"The trading fund legislation will continue to impose statutory obligations"
and I underline the word "statutory"—
"on all funds, whether created under the existing or the extended powers, to prepare full accounts for each financial year; these will be commerical-style accounts".
I have looked carefully through the Bill not only in regard to the trading agencies but also the non-trading agencies. I have done so particularly in regard to the amendments to Section 5 of the Exchequer and Audit Department Act 1921. That does not provide for the form of accounts to be rendered. There is no requirement under the Government's Bill or under the Acts that it amends, including the Act of 1866, which requires a specific form of accounts to be rendered in respect of these agencies. There is provision that accounts will be prepared but accounting concepts have changed considerably over the years.
With the noble Earl's co-operation, I sincerely trust that we on this side of the House will be able to devise an amendment suitable for him to accept so that the intention expressed in the White Paper—that is for a statutory obligation for the agencies to prepare full accounts for each financial year which will be commercial-style accounts—will receive statutory status within the Bill or the Acts that it amends. Drafts will be submitted during the course of the Committee stage. Should the noble Earl require to consult with us prior to that stage I

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shall be happy to co-operate in order to achieve the purpose set out in the White Paper.
We are concerned with a number of most important bodies. It may not be known, for example, that the agencies will fall under the financial purview of the Government and come within the administrative process. I say that it is administrative because, apart from the financial reforms incorporated in the Bill, all the others will be carried out by administrative action. It is as well that the country is aware that among the bodies which will become new agencies as distinct from part of the mainstream Civil Service is the social security benefits administration. It employs a large number of people and it received the strictures of the Auditor General when he recently audited the National Insurance Fund.
They are grave matters and the Bill provides the only occasion for us to raise them; other than on an originating Motion tabled by the Government or in a short debate initiated by one of the political parties. The noble Earl will be astounded to read paragraphs 13, 14 and 20 of the report of the Comptroller and Auditor General about the present state of the administration of the social benefits which include the majority of social security payments. By reason of the hour I shall not read them now but they require the most urgent attention.
We on this side of the House are prepared to give constructive support to the general thrust of the new agencies—the Next Steps agencies. We consider that they have a most valuable function to perform. However, it must not be assumed a priori that the mere creation of an agency, the setting of financial targets and all the paraphenalia that has been asssociated with similar ventures during the past few years will, of necessity, be best for what the Government euphemistically term the "customer". They are, in general terms, the citizens of the United Kingdom whose interests we are here to protect. Therefore, we hope that the noble Earl will respond to the constructive approaches that I have made on behalf of Members on this side of the House so that finally we shall have a much better Bill, still within the Government's policies, than is now before the House.
5.17 p.m.
The Earl of Caithness: My Lords, I am pleased that this afternoon we in this House have had the chance to debate the Bill which, though modest in itself, marks an important contribution to the wider reforms which are taking place through the Next Steps initiative in the way in which government go about their business. I am particularly grateful for the contributions of the noble Lord, Lord Bruce of Donington. I thank him for his constructive remarks and point out that my door is open too should he wish to discuss matters between now and another stage.
In my opening remarks I touched briefly on the origins of the Next Steps initiative and gave the House some idea of the progress that we have been making. As I said, with 11 agencies up and running and 43 announced candidates we have about one
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third of the Civil Service already within our sights. The Next Steps project manager, Mr. Peter Kemp, has said in public on a number of occasions that he will eventually expect something of the order of 75 per cent. of civil servants to be working in agencies. We are talking about maybe 400,000 civil servants and many billions of pounds of public expenditure. We are also talking about organisations which provide a large number of important services to the public ranging from such services as forecasting the weather, to issuing driving licences and making social security benefit payments to quote but a few examples. The scale of this reform should not be underestimated and the scope for benefits in terms of better quality and more efficient and effective public services is considerable.
The noble Lord, Lord Bruce, confirmed my figures, in slightly different format. However, I should perhaps remind the House, as I indicated in my opening speech, that not all those bodies which fall within the powerhouse of the Bill will necessarily become trading funds. Each case must be considered on its merits. At present one agency, HMSO, is a trading fund, as the noble Lord, Lord Bruce, reminded us; one trading fund, the Mint, is an agency candidate.
At present only around 20 per cent. of the running costs of government departments are offset by related receipts. It therefore follows logically that the majority of government activities will not be suitable to become trading funds because they will not have sufficient receipts to qualify.
The noble Lord, Lord Bruce, spoke earlier about privatisation and will mention the matter in more detail at a later stage. Before agencies are set up all other options, including abolition and privatisation, are examined. In most cases the examination leads to the conclusion that the nature of the services provided by the agencies does not make privatisation a feasible or realistic option. That is not to say that some activities might not be contracted out, but generally our expectation is that most mainstream activities of Next Steps agencies will continue to remain within central government for the foreseeable future.
