Lords Sitting of 11 July 1991

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

Population Control Programme
Viscount Craigavon Viscount Craigavon asked Her Majesty's Government:
How they intend to meet requests from developing countries for aid and advice in family planning in the 1990s.
The Minister of State, Foreign and Commonwealth Office (The Earl of Caithness): My Lords, we have responded and will continue to respond positively through our overseas aid programme. That gives high priority to providing developing countries with support for their population programmes. Our expenditure on multilateral and bilateral population programmes amounted to some £24 million in 1990, an increase of 28 per cent. in real terms on the previous year.
Viscount Craigavon: My Lords, I thank the noble Earl for that Answer. Does he accept that many of us agree that the Government's contribution and the recent increase have been very helpful, particularly as regards the past year? Does the Minister also agree that all the evidence points to the fact that there is a steadily growing demand for contraceptive services in developing countries? Is he aware that over the next decade it has been estimated by the major multilateral organisations such as the UNFPA and the International Planned Parenthood Federation that the increase in the number of couples who wish to use contraceptive services will be approximately an additional 200 million to the existing number of users? Can the Minister say whether the Government will give a lead in the matter by providing substantially increased funds in future and set an example, particularly to our Western European partners, in trying to deal with this very urgent problem?
The Earl of Caithness: My Lords, I am sure that the whole House agrees with the last remark made by the noble Viscount: it is an urgent problem. Therefore, it is entirely appropriate that he asked his Question on UN World Population Day. I confirm that there is an increasing demand from developing countries for population assistance. Surveys have shown that 100 million couples who want to use family planning services currently have no access to them.
Lord Houghton of Sowerby: My Lords, in view of the fact that most of the pictures that we all too frequently see of death and starvation come from Africa, does the Minister agree that the European Community has a very special responsibility for that continent in view of the long colonial history between
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Europe and Africa? Does the Minister also agree that most of the problems arise in Africa, and that they are a cause of grievous anxiety for the future?
The Earl of Caithness: My Lords, certainly Africa has its troubles; but the rest of the world also has to be considered. I reaffirm to the House that we are the second largest contributor in the aid programme to the Horn of Africa in trying to solve the current crisis. I hope that more countries follow our lead.
Lord Renton: My Lords, in deciding how best to help people in the third world countries, will my noble friend bear in mind that millions of them cannot afford contraceptives? Does my noble friend agree that contraception is the most important way in which the Government can arrange help with the co-operation of the governments of the countries concerned?
The Earl of Caithness: My Lords, my noble friend makes a most important point. That is certainly one of the areas in which we are working hard in the ODA.
Lord Mackie of Benshie: My Lords, is the noble Earl aware that the United Nations Population Fund, to which the Government contribute about half of the amount that Denmark contributes, has been enormously successful in its programmes in Mexico and Sri Lanka in bringing down the birth rate even where the standard of living is low? Can the Government be a great deal more generous instead of quoting the rises in the small amount that they give?
The Earl of Caithness: My Lords, I am delighted to receive another question from the noble Lord that requires more taxpayers' money to be spent. I have already explained to the House that there has been a substantial increase—28 per cent. in real terms—on last year's figures regarding population programmes.
Baroness Denton of Wakefield: My Lords, does my noble friend agree that one of the most effective and long-term means of reviewing the family planning issue in developing countries is to focus on the education and training of women so that they can take control of their own lives?
The Earl of Caithness: My Lords, my noble friend is right. That is why we try to involve women at all stages and all ODA projects and programmes are assessed for their impact on women. We have to try to improve the status of women throughout the world in the law, in education and in health so that women can play a full role in society.
Baroness Flather: My Lords, does my noble friend agree that this subject is one of the major problems facing many of the developing countries, and that it will have a very serious impact on the environment of some of the countries? Does he further agree that some of the issues we are worried about in other respects are also connected with overpopulation? Therefore, does my noble friend agree that more resources should be urgently made available through the ODA? I hope that is the message that can be sent through him.
The Earl of Caithness: My Lords, certainly an increase in population is taking place in the developing countries. We expect an increase of about 1 billion in the world population over the next 10 years. We anticipate that 95 per cent. of that increase will take place in the developing countries. At the moment the world population stands at about 5.3 billion. Therefore, my noble friend is right in saying that it is a problem not only for the developing countries but for the whole world to try to resolve.
Lord Dormand of Easington: My Lords, has the Minister seen the recent UN population report which states that the demand for contraception will increase substantially over the next few years because of the rapidly increasing number of women reaching child-bearing age? Equally worrying is that the report states that the population programmes—including that of the United Kingdom—have decreased in real terms. That contradicts what the Minister said in his Answer. When are the Government going to take the population explosion seriously? The Minister said that today is World Population Day: therefore, today would be a very good day to start.
The Earl of Caithness: My Lords, the Government already take this question very seriously, as the noble Lord knows full well from the replies I gave when he asked a Question on the subject.
Lord Glenamara: My Lords, does the Minister agree that the only long-term answer to over-population is the improvement of living standards? Living standards are in inverse proportion to the growth in population.
The Earl of Caithness: My Lords, the improvement of living standards is certainly a most important element in trying to solve the problem; but there is a whole range of other subjects that we are concentrating on, including health and education.
Baroness Ewart-Biggs: My Lords, in view of the fact that Mr. James Grant, the executive director of UNICEF, called for an increase in family planning users from 326 million to 525 million, does the Minister agree that this will depend to a large extent on aid-givers? Therefore, can the Minister say what percentage of the British aid programme goes to family planning? Can he also say when Her Majesty's Government will discuss with our EC partners the inter-relation between poverty and population?
The Earl of Caithness: My Lords, the net aid programme is currently £1.27 billion. The £24 million spent in 1990 was on activities directly related to population concerns. I know the House will agree that it is all the other ODA programmes that reflect on that in the health and training of women—to answer the point made by my noble friend Lady Denton.

Motor Vehicle Insurance: Offences
Baroness Oppenheim-Barnes Baroness Oppenheim-Barnes asked Her Majesty's Government:
In how many vehicle accidents in the last three years have one or more parties been found not to be properly insured.
Earl Howe: My Lords, figures for the number of convictions in England and Wales for using a motor vehicle uninsured against third party risk are as follows:

Number

1987

200,309

1988

208,568

1989

210,551

Figures for 1990 are not yet available.
Baroness Oppenheim-Barnes: My Lords, I thank my noble friend for that reply. However, does he agree that the number of defaulting motorists is unacceptably high? Is he aware that in France—and possibly many other countries—motorists have to display in their car windscreens a small uniform coupon which is detached from the insurance certificate. That facilitates enforcement and makes for greater compliance. Police time is not wasted by people having to show an insurance certificate at a police station and nothing is added to bureaucracy or administrative costs. Does the Minister agree that that would be good for this country, too?
Earl Howe: My Lords, I share my noble friend's disquiet at the figures I have quoted. In order to make my Answer completely clear I should point out that it is not possible to provide statistics in the precise form that she has requested. I turn now to her second point. A scheme of the kind outlined by my noble friend has an element of attractiveness in terms of compliance. However, there are also disadvantages. Motor insurance in the UK relates more to the driver than the vehicle. Insurance policies often cover a person to drive more than one vehicle, or vehicles owned by other persons subject to the owner's permission. Insurers would therefore have to issue several windscreen discs per policy holder, or one disc which could be transferred from vehicle to vehicle. In either case, the effectiveness of a disc for enforcement purposes would be seriously weakened.
Lord Swinfen: My Lords, my noble friend will be well aware that it is quite possible to relicense a vehicle with only a short time left to run on the insurance. Will Her Majesty's Government give consideration to making certain that the time for the insurance to run should be for the whole time of the licensing of that vehicle?
Earl Howe: My Lords, my noble friend makes a very interesting suggestion, which I shall happily pass on to my right honourable friend.
Lord Clinton-Davis: My Lords, in view of the quite extraordinary statistics revealed by the Minister which

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indicate a very serious state of affairs, does the Minister feel that it is appropriate to undertake a full investigation into all possible ways of reducing the incidence of this crime—and it is a crime? Does he agree that, quite apart from the valuable suggestion put forward by the noble Baroness, Lady Oppenheim-Barnes, all methods should be investigated? I ask that having particular regard to the fact that at present, as I understand it, the Motor Insurers' Bureau compensates only for injuries sustained and not for damage to property. That can be very serious for the victims in such circumstances. Will the Minister undertake to have these matters investigated thoroughly?
Earl Howe: My Lords, what the Government can do, and have done, is to create a framework of legislation which makes it less tempting to dodge the requirement for insurance while at the same time seeing to it that as far as possible there are no innocent victims of road accidents involving uninsured drivers. The first aim is achieved through stiffer penalties, and the second through the Motor Insurers' Bureau, to which the noble Lord, Lord Clinton-Davis, referred. It is not true to say that the Motor Insurers' Bureau will not compensate for damage to property. The victims of uninsured drivers who are denied access to compensation can claim compensation from the MIB, which will compensate the victim for injury in full and damage to property other than the first £175 of the claim, provided that the other party was negligent.
Lord Clinton-Davis: My Lords, I am obliged to the noble Earl for being so frank in the first part of his answer. However, the framework undertaken by the Government has hardly been successful in the light of the evidence which he has himself adduced. Therefore, will he look again at this matter without delay?
Earl Howe: My Lords, the easiest way to answer the noble Lord is to say that the Road Traffic Bill, which has just completed its passage through your Lordships' House, considerably increases the penalties that are applicable to this type of offence. It remains to be seen how that will work out.