I look forward to debating that in more detail with the noble Lord—who then spoke on what I consider to be an equally important point, the question of the quality of service. He suggested that because trading funds are largely financial mechanisms—they are set targets and will be concerned with financial matters—the quality of service is irrelevant and would suffer under pressure to meet financial objectives. Let me make it absolutely clear that that was never the intention and certainly is not the intention now.
The main aim of the Next Steps initiative is to deliver services more efficiently and effectively within available resources for the benefit of taxpayers, customers and staff. That applies just as much to agencies which become trading funds as to other agencies. It is always possbile to throw more money at public services, and that may or may not improve delivery. Many providers of public services are monopoly suppliers and therefore increased

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expenditure is likely to be reflected directly in increased charges, which is not always what the customer wants. In each case I say to the noble Lord that a balance has to be struck between securing improved efficiency and effectiveness in the delivery of services and protecting the taxpayers' and the customers' interests.
That does not mean that quality of service is the poor relation. As my right honourable friend the Chancellor of the Exchequer made clear in a speech to the audit commission in June of last year, shoddy public services should not be an option, nor should they be tolerated. We should not have embarked on the Next Steps initiative or introduced this legislation if all we were interested in was cutting costs. This Bill, unlike the earlier Act, no longer refers to improved commercial operation. Instead it specifically refers to management effectiveness, which means delivering a better service to the customer as well as the taxpayer.
The increased accountability requirement will show more clearly the quality of service actually provided compared with the targets originally set. They will thus lead to a better service to the public and better containment of taxpayers' and users' costs. The publication of full reports, including details of the extent to which agencies met their quality of service targets, will help to put agencies under strong pressure not only to maintain but to improve the standard of services provided.
The noble Lord, Lord Bruce of Donington, like me. managed to find a moment in his busy day to look at the Financial Times. I am glad that Mr. Bogdanor of the Financial Times is paying attention to this very important initiative and recognises that it is a real attempt to improve management and government for the benefit of taxpayer, customer and staff. I am glad that he recognises that there is a sensible bridge to be built between public and private ways of doing things, including a greater emphasis on output measurements and the extent of customer satisfaction, which is clearly right. Many of our public services could be improved and Next Steps is the right approach. I am glad that the noble Lord endorses the general direction in which we are going.
Mr. Bogdanor, however, is factually wrong on the question of accountability and redress. Ministers only delegate their powers to chief executives and can take such delegations back. They can become involved in day-to-day matters, though it is hoped that they will not normally do that. Individuals can still appeal to their MPs and MPs to the Minister responsible for all the activities of the agency, though as a matter of good management and speedy customer satisfaction it is hoped that they will try the chief executive first.
The Parliamentary Commissioner—the ombudsman—continues to have exactly the same
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rights of access and powers in respect of chief executives and staff working in agencies as he has now. With regard to freedom of information, Next Steps is a contribution to that rather than the reverse.
The noble Lord touched on the form of accounts. Here I bow to the superior knowledge of the noble Lord, as an accountant. He was right to say that the 1973 Act did not place a statutory requirement on the form of accounts and the present Bill follows that. However, all trading funds under the 1973 Act are required to prefer commercial style accounts. The very form of their operation means that they have to do so. We believe it would be inappropriate to determine the form of accounts, but I look forward to dealing more fully with that with the noble Lord in the fullness of time.
Lord Bruce of Donington: My Lords, I am grateful to the noble Earl. He will be aware that the White Paper referred to statutory means of accounting. "Statutory" means what it says. If it is to be statutory and the White Paper prescribes commercial-type accounts—which it does—it follows that the statute must lay that down.
The Earl of Caithness: My Lords, I hear what the noble Lord says about "statutory". As I concluded that part of my speech it occurred to me that he mentioned "statutory". He has covered the point again and we shall be debating it at the next stage.
The Next Steps initiative seeks to build on the strengths of our Civil Service. It has a well deserved reputation for impartiality, fairness, integrity and propriety. Those attributes will continue to be an essential part of public service. People are the service's important asset. By delegating real managerial responsibility for achieving results along with the right tools for the job, Next Steps aims to provide an incentive for people to give their best; a recipe, I hope for turning the good into the excellent.
Next Steps indicates the Government's genuine intention to improve the quality of the services it offers to the public within the resources available. All of us at some time or other have cause to use those services, and it is right that we should expect to receive a high standard of service. One of the most important benchmarks of whether this initiative has succeeded will be whether it leads to significant improvements in standards of service.
The measure which we have been debating this afternoon adds to the range of tools available to help us in this task. For those agencies for which it is suitable it will, without any loss of accountability to Parliament, be the key to considerable improvements in value for money. I commend it warmly to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at twenty-nine minutes past five o'clock.