Nuclear Weapon States
3.21 p.m.
Lord Orr-Ewing Lord Orr-Ewing asked Her Majesty's Government:
How many and which countries are currently believed to have nuclear weapons.
The Earl of Caithness: My Lords, there are five declared nuclear weapon states; that is, states which exploded a nuclear device before 1st January 1967. The nuclear weapon states are the United States, the Soviet Union, the United Kingdom, France and China.
Lord Orr-Ewing: My Lords, can my noble friend say what other states have nuclear facilities? I believe the number to be seven but I should like to know which they are. Is it not now clear that the monitoring and supervision provisions of the Non-Proliferation Treaty, signed by 141 countries, are being flouted? The
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most recent example is Iraq, where the facilities turned out to be far more extensive than had hitherto been thought?
The Earl of Caithness: My Lords, Argentina, Brazil, India, Israel, Pakistan and South Africa have significant nuclear facilities. I am glad to inform the House that I have just heard that South Africa has now joined the Non-Proliferation Treaty. Under Article 3, South Africa now has 18 months to sign up to the International Atomic Energy Agency safeguards. Furthermore, Korea, which, as the House knows, is not recognised as a state by Her Majesty's Government, also has significant nuclear facilities. We hope that the countries that have not yet joined the NPT will do so in the near future. With regard to strengthening the NPT, yes, we certainly wish to strengthen all existing regimes and restrictions of control.
Lord Cledwyn of Penrhos: My Lords, is it not the case that some of the countries which the noble Earl has named as being on the verge of producing nuclear weapons have unstable governments? Does this not pose a serious threat to the world? Can he say whether the Government believe that the Non-Proliferation Treaty is effective; or does a further step need to be taken through the Security Council of the United Nations to probe the possibility of creating a more effective restriction? Finally, can he say what are the prospects of creating a nuclear free zone in the Middle East?
The Earl of Caithness: My Lords, the noble Lord referred to the Non-Proliferation Treaty and asked whether it needed to be strengthened. We shall seek further accessions to the NPT. We will wish to strengthen the international safeguards administered by the IAEA and we wish to harmonise and improve existing export controls through the Zangger Committee and the Nuclear Suppliers Group. That, we hope, will take care of some of the noble Lord's anxieties.
The noble Lord asked about a nuclear free zone in the Middle East. We would support that in principle, provided all the states therein could agree to it.
Lord Renton: My Lords, my noble friend did not mention Libya, about which there have been a number of rumours. Can he tell us anything about that?
The Earl of Caithness: No, my Lords, I did not mention Libya. I do not have the information to give your Lordships.
Lord Zuckerman: My Lords, in view of the fact that the Iraqi nuclear installations were inspected by the IAEA not many months before her invasion of Kuwait, are the Government satisfied that the IAEA has enough authority and personnel? What exactly are its functions with respect to the NPT? In our case, we opened the majority of our nuclear installations. There are no safeguards so far as I can see—I should like to be reassured that I am wrong—that when the IAEA goes out to inspect a suspected nation it is given real access.
The Earl of Caithness: My Lords, the noble Lord puts his finger on a very important point. It is true that the IAEA inspected and checked the facilities in Iraq which it was shown. But it has come to light subsequently that the IAEA was certainly not shown all the facilities. A new inspection is taking place which is due to end tomorrow. The IAEA will report back to the Security Council under Security Council Resolution 687. I agree with the noble Lord that it is one of our intentions to strengthen the international safeguards administered by the IAEA.
Lord Mayhew: My Lords, can the noble Earl explain why the intensive and prolonged bombing of Iraq's nuclear facilities was not more successful? How do the Government now assess Iraq's capability for producing nuclear weapons? Do the Government feel the time might come when further military action was needed?
The Earl of Caithness: My Lords, this work is being carried out by the special commission to which I have already made reference. Security Council Resolution 687 provides for the elimination of Iraqi weapons of mass destruction. We are waiting for the report about the commission's recent work.
Lord Chalfont: My Lords, I hope that the noble Earl will not think this too wide of the Question on the Order Paper, as we are talking about weapons of mass destruction. Can he confirm that there are also 20 nations, many of them third world nations with unstable governments, with a chemical warfare capability?
The Earl of Caithness: My Lords, that question is a little wide of the Question on the Order Paper, which specifically refers to nuclear weapons.
Lord Stoddart of Swindon: My Lords, can the noble Earl tell the House whether inspection of nuclear facilities also includes the inspection of delivery systems?
The Earl of Caithness: Not without notice, my Lords, but I shall try to find out and write to the noble Lord.
Lord Orr-Ewing: My Lords, will my noble friend give wide publicity to these serious facts? That might encourage more of the 151 Labour MPs who are still members of CND to speed up their resignations and follow the example of Mr. Kinnock himself.
The Earl of Caithness: My Lords, we certainly seek to publicise the information that is available to us. We wish that more of the countries I have mentioned would sign up to the Non-Proliferation Treaty.
Lord Cledwyn of Penrhos: My Lords, is the noble Earl aware that this matter is far too grim and serious to become the subject of petty party politics?
The Earl of Caithness: My Lords, what is absolutely clear is that everyone in the country wishes to know where each party stands.
Lord Molloy: My Lords, is the UN Security Council aware of the grave possibility of terrorist
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organisations managing to get hold of nuclear weapons to threaten governments—even governments with whom we may not agree? Is this not a matter for the Security Council to consider in order to prevent the possibility of a terrorist organisation getting hold of nuclear weapons?
The Earl of Caithness: My Lords, we certainly wish to prevent any such possibility occurring.

Higher Education: Teachers' Pay
3.30 p.m.
Lord Rochester Lord Rochester asked Her Majesty's Government:
Why they will not establish an independent statutory pay review body or bodies for teachers in higher and further education.
The Minister of State, Department of the Environment (Baroness Blatch): My Lords, universities do not rely exclusively on public funds for their income. Accordingly, the Government have no plans to extend the proposed review body for school teachers to cover the pay of teachers in higher and further education.
Lord Rochester: My Lords, I thank the noble Baroness for that Answer. However, does she acknowledge that in the Statement made by her right honourable friend the Secretary of State in another place on 17th April giving reasons for the establishment of a review body for school teachers, he said:
"We want to raise still further the esteem in which the teaching profession is held in our society"?—[Official Report, Commons, 17/4/91; col. 433.]
Should not that statement have equal application to teachers in universities, polytechnics and colleges of higher and further education and be validated by a policy that enables all teachers to have their pay determined in the same way?
Baroness Blatch: My Lords, the noble Lord is right. The standing and status of teachers, whether in the university, polytechnic, higher education, further education or, indeed, the school sector, is most important. Nevertheless, there was a real understanding of a particular problem as regards the perception by the public and parents of the teaching profession. It was especially to address that point that the Secretary of State introduced the pay review body.
Lord Beloff: My Lords, is my noble friend the Minister aware that her first Answer is wholly beside the point? Although it is true that universities receive funds for research and through contracts, the basic staff—that is, the professors and lecturers—live, as other people do, on their salaries. Those salaries have declined relatively in regard to the rest of the teaching profession and relatively in respect of wages and salaries in general over a long period of time. How can my noble friend justify that discrimination at a time when higher education is being asked to absorb an ever larger number of students?
Baroness Blatch: My Lords, the distinctions that I made are, nevertheless, very real. Recruitment and

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retention are not a general problem with higher education. However, there are particular problems with some areas of teaching. The Government are doing their best to introduce flexibility into the pay of teachers in higher education in order to address merit, recruitment and retention of teachers. But one cannot avoid the fact—and this, again, is another distinction—that university teachers have opportunities outside their profession which are not open to school teachers.
Lord Glenamara: My Lords, will the noble Baroness bear in mind that all institutions in higher education—that is universities, polytechnics and colleges—are now independent institutions? Therefore, their employees are not employed by the Government but by institutions. If they want to have their ray and conditions negotiated separately, they have a perfect right to make that decision. Moreover, when the further education colleges become independent shortly, they will also, if they so wish, be able to negotiate their own pay and conditions.
Baroness Blatch: My Lords, the noble Lord is absolutely right; they do indeed. In fact, the Government believe that the negotiating machinery is a matter for the higher education sector and that negotiations should take place predominantly between employer and employees. The interest that the Government have in the macro situation is that government money made available to the higher education sector has to be protected. There has to be accountability.
Earl Russell: My Lords, as a university teacher I must, of course, declare an interest. Is the noble Baroness aware that her first Answer gave the appearance of encouraging universities to increase their income not derived from public funds? Is she further aware that if much more of this were to take place, it could be at the expense of UK students and therefore prove an obstacle to the expansion which the Government wish to see?
Baroness Blatch: My Lords, the noble Earl sees far more in my first Answer than is the case. I believe that he infers from it an undercover message. I said that,
"universities do not rely exclusively on public funds".
That is a fact. There was no hidden meaning in my Answer. Moreover, there is no suggestion that anything that is happening in the higher education sector is being done at the expense of students.
Baroness Park of Monmouth: My Lords, is my noble friend the Minister aware of the extent to which such a review body would take pressure off the universities, which are already struggling with hard decisions as they try to meet the Government's objectives for a major expansion of the university system? It would remove the threat of possible confrontations with staff year by year and would make a major contribution to the efficiency of universities.
Baroness Blatch: My Lords, I note and understand my noble friend's point. Nevertheless, it is true that
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my right honourable friend has determined that the pay review body for this particular group of employees shall not be extended.
Baroness Blackstone: My Lords, is the Minister aware that we are now well into the month of July and there is still no settlement of university teachers' pay, which should have been resolved soon after April? Does she agree that this is a wholly unsatisfactory situation for which there are two reasons? The first is that the current negotiating machinery is inadequate; the second is that the universities have been inadequately funded to meet the perfectly reasonable demands of university teachers that their pay should at least be increased in line with inflation if not catch up with the other groups to which noble Lords have referred.
Baroness Blatch: My Lords, as regards funding, university teachers' pay has increased in real terms by 14.5 per cent. since 1979. That does not include flexibility payments. At the same time, for the past two years, pay for the university sector (which is £2.3 billion for this year) has increased by 10 per cent. So far as concerns the negotiating machinery, the Government will always consider changes which the university sector presents to them. Thus far, the alternatives suggested have called for unconditional funding; that is, automatic settlements based on formula. I am afraid that that is a proposition which the Government will not accept.
Lord Peston: My Lords, I, too, should declare an interest as some of my salary is paid from such funds. Is it the Government's position that if the universities set up a pay review body that would be perfectly okay?
Baroness Blatch: No, my Lords; that is not what I said. The higher education sector is about to be restructured. I said that it could determine its own machinery for negotiation.
Baroness Young: My Lords, I wonder whether my noble friend can consider two suggestions. First, in view of the concern which has been expressed on all sides of the House in this matter, will my noble friend convey the same to her right honourable friend the Secretary of State? Secondly, while accepting the decision that has been taken at present, will she agree that, once the new machinery is working and operating, the matter should be reconsidered?
Baroness Blatch: My Lords, I always refer back to my right honourable friend the Secretary of State and report fully the views expressed by noble Lords in this House.

Summer Recess
Lord Hesketh: My Lords, it may be for the convenience of the House to know that, subject to the progress of business, the House will rise for the Summer Recess on Thursday 25th July and return on Monday 14th October. The House will sit at 11 a.m. on Thursday 25th July.

Ports Bill
3.39 p.m.
Report received.
Clause 2 [Transfer of undertakings]:
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 1:
Page 2, line 23, at end insert:
("and
(c) all functions conferred on the authority by section (Environmental duties) of this Act;").
The noble Lord said: My Lords, in moving this amendment I shall, with the leave of the House, speak also to Amendments Nos. 18, 24 and 25. We have, of course, alluded to this matter during earlier debates both on Second Reading and in Committee. There is an important divide not simply on party political grounds but also as regards those who believe that the Bill is not environmentally neutral, as the Minister persistently argues. No doubt he will insist again on that being the case.
I shall deal briefly with the purposes of the amendments. A general environmental duty should apply to appropriate Ministers, port authorities and successor bodies. There should also be safeguards for land of special interest when transferred from a port authority to a successor body, or when subsequently disposed of by that body. Those are essential matters, especially in respect of SSSIs and areas of outstanding natural beauty.
There is undoubted anxiety that environmental difficulties could arise as a result of the operation of the Bill upon its enactment. I see the noble Lord, Lord Wade, patiently waiting to rebut those arguments. I do not accept that he is a barbarian, as has been suggested in the past, but it is wrong to suggest that there is a competitive element between industrial advance and environmental advance. The two should be able to march purposefully together. I cannot understand why the Minister is so hostile to the conceptions advanced, not merely by the Opposition but by noble Lords on all sides of the House and by reputable conservation agencies and other environmental bodies, whose anxieties have not been assuaged by anything said by the Government and some of their supporters during these debates.
The issue can be best summarised by something said by the Royal Society for the Protection of Birds in briefing material sent to noble Lords. It said that it found great difficulty in persuading ports in general to care for the natural environment. That is its experience. It continues:
"There are frequent differences of opinion, mainly relating to development ambitions or dredging programmes".
It then says, and this is the point that I underline:
"Inevitably the trust ports are more accommodating than private operations. Particularly good relations have been fostered with the Harwich, Poole, Chichester, and Langstone Harbour Authorities, all of which have incorporated concern for the natural environment into their decision making processes".
It adds:
"On privatisation, relationship with ports such as these will be placed in jeopardy".
That is a genuine worry. It is not one that should be lightly fobbed off with suggestions that the Bill is not about the environment and that it is merely about the change of ownership of ports.
No one seems to be persuaded by the Minister's suggestion that the Bill is environmentally neutral or that the planning laws are sufficient to safeguard the environment once development is contemplated, and—I am giving a resume of what the Minister said—that it would be wrong to single out privatised ports for special environmental attention.
I shall deal with those arguments in the order in which I have put them. It is the potential change of ownership of the trust ports, which have an excellent record in that connection, and the breaking of a link with the surrounding community and local authorities—which are of course accountable to the communities that they serve and which have a close and binding interest, as have the port authorities—in the area surrounding the port that causes anxiety. It is because of those facts that reputable national and local environmental organisations and conservation groups are deeply worried.
Those anxieties are not confined to the RSPB. English Heritage and the National Trust have also written to your Lordships about the matter. As I said, nothing that the Minister said has assuaged those anxieties, especially when he warmly embraces the arguments put forward by his noble friend Lord Wade. Those people are fearful that the prime purpose those ports fulfil will be diminished, at the very least. They worry about the reduced commitment of interests that may come from overseas which will have no relationship with surrounding areas. They worry, although the Minister does not, about the line property developers may take, being rather more interested in property development than in port development.
I do not dissent from the Minister when he says that land which is surplus to the ports' requirements should not remain undeveloped. That would be absurd. We must worry a little about what is meant by surplus to requirements, because it is all too easy to see that a port authority may be tempted by an offer to buy valuable land even though it may lead to a reduction in the development of the port itself.
The Minister says that the Bill is environmentally neutral. It is possible developments subsequent to a change of ownership that give rise to the belief that it would be naive of the House to accept that assertion. The Opposition do not. The Minister said that planning laws provide the required protection. If that were the case, we should not have had the splurge of activity by the Department of the Environment which produced the White Paper The Common Inheritance on Britain's environmental strategy. The DoE does not appear to be prepared to accept the status quo and nor should the Department of Transport when it comes to deal with such a matter.
I carefully looked through the Government's document which deals with transport policy and the environment. I searched high and low for any reference to the environment and the ports. All I could find was a brief reference under "Ports" which states:

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"The shoreline is environmentally sensitive. Ports must maintain a balance between their vital economic role and the effect of their operations and the development on the environment".
That was that. That is all that the Government could say in a substantial document. One doubts the Government's credibility on these matters, especially when one has regard to the views adduced by the RSPB in Turning the Tide: A Future for Estuaries. I want to quote three short extracts dealing with special protection areas from page 22 of that report. It states:
"Progress towards listing as special protection areas has been painfully slow and has, if anything, slowed down in recent years. The UK now lags behind other EC member states in the area of land protected as SPAs".
The re port continues:
"Not only has progress in making designations to safeguard our wildlife heritage been lamentably slow, but the designations themselves once applied have also proved to be no guarantee of protection".
It then states:
"The UK Government is manifestly failing to protect sites of international value".
In the light of that and the fact that the Government have found little time to mention anything about ports and the environment in their most recent document or in The Common Inheritance, the Government's credibility in that regard is in issue. They should therefore do something to rectify the situation.
I do not believe that any of the concerns that have been expressed would place undue strain on the privatised ports. The duties that would be imposed would not be unconscionable for them and there has been no evidence to the contrary. It is for the Minister to support us and say why those obligations would be so crippling. At the very least they would set a useful precedent. I believe that the obligations should apply to all ports. I wish to hear from the Minister whether he has any plans to introduce legislation that would apply not simply to the privatised ports that would be affected by this but to all ports. I believe that that is overdue.
In the previous debate we cited precedents which it would be open to the Government to use on this occasion. I listed the eight or nine different enactments where a not dissimilar proposition was accepted by the Government and inserted into the various Acts. The Minister chose to select only one in his reply, the Water Act 1989. However, there were also the Opencast Coal Act right back in 1958, the Agriculture Act 1986, the Wildlife and Countryside Act 1981 and the Electricity Act 1989. I believe that those precedents ought to be followed. I am not convinced that it would be inappropriate in this instance to follow the same pattern. I do not understand what prejudice would flow if that were the case.
I sha11 leave it to others to argue the case for the special ports. I am sure that the noble Lord, Lord Murton, has good reason for not being here today, but he has expressed the deepest anxiety on behalf of the Poole harbour authorities. Poole is a remarkable place, for which my noble friend Lord Shackleton has deep concern. He may wish to intervene in the debate, because people in Poole are deeply worried.
I end on this note. I believe that there is a compelling case to take a different attitude on
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environmental matters from the one so far evinced by the Government and in particular by the noble Lord, Lord Wade. We must take every opportunity to show that we genuinely believe in environmental protection where it is required. The evidence that has been adduced by the conservation organisations to which I have alluded shows that there is not only anxiety but a need to abate the anxiety by introducing into the Bill provisions which are, if not necessarily completely along the lines we have drafted, very similar. We therefore wait to hear whether the Government are prepared to embrace the principle underlined in the amendments. I beg to move.
Lord Ezra: My Lords, as I am associated with some of the amendments which have been grouped with the amendment moved by the noble Lord, Lord Clinton-Davis, I wish to support what he proposed.
This is one of the most important issues relating to the Bill—the question of environmental responsibilities. I was surprised at the way in which our discussions on the subject went at the previous stage. The Government have emphasised time and time again their commitment to improving the environment. We have had the White Paper, which was perhaps the largest and most impressive document on the subject ever issued by any government in this country. We have debated and referred to it in the House on a number of occasions.
However, the White Paper was a blueprint and in order to carry out its environmental objectives, what it seeks to do must be enshrined in legislation when appropriate. As the noble Lord, Lord Clinton-Davis, clearly pointed out, this has been done on a number of occasions in the past, particularly with regard to the privatised public utilities. Here we are talking about a process of privatisation. It seems to me that in pursuit of their policy of support for the environment the Government should lose no legislative opportunity for introducing that objective.
The term "environmentally neutral" has been introduced. I find that a totally unacceptable term these days. Legislation which touches on the environment should be environmentally positive from now on. It should make the point that to be successful enterprise and industry have, among other things, to have full regard to the environmental imperative.
That brings me to the remarks of the noble Lord, Lord Wade, to which the noble Lord, Lord Clinton-Davis, referred. I listened with great care to what he said at Committee stage. He is a successful entrepreneur for whom I have great regard. But I have also had considerable experience in industry, both public and private. These days, more and more we have regard to the environmental consequences of our actions. This is happening anyway. However, the Government must play their part as well. It is not enough to leave it to people on their own. We must take action together. There is a government role, the role of the citizen and the role of enterprise. I should have said that the amendments to the Bill proposed in this group are totally appropriate and entirely in line with precedent and with what the Government have said are their objectives for the improvement of the environment.
Baroness Nicol: My Lords, I wish to support the amendment which has been so ably moved by my noble friend. Over the approximately 15,000 kilometres of coastline around Great Britain, there are many sites of international importance under the RAMSAR convention, the wild birds directives and other international agreements. So far, our history of protection of some of these areas is not good. As we have heard, our coasts are constantly under pressure from commercial and leisure activities. Such protection as exists is fragmented among numerous authorities and limited by conflicting interests.
There are no truly effective safeguards for the public interest in conserving the natural and built environment, whether it be on the coast or anywhere else. There is not a single designation available to conservation authorities in this country which is inviolate. That is just part of the general picture in which the Government say that they have this great commitment to the environment. Ministers make tremendous speeches here, there and everywhere. But when it comes to the nuts and bolts of legislation it is almost impossible to get anything through.
We have made several attempts recently to persuade the Government of the pressing need to introduce a system of coastal zone management; for example, during the passage of the Planning and Compensation Bill and by way of a number of parliamentary Questions. The Minister who answered on each occasion always assured us that the matter was under review. I am now beginning to wonder, somewhat cynically, I have to confess, whether "under review" is shorthand for, "Let's get the ports privatised without encumbrances", because that is what it is beginning to look like.
Yesterday I attended an environmental exhibition in the Great Hall at Olympia. The Department of Transport has a large and grand stand there, much larger than many others. I stopped to talk to some of the bright young men manning the stand. They made all the right noises about the environment. To talk to them one would think that the Department of Transport was way ahead of every other department on environmental matters. However, in the dealings I have had with the department over the past few years, it seems to me that the Department of Transport is the last stronghold of anti-environmentalism—I hope noble Lords will forgive that word—in this House. The attitude that has been taken on this set of amendments is typical of the attitude that the department takes in other matters.
I beg the Minister to take this chance to implement these measures. At this stage we are not asking for inviolate protection for these areas, although I wish that were the case. We are asking modestly for environmental issues to be taken into consideration. That is all we are asking. It seems a small request in view of the great commitment which the Government constantly claim they have as regards environmental matters.
4 p.m.
Lord Bridges: My Lords, from these Benches I wish to express my support for some of the motives which lie behind these amendments. I believe that the amendments address some of the concerns that I have as a person who has had an involvement in environmental matters both as regards the work of the National Trust in East Anglia and as regards other environmental societies that are active in the area.
I have three reasons for expressing my concern. My first worry is the state of our estuaries, particularly in eastern England. There has been a profound change in the direction of our foreign trade over the past 20 years or so as a result of Britain joining the European Community. The effect of that has been to transfer trade from our western ports such as Bristol, Liverpool and Glasgow to the haven ports on the east coast of East Anglia and on the adjoining estuaries such as the Orwell. That has led to a great increase in maritime activity in those estuaries. The navigation channels are being dredged much more intensively now and the river banks are suffering from erosion. That has been confirmed by a recent survey conducted by the Suffolk Wildlife Trust. A study was undertaken of material dredged from the Orwell which showed that no less than about 30 per cent. of it came from eroded mud flats.
The mud flats are particularly rich in the small invertebrates on which many sea birds depend. The estuaries also suffer from the discharge of oil and from damage caused by other chemicals associated with shipping. The expansion of port facilities has reduced—and no doubt will reduce further—the remaining areas of salt marsh. There are therefore quite serious grounds for concern about the state of those estuaries.
My second cause for anxiety is the economic environment in which the privatised ports will operate. After privatisation those in charge of the ports will understandably be concerned with the need to demonstrate their economic efficiency by turning all their assets into profitable sources of income at an early stage. They will have to do that as they will consider it to be their job. Indeed I do not dispute that it is their job. However, many of the ports will be fighting for their lives. They may find it difficult to maintain their independence. They may be concerned at the prospect of being gobbled up by some of their larger neighbours or by other conglomerates. The managers of the ports will view their main priority as obtaining financial returns from the assets they control. Their main priority will not be the environmental values which many of us have at heart.
My third area of concern relates to the role that the public authorities can play in meeting our environmental worries. Earlier this week the Prime Minister announced the creation of a new national environmental agency. It appears that that agency will affect the role that the National Rivers Authority has hitherto taken. The creation of a new environmental agency may be a good thing but I feel that the disturbance created to the NRA so early in its life is regrettable. I hope that the change in institutions,

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about which we have few details at the moment, will not lead to any diminution in the NRA's role of protecting our coastal waters and estuaries.
A further cause for worry are the statements in the recent consultative document issued by the Government on the reorganisation of local government. The document expresses a clear preference for a single tier of authority. It is widely assumed—I do not know whether this is correct—that the Government would prefer the district councils to have greater authority and for the county councils to have less. If that is the case, I am even more worried, as in my experience the county councils have played an active and helpful role in environmental matters, particularly as regards areas of special interest on our coastline where they have made a great contribution.
I believe that at an earlier stage of the debates on this Bill the noble Lord, Lord Brabazon, informed the House of the Government's power to make orders on environmental grounds on matters relating to harbours. I have received advice on this and I believe it may be difficult for the Government so to act on environmental grounds alone. The state of the regulatory field gives us reasons for genuine and impartial concern as regards the way the coastline and our ports and estuaries will be affected as a result of the privatisation of the ports.
I hope that it will be recognised that my concerns arise from a genuine anxiety about environmental matters. I hope that it may be possible for the Government to reassure us that the worries have been addressed more directly than they appear to have been on the face of the Bill.
Lord Wade of Chorlton: My Lords, I am tempted to tell the House a story but I shall not tell the entire story as that would not be appropriate. It ends along the lines of someone saying to someone else, "I would not come if I were you because your name has been mentioned several times tonight already". I feel rather like the person in the story. Perhaps it would have been better if I had not entered the Chamber at all.
We are not discussing whether something is environmentally acceptable. I may be branded as a barbarian, but I assure your Lordships that I am as anxious as any other noble Lord to see the environment maintained in as attractive and perfect a state as possible. We are discussing how to achieve the right balance to enable the environment and commercial development to develop side by side. The noble Lord, Lord Clinton-Davis, referred to his concern about environmental issues. The noble Lord, Lord Bridges, has just said that he too has anxieties about environmental issues. However, noble Lords must understand that many people have similar anxieties about the need for economic growth unhampered by unnecessary rules and regulations. We are not really talking today about our desire to see a beautiful environment, to see buildings looked after in an efficient way and to see our wildlife protected. However, I must stress that I am as much a defender of the environment as anyone else. What concerns me is that in this country the balance in our legislation has tilted too far in the direction of environmental
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concerns and away from the need to obtain the growth, investment and money we need to be able to protect the environment.
In different debates many noble Lords have complained about agricultural buildings and the state of the rural economy. They give the impression that the rural scene now should be the same as it was 100 years ago. However, 100 years ago there were no planning requirements whatsoever. People who had the resources built whatever they wanted to build. People do not set up enterprises as a result of Bills and legislation but because the business environment prevalent at the time allows them to set up enterprises.
I am sympathetic to the arguments that have been put forward but I believe we have reached the stage when we can no longer tilt the balance of legislation towards imposing more and more restrictions on buildings and developments. It would be wrong of me to pretend that I feel differently about this issue. We should tilt the balance of legislation towards measures that will enable people to invest in projects and make profits from their investments. We must encourage commercial investment that leads to employment opportunities.
There must be a balance between those two elements. In my view greater environmental control will do more harm than going too far the other way. I sympathise particularly with what the noble Baroness, Lady Nicol, wants to achieve. However, this is a Bill for privatising ports. If every time we introduce a Bill which enables someone to do something commercially we then put a shackle round his leg and say, "You can do so much, but, by God, we shall not really let you do it", because other aspects which are not commercial are more important to the Government; that is wrong. We have to strike the correct balance between the two issues.
The noble Lord referred to legislation. Much legislation already applies to all ports to ensure that there is no pollution, that the environment is protected, that the waterside remains undamaged and that wildlife is cared for. It is all there. I could quote reams of legislation falling within the countryside and planning Acts which impose controls on everybody.
Only yesterday I accompanied other noble Lords to the port of Liverpool. Although it does not come within the Bill it is a privately run port. All of the legislation which would apply to these ports already applies to Liverpool. Its encouragement of the improvement of the environment in recent years has been considerable. I do not know whether many noble Lords have been to Liverpool lately, but it is not the place we are given to understand it is by the newspapers.
Noble Lords may have seen a few weeks ago a photograph on the front page of the Sunday Times showing rubbish which appeared to be piled up in front of the Liver Building because the workers in Liverpool were not clearing it. The photograph was taken with a telephoto lens from the Birkenhead side of the Mersey. It was taken in such a way as to show a rubbish tip on the Birkenhead side of the river apparently in front of the Liver Building. That is a perfect example of how a totally false image has been

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given of the city. Developments and improvements have taken place in that port without any new legislation or special rules and regulations having to be discussed in this House. They were undertaken because a port, which is now making the profits to allow it to do it, wanted to do it.
I hope that noble Lords will not be persuaded by siren voices demanding that we have legislation to ensure that everywhere there are beautiful flowers on the verges and the birds are singing. Life is not like that. Noble Lords talk about our being naive, but it is they who are naive if they think that through legislation they can achieve what one can never do through legislation. It takes people, motivation, encouragement and enthusiasm to create the environment which they and I want to see.
Lord Clinton-Davis: My Lords, why does the noble Lord then think that the Government have made such play of legislation which they have recently introduced, however ineffective it may be, and have also gone to the trouble of producing a White Paper which envisages further legislation at some time? Does the noble Lord divorce himself from the Government's intentions?
Lord Wade of Chorlton: My Lords, I have already agreed that the importance of the environment has grown enormously in the past 10 years. It is right that it should. Clearly, the Government have to take the lead and the initiative in the proper place. However, a Bill to privatise the trust ports is not the place to include further restrictions on those who are trying to create employment, extra business and work for the country. It is a question of arbitrating betwixt hope and fear, as we do many times in life. I would rather that we legislated for hope rather than for fear.
4.15 p.m.
Lord Wedderburn of Charlton: My Lords, before the noble Lord sits down, can he clarify one point in his eloquent speech? He spoke of being opposed to regulation, restriction and controls. I understand that. The amendments before us ask the Minister, in five of six paragraphs, to have regard to and to take into account environmental matters. In opposing the amendment, as against opposing all restrictions, regulations and controls, is the noble Lord saying that the Minister will take account of those matters anyway, that they should not be taken into account or that they will be taken into account in other legislation? I was not sure which of the three he meant.
Lord Wade of Chorlton: My Lords, there is a range of legislation which already has to be taken into account. All of the existing ports which are not trust ports are controlled by legislation which ensures that they maintain certain environmental standards. That legislation exists. The amendments suggest further legislation applying specifically to the trust ports. I do not agree. What is proposed is entirely unnecessary. General legislation which ensures good environmental practice, and the very forces which noble Lords have expressed, are all that is necessary without placing
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further shackles round the legs of those whose prime purpose ought to be running businesses. I hope that my noble friend the Minister will continue to resist the amendments.
Lord Shackleton: My Lords, the noble Lord has given a splendid and passionate description of the dangers of too much legislation. There is a lot to be said for his case. However, the amendments are very reasonable. I wonder whether the noble Lord feels that the requirement that certain matters should be considered by ports which have been privatised is a terrible infringement of their freedom. I find it very difficult to accept that.
The Government are interfering grossly with certain activities in trust ports. I have in mind, as always, Poole, which is a wonderful port. It is admirably run by a trust and ought to be left alone. It is run perfectly adequately. I have been involved with Poole and the protection of Brownsea Island and the struggle to ensure that there is protection.
The amendments are exceedingly reasonable. I cannot see what the noble Lord objects to. I agree that there are extreme environmentalists who rather turn us off. That is a danger. However, this is not extreme. It is a very moderate series of proposals which I should have thought the Government could accept without too much difficulty. I urge them to do so in the light of the fact that they are potentially interfering with activities in ports which are run commercially, economically and environmentally, like Poole.
Poole Harbour is a wonderful place. I am terrified by the danger contained within the Bill. I want to do everything I can to provide protection of the kind which my noble friend has proposed.
The noble Lord, Lord Wade, was anxious to put a case, which he did with great eloquence. Unfortunately, he failed to convince me that he felt other than emotionally that something was wrong. I do not know how far he has considered the amendments. I am sure that he has. They seem to me to be very reasonable, and I hope that the Government will listen to the House on this occasion.
Lord Greenway: My Lords, when the noble Lord, Lord Clinton-Davis, introduced the amendment he rightly paid tribute to the environmental record of the trust ports. However, he did not allude to the equally fine environmental record of those ports already in the private sector. They comprise over 50 per cent. of our ports and include such large ports as Felixstowe, Southampton and Hull, all of which have outstanding records on the environment. Therefore, it is quite wrong to make out that only trust ports have been doing a good job when it comes to the environment.
Port managements have a powerful tradition of encouraging partnership with the local community to look after and enhance the environment. I see no reason why that tradition should not be extended into the private sector by the trust port managements. Perhaps I may take one example. I am sure that my noble friend Lord Napier can enlarge on this. Felixstowe went out of its way to build a new 200 acre nature reserve when it built a new terminal a few years ago. That has all worked out satisfactorily.

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I object to the amendments because they deal with only 30 to 35 per cent. of our ports. Mention has been made of previous privatisation measures, but they were across the board. If we are to put environmental measures into any Bill concerning ports it should be done across the board, perhaps by amending the Harbours Act. It is manifestly unfair to put those obligations on to what amounts to about one-third of our ports rather than all of them. That is my main objection to the amendments.
Lord Geddes: My Lords, I wholeheartedly endorse the words of the noble Lord, Lord Greenway, and my intervention will therefore be that much shorter. The track record of private ports in environmental matters is extremely good. It is good from a historical point of view and from a practical point of view. The owners of those ports know very well that if they are not minded in an environmental way the environmental associations will come at them and be round their necks as though there were no tomorrow. That is the position from a practical point of view, let alone from an environmental and aesthetic point of view.
In addition, again from a practical point of view—my noble friend Lord Wade alluded to this point—there is already a great deal of legislation, particularly in the planning field. I know very well that, if you want to do something with a port, the very first people to whom you must talk, if you have any sense at all, are the environmental agencies. Again from a practical point of view, if you do not do so you know perfectly well that they will object right, left and centre and either delay the project almost indefinitely or kill it.
To revert to the point made by the noble Lord, Lord Greenway, this is not the Bill in which to put that kind of legislation into effect, admirable though it may be. I do ibt whether anyone in the House objects to the motives behind the amendments of the noble Lord, Lord Clinton-Davis, but this is not the place for them.
Lord Sefton of Garston: My Lords, the noble Lord, Lord Wade, suggested that there may be some noble Lords who come from Liverpool or who visit Liverpool. Perhaps I may claim to visit Liverpool more frequently than does the noble Lord. Three weeks ago he regaled the House with true stories about the Merseyside Development Corporation and the wonderful work that it has done on Merseyside.
My memory goes back much further than the Merseyside Development Corporation. There are two ports in Liverpool: the port of Liverpool (most of which it;, incidentally, in Sefton) and the port of Garston. If anyone wants an example of how the environment has been neglected, I suggest that they go to Garston. The dock is completely under the control of the port authority. Nothing has been done and nothing will be done. The very fact that we had to establish a development corporation in Merseyside to clear up the dereliction shows that the Mersey Docks and Harbour Board had not done anything about it. The harbour board was completely responsible for seven miles of dockland and had been urged over and over again to do something about the south docks. Even the local authority knew that the south docks
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were reaching the end of the line. The harbour board consistently refused to work in partnership with the local authority and the area became derelict because there were certain workhouses on that three-and-a-half mile stretch of dockland for which the harbour board received rent.
That is the issue that we are discussing. It is not a question of how a port is run and the effect on the environment. It is a question of the financial interests of the people who may take over the ports and their land and then use them to make a profit. Noble Lords should go to Liverpool and look at the port. The points praised by the noble Lord, Lord Wade, are not achievements of the port but of the Merseyside Dockland Development Corporation. There is a big question on Merseyside as to the correctness of spending thousands of millions of pounds on the development corporation which, ultimately, has become necessary only because the Merseyside Docks and Harbour Board was not administered properly and did not have regard to the environment. My experience in Liverpool and Merseyside tells me that the more precautions that are written into the Bill in order to prevent that situation arising elsewhere, the better.
The Viscount of Oxfuird: My Lords, I too was privileged yesterday to join my noble friend Lord Wade on a visit to the Merseyside Dock and Harbour Company. During that visit I took time off to speak to the secretary of the company and discuss with him his views on the environmental issues brought forward in the Bill. I regard him as a man of integrity, who is in daily contact with the issues that we are discussing. He believes that the existing environmental protection Acts are more than sufficient to deal with any problems that might ensue from use of the facilities in Merseyside. He cited to me the Environmental Protection Act and the Environmental Protection (Prescribed Processes and Substances) Regulations which definitely apply to ports. As a result of those measures, it has had to tidy up its act. It has become aware of its responsibilities and it is showing a definite lead to a great number of ports in the way in which it controls pollution and other attendant problems associated with port work. I might add in support of what my noble friend Lord Wade said that our visit to Liverpool yesterday could not have been described as anything other than a great success. We saw no rubbish and the place was as tidy as one could wish to find anywhere in the United Kingdom.
The Minister of State, Department of Transport (Lord Brabazon of Tara): My Lords, we have had a good debate on this series of amendments. I am fully aware of the importance that the House attaches to the need to protect the environment. That concern is fully shared by the Government and—I say this especially to the noble Baroness, Lady Nicol—especially by the Department of Transport. She may disagree, but that is the case. I therefore welcome the opportunity that we have had today for a further debate on the subject.
However, I must continue to regard provisions of the kind proposed as inappropriate to the Bill. I do not

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dispute the contention of the noble Lords, Lord Clinton-Davis and Lord Ezra, that similar provisions exist in other recent legislation, but I have considered the circumstances and context of those provisions and believe them to be materially different. The noble Lord and I have already agreed to disagree as to whether Section 8 of the Water Act 1988 forms a precedent. Let us take one of the other statutes mentioned by the noble Lord; namely, the Coal Industry Act 1990. Section 5 of that Act requires the British Coal Corporation or other relevant persons, in terms very similar to the amendment proposed by the noble Lord, to have regard to environmental factors:
"In formulating any proposals as to the working of coal by opencast operations or the carrying out of operations incidental to such working or the restoration of land affected by such working".
It must clearly be the case that, if someone undertakes an activity such as restoring land affected by open cast coal mining operations, they should have regard to the environmental results once it is finished. The same considerations would apply to proposals to install overhead power lines, which are dealt with in Schedule 9 to the Electricity Act 1989, again in terms similar to those in the amendment proposed by the noble Lord.
But the functions imposed in this Bill on Ministers, port authorities and successor companies are nothing remotely like that. For instance, in preparing a transfer scheme a port authority will formulate workable proposals for transferring its existing business to a wholly owned subsidiary company and ensuring that that company is appropriately established to attract investment and hence pass successfully into the private sector. That is why the provisions in Part II of Schedule 1 deal with matters such as accounting procedures and the Transfer of Undertakings (Protection of Employment) Regulations.
But these matters have no bearing on or implications, either favourable or unfavourable, for the environment. The simple point is that the Bill is very different in its scope from the earlier legislation in which provisions of the kind proposed by the noble Lord were included. As has been said before, this Bill is about a change of ownership of the ports and carries no implications about activities of the kind to which the environmental provisions in that earlier legislation were directed.
So I do not share the apprehension evidently felt by some noble Lords and organisations outside this House that the privatisation of individual trust ports will result sooner or later in significant damage to the environment.
Trust ports are not the only ports to have reached accommodations on environmental issues. The noble Lord, Lord Greenway, mentioned in particular the case of Felixstowe. No doubt we all recall the passage of that Bill through the House and the establishment of the nature reserve when the port was expanded in recent years. The noble Lord and my noble friend Lord Geddes also mentioned other cases of company owned ports which have just as good a record on environmental matters as any of the trust ports. When
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we consider the other amendments tabled by the noble Lord, we shall discuss the measures for environmental protection which apply directly to the ports. But I do not accept that separate statutory provisions concerning the environment should be applied to the limited number of ports that are likely to be privatised under the Bill. As the noble Lord, Lord Greenway, said, they would apply to only a small proportion of our ports and could place unnecessary obstacles in the way of individual port privatisations.
I have already stated my opposition to proposals of this kind which would effectively place additional and potentially onerous obligations not on the entire ports industry but on a relatively small number of ports within it. In the present case I believe that it would be wrong to place constraints of the kind suggested on transfers of a port authority's property and on disposals by a successor company of what these amendments call "protected land".
Environmental and conservation issues should be addressed more specifically and directly than these amendments suggest. For example, I believe that the system of environmental assessments, which already applies generally to proposals for development within the ports field, is a much more effective and properly directed approach to environmental concerns than are the amendments which are now before us. Environmental assessments are already required in three separate situations. My noble friends Lord Wade and Lord Oxfuird have touched on them.
The first situation arises where a harbour authority, which may be a trust port, a private port, a private company port or a local authority harbour, wishes to carry out works for which a harbour revision order or harbour empowerment order is necessary. The Harbour Works (Assessment of Environmental Effects) Regulations 1988 lay down that the Secretary of State should determine whether a project falls within certain categories of the EC directive on environmental assessments—for example, the creation of a new harbour or additional works in an existing harbour—and is likely to have significant environmental effects. That determination of the Secretary of State decides whether an environmental assessment has to be prepared. If so, that assessment may give rise to an objection to the order which, if it is not withdrawn, will become the subject of a public inquiry.
The second situation that I should mention is where proposals for harbour works below low water which need neither a harbour order nor planning permission are subject to the Harbour Works (Assessment of Environmental Effects) (No. 2) Regulations. In this case the conservation bodies, and just the type of bodies which have been mentioned by noble Lords today, are consulted on the basis of the environmental assessments and again a public inquiry may follow.
The third case is where authorisation is being sought for harbour works under private Bills. These too in future will be subject to environmental assessment before they are considered by Parliament. The Government have announced acceptance of that recommendation in the report of the Joint Committee

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on Private Bill Procedure. It will involve amendments to Standing Orders in this House and, as noble Lords will know, those are to be debated on Monday.
It is just not true to say that there are no environmental measures which bite on ports. There is a whole raft of legislation which controls activities of ports in such matters as the disposal of dredge sediments, the prevention of pollution from shipping and coastal and estuarial management. The National Rivers Authority also has responsibilities to cover the pollution of our coastal waters. I hope that that gives some reassurance to the noble Lord, Lord Bridges.
The noble Baroness Lady Nicol said that environmental protection was too fragmented at the moment. But to burden a small proportion of one type of port with substantial environmental duties will tend to fragment further the responsibilities and not coalesce them. This is relevant to the question of the land being transferred from the port authority to its successor company, which both before and after privatisation will continue to operate and maintain the harbour undertaking.
So far as concerns onward disposals of land by the successor company, the clawback levy provisions in the Bill, although they do not bear specifically on environmental matters, are designed to minimise the prospect of excessive windfall profits on land sale for development purposes. More generally, however, it would surely be quite wrong to place that restriction on successor companies in perpetuity simply because the land in question once belonged to a trust port. In the case of land being sold by other ports, normal planning controls apply—as is logical—not at the point of intended change of ownership of land, which in itself has no direct effect on the land use, but at the point where a specific proposal for development is formulated. I do not see why in this situation as in others the point at which environmental interests are addressed should not be the point at which a change in land use or permission for development is sought rather than at the point of the disposal of the land. Finally, there seems to me to be no good reason why these provisions about the disposal of protected land should apply only to trust ports privatised under this Bill when they will not apply to other harbour authorities.
I hope that what I have said has reassured noble Lords that the Government take environmental issues very seriously, and that the ports—whether they be in the private or the trust port sector—should both have applied to them the same environmental considerations. For those reasons I must ask noble Lords to reject the amendments.
4.30 p.m.
Baroness Birk: My Lords, this has been an interesting and varied debate. I listened carefully to the Minister and also to those noble Lords who spoke against the amendments which were argued so forcefully and eloquently by my noble friend Lord Clinton-Davis. The noble Lords' arguments do not pass muster, either logically or environmentally.
The Government say that the Bill is environmentally neutral. How can that be? What is the point of
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privatising ports unless the object is the expansion of the industry and activity of the ports? That is fine, but if so, it becomes even more important that the protection of the environment, both natural and built, should be carefully studied. As my noble friend Lord Wedderburn said, when he referred to Amendment No. 18, the Secretary of State should have the duty to exercise any power to have regard to and to take into account the protection of the environment.
In my view these are mild amendments. Some noble Lords might have preferred something a little stronger but the provisions should not be turned down. The noble Lord, Lord Greenway, referred to Felixstowe dock. I do not know whether he is aware that the RSPB reports that the Felixstowe Dock and Railway Company has destroyed a large part of the Orwell estuary, the SSSI, and has extended its activities on the boundary of an area of outstanding natural beauty. With great respect therefore one cannot leave such matters to chance.
I wish to highlight an area of potential damage which I do not believe has been dwelt on at any length. I refer to the potential for damage to the archaeological and historic interest of land in the vicinity of the ports. Perhaps noble Lords will consider Amendment No. 18 on the Marshalled List. Subsection (1) (b) of the amendment refers to,
"protecting and conserving buildings, sites and objects of archaeological, architectural or historic interest".
I draw particular attention to that, because we have, not unnaturally, been dealing mainly with areas of natural beauty in the countryside.
Subsection (2) (b) has regard to,
"the desirability of maintaining the availability to the public of any facility for visiting … any … sites".
That is important. It is an issue about which we have gone to a great deal of trouble in this country in other areas. I received a letter from the noble Lord, Lord Montagu, which states that English Heritage strongly supports these amendments. Such support is not by a few way-out people or mavericks, but by organisations very closely connected with the subject.
The problem to which I refer has three aspects. There is the threat to the setting of important historic buildings from shoreline development of inappropriate scale or unsympathetic character. Once that damage has been done—we have seen this occur in other areas—one cannot re-stitch or put back the damage. There is too the threat to the archaeological importance of the area surrounding the port and the shoreline of the harbour in general arising from similar development but also from related building or excavation work and the need to construct access roads. Those are areas of great potential damage. There is the threat to the harbour floor from expanded dredging activities and the need to provide materials for harbour defences or the reconstitution of beaches. The noble Lord, Lord Murton of Lindisfarne, referred to that aspect in Committee.
All those threats are real and carry greater significance when one considers the area. My noble friend Lord Shackleton referred to Poole. Its surrounding area contains a wealth of Iron Age, Roman and more recent remains, many of which have been especially well preserved because of the nature of

1531
the heathland in which they are found, which has acted as a protection, and through the relative lack of disturbance which they have suffered until now. Should the port expand beyond its present boundaries—we have all heard how tight it is for land available within its immediate environs—it would be difficult to avoid construction on the immediately adjacent Iron Age and Roman sites. Careful archaeological excavation and recording work will be carried out to ascertain what damage may be done and what should be avoided at all costs, but some losses will be inevitable. Those are areas which relate to our distant history. I do not believe that there is any difference between us: we all wish to preserve and conserve such areas and ensure that they do not suffer unnecessary damage. There is the possibility of expansion in the next two years in the area of Poole should a proposal be pursued to build a bridge across nearby Holes Bay to facilitate a new road. The need has arisen as a direct result of increased traffic generated by the port.
The amendments that we propose, and in particular that relating to the general environmental duties placed upon trust ports, successor bodies and Ministers, will, we believe, achieve a guarantee of protection. With respect, I do not consider that there is much value in the argument as to why the position should affect only a few ports at present, and why such a guarantee should start with those. We have to start somewhere. We are dealing with a Bill which relates to ports. There is no reason why one should say, "We must wait until we have the ports marshalled together like a regiment of soldiers before we do anything about them". We should start now and as opportunities arise we should bring in others. If not, I do not know where we shall start. The environmental input will slip.
4.45 p.m.
Lord Brabazon of Tara: My Lords, will the noble Baroness give way for one moment? The process has been started. All the types of work that the noble Baroness described already have to pass through the various tests that I described in my winding up speech.
Baroness Birk: My Lords, if the Minister will bear with me for one moment I was coming to that point. I agree that such tests are applied project by project. However, the Government state that existing legislation is already adequate. It is not. Harbour authorities are exempt from many types of development control which would otherwise be covered in planning legislation. That has been made clear. This issue is quite different. It has already been made clear that legislation covering ports and the empowerment of works orders arising from them preclude provision for environmental protection within the programmes of work. The Minister said that regulations concerning environmental assessment of works provide precisely the form of protection to which I refer. But again that is not the case. Environmental assessment deals only with specific
1532
projects or schemes of work. It does not force the authorities concerned to consider their programme of work as a whole.
In other words, the amendments take the matter back one step and make provision not to deal with the different projects piecemeal. I should have thought that most reasonably minded people would understand that that is a better method. We have found in other areas of our national life that that is better when one is dealing with environmental issues rather than dealing with them piecemeal in this limited way. Such assessment does not force authorities to consider the means of implementing their proposals in practice. That can be all important. It does not allow Ministers to vary the schedule of works proposed on nature conservation and environmental grounds alone. Unless individual port authorities conclude separate protective agreements with the relevant conservation bodies, ports are clearly not adequately covered by the environmental duties that we seek and which are so necessary. I am sorry to disagree so strongly with the Minister. I believe that he will find that what I have said is absolutely true.
If the Minister does not consider the Bill an adequate vehicle for filling an obvious gap in our environmental protection legislation, in what vehicle does he believe that it could appropriately be carried? For example, will the Government use the opportunity afforded by the proposed legislation on Private Bill procedure later in the year? Do they simply not believe environmental protection to be appropriate in this instance?
I believe that it will be difficult to change the Minister's mind, but it is not too late. He could still take the issue away to consider it. We had a very short debate late at night on the matter in Committee. This is the first time that we have debated the whole issue on both the natural and the built environment aspects. I hope that he will reconsider the issue. If not, we must test the feeling of the House.
4.49 p.m.
On Question, Whether the said amendment (No. I) shall be agreed to?
Their Lordships divided: Contents, 82; Not-Contents, 105.

Division No. 1

CONTENTS

Addington, L.

Dormand of Easington, L.

Amwell, L.

Ennals, L.

Ardwick, L.

Ewart-Biggs, B.

Aylestone, L.

Ezra, L.

Beaumont of Whitley, L.

Falkland, V.

Birk, B.

Gallacher, L. [Teller.]

Blackstone, B.

Galpern, L.

Boston of Faversham, L.

Gladwyn, L.

Bottomley, L.

Glenamara, L.

Bridges, L.

Graham of Edmonton, L.

Bruce of Donington, L.

[Teller.]

Campbell of Eskan, L.

Grey, E.

Carmichael of Kelvingrove, L.

Hampton, L.

Carter, L.

Hanworth, V.

Charteris of Amisfield, L.

Harris of Greenwich, L.

Cledwyn of Penrhos, L.

Hilton of Eggardon, B.

Clinton-Davis, L.

Hollis of Heigham, B.

Cocks of Hartcliffe, L.

Houghton of Sowerby, L.

David, B.

Hughes, L.

Desai, L.

Irvine of Lairg, L.

1533

Jay, L.

Phillips, B.

Jenkins of Putney, L.

Pitt of Hampstead, L.

John-Mackie, L

Prys-Davies, L.

Judd, L.

Redesdale, L.

Kilbracken, L.

Richard, L.

Kilmarnock, L.

Rochester, L.

Lloyd of Hampstead, L.

Russell, E.

Longford, E.

Sainsbury, L.

Lovell-Davis, L.

Sefton of Garston, L.

McCarthy, L.

Shackleton, L.

Mackie of Benshie, L.

Stallard, L.

McNair, L.

Stedman, B.

Masham of Ilton, B.

Stokes, L.

Mayhew, L.

Tordoff, L.

Milner of Leeds, L.

Underhill, L.

Mishcon, L.

Wallace of Coslany, L.

Montagu of Beaulieu, L.

Wedderburn of Charlton, L.

Mulley, L.

White, B.

Nicol, B.

Williams of Elvel, L.

Northfield, L.

Willis, L.

Ogmore L.

Wilson of Langside, L.

Poston, L.

NOT-CONTENTS

Aldington, L.

Long, V.

Arran, E.

Lucas of Chilworth, L.

Astor, V.

Lyell, L.

Auckland, L.

Mackay of Ardbrecknish, L.

Belhaven and Stenton, L.

Mancroft, L.

Beloff, L.

Marlesford, L.

Belstead, L.

Melville, V.

Blatch, B.

Merrivale, L.

Blyth, L

Mersey, V.

Boyd-Carpenter, L.

Montgomery of Alamein, V.

Brabazon of Tara, L.

Morris, L.

Brougham and Vaux, L.

Mottistone, L.

Butterworth, L.

Mowbray and Stourton, L.

Caithness, E.

Munster, E.

Campbell of Croy, L.

Napier and Ettrick, L.

Carnock. L.

Napier of Magdâla, L.

Clanwilliam, E.

Nelson, E.

Cochrane of Cults, L.

Newall, L.

Conesloe, L.

Nugent of Guildford, L.

Cox, B.

Orkney, E.

Craigavon, V.

Orr-Ewing, L.

Cross, V.

Oxfuird, V.

Davidson, V. [Teller.]

Park of Monmouth, B.

Denham, L.

Pym, L.

Denton of Wakefield, B.

Quinton, L.

Dilhorne V.

Rankeillour, L.

Dormer, L.

Reay, L.

Eccles, V.

Renton, L.

Elibank, L.

Renwick, L.

Elliot of Harwood, B.

Rippon of Hexham, L.

Elliott of Morpeth, L.

Rochdale, V.

Erne, E.

Rodney, L.

Erroll, E.

Saint Albans, D.

Flather, B.

Selborne, E.

Fraser of Carmyllie, L.

Shannon, E.

Gainford L.

Sherfield, L.

Gainsborough, E.

Skelmersdale, L.

Gardner of Parkes, B.

Strathcarron, L.

Geddes, L.

Strathclyde, L.

Grantchester, L.

Strathmore and Kinghorne, E.

Gray, L.

Sudeley, L.

Gray of Contin, L.

Swinfen, L.

Greenway, L.

Swinton, E.

Halsbury, E.

Terrington, L.

Henley, L.

Thomas of Gwydir, L.

Hesketh, L. [Teller.]

Thurlow, L.

Hives, L.

Trefgarne, L.

Hylton-Foster, B.

Ullswater, V.

Ironside, L.

Vaux of Harrowden, L.

Killearn, L.

Waddington, L.

Kinnaird, L.

Wade of Chorlton, L.

Knollys, V.

Young, B.

Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.
4.57 p.m.
Clause 5 [Control by appropriate Minister over exercise of authority's functions under sections 3 and 4]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 2:
Page 4, line 13, leave out from ("disposal") to end of line 14 and insert ("of the whole or a substantial part of the equity share capital of the successor company to—

(a) managers or other persons employed by the company; or

(b) another company the whole or a substantial part of whose equity share capital is owned by managers or other persons so employed.").

The noble Lord said: My Lords, I shall speak also to Amendments Nos. 30 and 38. These amendments aim to rectify a possible shortcoming in the Bill's provisions enabling support to be given to a management and employee team engaged in bidding for a port. Where such a situation exists it is normally the case that the managers and employees involved, rather than acting as a group of individuals, will form a company to act as a vehicle for making the bid. It was possible that on a strict interpretation of the Bill's provisions such a company would not have qualified for support because the wording used, "managers and other persons employed", could have been held to refer only to individuals.
This group of amendments is intended to preclude that possibility by referring to a management and employee team in terms of individuals and as the owners or part owners of a company. Amendment No. 2 covers the situation where the Minister is required to have particular regard to the desirability of encouraging the disposal of a successor company's equity share capital to managers and other employees in Part I of the Bill. Amendment No. 30 deals with the corresponding provision in Part II. Amendment No. 38 similarly widens the interpretation in the Bill of the references to maximising employee participation in share ownership in the successor company which occur in the provisions enabling a port authority to reimburse the costs incurred by a management and employee team. In line with the existing provisions the new interpretations indicate how a port authority should decide which management/employee-owned company to support should there be more than one of them. I beg to move.
Lord Clinton-Davis: My Lords, I do not dispute the purport of what the Minister seeks to do. But I wish to raise a small point which perhaps I should have raised earlier but as the phrase is repeated in this amendment it is relevant. What does the Minister mean by a "substantial part of the equity"?
Lord Brabazon of Tara: My Lords, at this stage I cannot give a percentage figure to describe a substantial part of the equity. At an earlier stage I said that it might be possible that a management and employee team would not buy the whole of the equity of the company because part might be bought by institutions, local shareholders or someone else.
I am now advised by my noble friend that a substantial part will be at least 10 per cent.
Lord Clinton-Davis: My Lords, so that is a substantial part, is it? How will a court define that? Perhaps the Minister will be good enough to indicate that.
Lord Brabazon of Tara: My Lords, how will a court define what?
Lord Clinton-Davis: The word "substantial".
Lord Brabazon of Tara: I can go no further than I already have.
Lord Clinton-Davis: The Minister has merely said what he believes the situation might be, but surely that is not good enough for legislation.
Lord Brabazon of Tara: I gave a figure of 10 per cent.
Lord Clinton-Davis: If that is the case, why has the Minister not put it on the face of the Bill but has left the matter so vague? He will know that courts cannot look to Ministers' speeches in this House to obtain benefit and guidance. Will the Minister think again about the matter?
Lord Brabazon of Tara: Of course I shall think again. If there is anything that I can add to what I have said I shall write to the noble Lord before the next stage of the Bill.
On Question, amendment agreed to.
5 p.m.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 3:
Page 4, line 14, at end insert ("; and pursuant thereto the Minister shall be satisfied that such managers or such other persons shall individually have received or had the opportunity of receiving independent and objective professional advice concerning the desirability of such disposal to them and that the expenses incurred in providing such advice shall have been discharged by the authority.").
The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 19, 20, 22, 23, 32, 33, 34, 36 and 37. I raised this matter in Committee. I shall try to summarise the arguments because we feel strongly about this issue.
The Government's intention, as stated repeatedly, is to maximise the possibility of management or employee buy-outs. This amendment tests their credibility because we are saying that such buy-outs can be very risky. One must concede for the benefit of argument at this stage—although I am by no means satisfied with the Minister's last reply, as he will know —that we may be talking about 10 per cent. or more as regards the equity in terms of the interests of employees.
On any showing, each and every participant in an employee buy-out may well be risking a significant part of his or her savings. For that reason we say that professional, objective, independent and competent advice will be needed. The Minister agrees with that and says that there is provision for that in the Bill. He says that as regards collective groups there is provision for an indemnity for at least some of the costs. I do not believe that the Government have gone far enough because it is extremely difficult for a potential investor—an employee in the company—to divulge to a group
1536
of people anxieties which depend upon personal commitments in order to make a judgment as to whether it is appropriate for that person to participate in the buy-out.
I should have thought it axiomatic that individuals who have spent a lifetime working in the ports and who have a deep and abiding interest in them wish to see the ports succeed and, for that very reason—I was able to witness this when I went to Tilbury—are very anxious about other potential buyers. Those people who for those reasons want to participate in an employee buy-out will wish to have clear advice given to them individually. That is what Amendment No. 3 seeks to achieve.
People in that category are very different from people who engage in share buying in a privatisation exercise. They are different because they have given their working lives to the enterprise in question. They are not just in it to make a quick buck or in order to sell at the earliest opportunity and make a small profit. They are in it because they perceive it as a way of protecting their interests in the future.
I know that that is not necessarily the view of the noble Lord, Lord Brabazon, because in Committee he said—and he will correct me if I mis-state his observations—"We see no reason to provide any assistance at all for anyone who wishes to indulge in the luxury of independent advice as distinct from the collective arrangements which we are prepared to authorise". I do not believe that that is the best way of maximising employee participation in an employee buy-out.
We then come to the proposition which the Minister has stated that effectively it will be for the port authority to be able to exercise its sole discretion on whether the indemnity as regards costs should be provided wholly or in part. I believe that that provides the port authorities with far too wide a discretion. Consequently, we seek to rectify that by importing the word "reasonably".
I agree with the Minister that it would be unfair for an individual, or these collective groups of employees or managers, to go on a frolic of their own without incurring any expense in seeking advice. Consequently, only reasonably incurred expenses should be covered. In order to meet the eventuality of a dispute as to what may or may not be reasonable in the circumstances, we have provided for a form of arbitration procedure.
In short, that is the purport of this group of amendments. I hope that the Minister will be more responsive than he was on the previous occasion. I beg to move.
Lord Brabazon of Tara: My Lords, I am grateful to the noble Lord, Lord Clinton-Davis, for explaining again to us the purpose that he has in mind in putting forward these amendments. However, I am afraid that I cannot give him a different answer from the one which I offered in Committee.
I agree, and I am sure that noble Lords generally will agree, that the employee of a trust port needs to give serious thought to the matter when he is considering whether he should put his own money into the shares of that port. He will need to appreciate that

1537
it is not a sure-fire route to riches and that the value of shares can go down just as it can go up. He will, however, have two advantages in making up his mind. First, through working for the port he will have his own view about its efficiency, how secure its trade position is and how good its management is. Secondly, he will know that, if the buy-out is successful, he will be able through his own efforts to affect the efficiency of the port and to help it to prosper. He will know that other employees who have invested in the port will be in the same position and will be motivated to make the port a success in a way in which those who do not have a stake in the port may not be motivated.
A further point is that we should not underestimate the extent to which share ownership is now a familiar concept to a large section of the community. Shares in many industries which have been privatised by this Government have been taken up by private individuals, and they have learnt that even the bluest chips can lose some of their value from time to time. This is not a novel thought to the population at large, which has learnt a good deal over the past decade about both the benefits and the hazards of share ownership. This is one mark of the Government's success in broadening the spread of share ownership. I think therefore that the noble Lord, Lord Clinton-Davis, adopts a slightly patronising view of port employees when he suggests that Ministers should ensure that each employee has been given proper financial advice about his personal circumstances before his is allowed to invest in his own port.
Putting together a buy-out bid is not something which would be done overnight. The employees will talk together about it and those organising the buy-out bid, and the financial advisers whom they will employ, will need to put the facts before them. That will be an important part of putting together the bid, and clearly those organising it will need to be able to answer the concerns of the employees. They will have no interest in trying to dragoon employees against their wills into a management and employee buy-out, because, if the buy-out is successful, they will not want to be faced with a discontented workforce which complains that it was misled in being persuaded to join in the buy-out.
I am sure that any buy-out team worth its salt will, with its financial advisers, be concerned to give proper advice to employees who are considering joining in the buy-out. I see this as an integral part of setting up the buy-out, and under the Bill the port authority will be able to reimburse the costs involved. It would be quite inappropriate for Ministers to act as nannies to the employees in the way that these amendments suggest.
I feat that the noble Lord, Lord Clinton-Davis, has overlooked some of the background behind the provisions in both parts of the Bill enabling a relevant port authority to support its management and employees' bid for the port undertaking. My honourable friend the Minister for Shipping was asked in another place if he would include in the Bill a provision giving a port authority quite wide discretionary powers to reimburse a management and employee team's expenditure in mounting a bid. He did this to the apparent satisfaction of all sides. Now
1538
the noble Lord's amendment proposes that the provision is in fact too wide and needs to be made more restrictive in case a port authority, perhaps ill-disposed to its management and employees, withholds from them financial support which in some way it ought to provide.
I must admit to being apprehensive about the effect of Amendments Nos. 19, 20, 32 and 33. First, the substitution of the more nebulous term "reasonable" gives one cause for concern. As the Bill stands, it is abundantly clear that expenditure incurred wholly and exclusively for the purpose of the management and employee proposal qualifies for reimbursement. Substitute "reasonable" and you open up the prospect of disputes between the authority and its managers and employees as to both the scope and the amount of expenditure which may qualify. Indeed, it may be impossible for complete agreement to be reached as to what type and amount of expenditure should be regarded as reasonable, and hence reimbursed by the authority. What will happen then? Under Amendments Nos. 20 and 32 the authority would be faced with an all-or-nothing decision as to reimbursement. If there was no agreement on what was reasonable, the authority, no doubt concerned about its fiduciary duties, would probably be obliged to choose not to support the proposal at all, and the net effect of the amendments would be to have reduced the chance of a successful management and employee buy-out of the port.
As for Amendments Nos. 22 and 36, these would impose an extra duty on the authority to consult independent accountants before deciding which management and employee proposal to support. If a trust port board could not decide which of two proposals was likely to maximise employee share ownership in the new company, I am sure it could be relied upon to consult the independent financial advisers whom it will in any case have certainly engaged to assist it in the sale of its undertaking, but I think this is a matter which we should leave to the ports themselves. I most cases I submit that the decision will be quite clear and that the noble Lord's amendment would impose on the ports an unnecessary further piece of bureaucracy. I hope that the noble Lord will realise that these amendments are therefore unnecessary, as are the others the dangers of which to the success of management and employee teams I have tried to make clear.
Amendments Nos. 25 and 37 serve only to reinforce my concern that, by removing the simple and flexible provision enabling a port authority to reimburse any part of the management and employee team's expenditure—which gives the authority the best chance of reaching an agreement with the team which is appropriate in the particular circumstances of the case—the noble Lord has fallen into a maze of bureaucracy that requires numerous alterations to be made to the Bill, not least the addition of these two new clauses providing for arbitration of disputes between an authority and a management and employee team.
I cannot share the concern expressed by the noble Lord that the existing provisions in the Bill are likely

1539
to work to the detriment of the management and employees. Port authorities intending privatisation will, to the best of my knowledge, be as keen to support a management and employee team to help it bid for the port as the team itself will be to purchase it: the fact that expenses incurred by the authority in reimbursing the team's costs will be deductible from the Government's levy and not from the assets of the successor company, is likely to be a further encouragement in the process.
These arrangements seem well devised. We have heard no complaints about them from either port authorities or the individuals intending to participate in management and employee teams. I cannot envisage what disputes between port authorities and the management and employees teams are likely to arise which they cannot sort out between themselves. Certainly, I see no need for a statutory arbitration procedure. If the noble Lord fears that a port will give preference to a management-led bid over a bid promoted by other employees, I must refer once again to the provision in Clause 40 of the Bill which stipulates the involvement of the greatest possible number of managers and other employees. This clearly makes it impossible for a port to favour a management-orientated buy-out over one which provides for greater employee involvement.
I have necessarily dealt with this large number of amendments at quite considerable length. To summarise, I have to say that I regard the amendments as unnecessary, and I shall not be able to advise the House to accept them.
5.15 p.m.
Lord Clinton-Davis: My Lords, I am sorry that the Minister has misunderstood—either wilfully or innocently, I know not—the anxieties that I have sought to portray. To introduce words like "patronising" when one is concerned to ensure that proper protection is afforded to individuals is unnecessary. There is no suggestion of "a maze of bureaucracy" here. Those are all words which would have been better left out. However, the draconian consequences to which the Minister refers are part of his imaginary processes, because arbitration as to the interpretation of what is reasonable does not have to hold up anything. One does not wait for arbitration. Whether the costs have been incurred reasonably or not is a matter which can be dealt with subsequently.
The point I am making here, I think with some justification —particularly after having had the advantage of going down to Tilbury and talking to the people there, which the Minister has not done—is that there is concern about this. This is not a point that I have just dreamed up. It arose directly out of discussions that I held with people who said "We do have a problem here". The Minister has shown no interest in recognising that there is a problem on the question of costs. It is that of putting far too great a responsibility, free of discretion, on the port authority to determine under Clause 19(2) whether it is the whole or any part of the expenditure which it is prepared to undertake. I do not believe that that is
1540
right. If the Minister is to be believed on the matter of seeking to maximise employee buy-outs, it is the converse of what he has been trying to portray.
In parenthesis, it is fair to point out that the Government forgot to introduce anything about management and employee buy-outs when the Bill was introduced. It arose only as a result of pressure in another place. The Government responded, but it was amazing to forget. One would have thought that the provision was fundamental to a process of this kind. However, there was a complete omission. It is fair to note that. Late in the day the Government had second thoughts and I welcome that. When the Government talk about an amazing bureaucracy it is well to have regard to the fact that they were not prepared to have any bureaucracy as regards management and employee buy-outs.
The Minister casts aspersions on the use of the word "reasonable". He responded positively to the introduction of the word in a not dissimilar context although it was not about management and employee buy-outs. My noble friend Lord Underhill will remember well that this arose when we were dealing with the New Roads and Street Works Bill. The Government again forgot to do something which was subsequently put right. The whole process of arbitration was introduced. I can assure the noble Lord that the word "reasonable" is not unknown in English law. The courts and arbitrators have to interpret what is reasonable in given circumstances. It is not impossible by any manner of means to do so here. The Minister's suggestion is unworthy. He is doing something here which is unhelpful. That being so, we feel that we should test the opinion of the House.
5.22 p.m.
On Question, Whether the said amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 72; Not-Contents, 90.

Division No. 2

CONTENTS

Addington, L.

Graham of Edmonton, L.

Airedale, L.

[Teller.]

Ardwick, L.

Grey, E.

Aylestone, L.

Hampton, L.

Barnett, L.

Hanworth, V.

Beaumont of Whitley, L.

Harris of Greenwich, L.

Birk, B.

Hilton of Eggardon, B.

Blackstone, B.

Hollis of Heigham, B.

Boston of Faversham, L.

Hughes, L.

Bottomley, L.

Irvine of Lairg, L.

Bruce of Donington, L.

Jay, L.

Carmichael of Kelvingrove, L.

Jenkins of Putney, L.

Carter, L. [Teller.]

John-Mackie, L.

Cledwyn of Penrhos, L.

Judd, L.

Clinton-Davis, L.

Kilbracken, L.

Cocks of Hartcliffe, L.

Longford, E.

David, B.

Lovell-Davis, L.

Dean of Beswick, L.

McCarthy, L.

Desai, L.

Mackie of Benshie, L.

Dormand of Easington, L.

McNair, L.

Ennals, L.

Masham of Ilton, B.

Ewart-Biggs, B.

Mayhew, L.

Ezra, L.

Milner of Leeds, L.

Falkland, V.

Mishcon, L.

Gallacher, L.

Mulley, L.

Glenamara, L.

Nicol, B.

1541

Northfield, L.

Shackleton, L.

Ogmore, L.

Stedman, B.

Peston, L.

Stoddart of Swindon, L.

Phillips, B.

Tordoff, L.

Pitt of Hampstead, L.

Underhill, L.

Prys-Davies, L.

Wallace of Coslany, L.

Redesdale, L.

White, B.

Richard, L.

Williams of Elvel, L.

Ross of Newport, L.

Willis, L.

Russell E.

Wilson of Langside, L.

Sefton of Garston, L.

NOT-CONTENTS

Allenby. of Megiddo, V.

Lindsey and Abingdon, E.

Amwell, L.

Liverpool, Bp.

Arran, E.

Lloyd of Hampstead, L.

Ashbourne, L.

Long, V.

Astor, V.

Lucas of Chilworth, L.

Auckland, L.

Lye11, L.

Beloff, L.

Mackay of Ardbrecknish, L.

Belstead, L.

Mancroft, L.

Blyth, L.

Marlesford, L.

Boyd-Carpenter, L.

Merrivale, L.

Brabazon of Tara, L.

Mersey, V.

Brougham and Vaux, L.

Mottistone, L.

Butterworth, L.

Munster, E.

Caithness, E.

Napier and Ettrick, L.

Campbell of Alloway, L.

Napier of Magdâla, L.

Carnoclk, L.

Nelson, E.

Cavendish of Furness, L.

Orkney, E.

Clanwilliam, E.

Orr-Ewing, L.

Cochrane of Cults, L.

Oxfuird, V.

Cox, B.

Park of Monmouth, B.

Craigavon, V.

Pearson of Rannoch, L.

Davidson, V. [Teller.]

Pym, L.

Denham, L.

Quinton, L.

Denton of Wakefield, B.

Rankeillour, L.

Elibank L.

Reay, L.

Elliot of Harwood, B.

Renfrew of Kaimsthorn, L.

Elliott of Morpeth, L.

Renton, L.

Erne, E.

Renwick, L.

Flather, B.

Rochdale, V.

Fraser of Carmyllie, L.

Rodney, L.

Gainford, L.

Saint Albans, D.

Gainsborough, E.

Skelmersdale, L.

Gardner of Parkes, B.

Strathclyde, L.

Geddes, L.

Strathmore and Kinghorne, E.

Gray, L

Sudeley, L.

Gray of Contin, L.

Swinfen, L.

Greenway, L.

Swinton, E.

Henley, L.

Thomas of Gwydir, L.

Hesketh, L. [Teller.]

Trefgarne, L.

Hives, L.

Trumpington, B.

Holderness, L.

Ullswater, V.

Hylton-Foster, B.

Vaux of Harrowden, L.

Ironside, L.

Waddington, L.

Kimball, L.

Wade of Chorlton, L.

Lauderdale, E.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.30 p.m.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 4:
Before Clause 9, insert the following new clause:
("Guidance note on procedure for sale
.—(1) Not later than 42 days after the date on which this Act is passed the Secretary of State shall issue a guidance note concerning the procedure for the sale of trust ports.
(2) No guidance note shall be issued under subsection (1) above unless a draft of it has been laid before and approved by a resolution of each House of Parliament.
(3) For the purposes of this section a guidance note shall be treated for the purposes of the Statutory Instruments Act 1946 as if it were a statutory instrument.").
The noble Lord said: My Lords, this is a probing amendment. The Minister will recall that the Secretary of State's guidance note gave rise to certain problems
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when we were debating these matters in Committee. Since then I understand from the Minister that he has been distributing these guidance notes like confetti at a wedding and that they are now available everywhere, including places of divine worship! But the guidelines are only a draft. I think I am right in saying that. My argument is that this is a matter which should be very carefully considered. The Minister was kind enough to ensure that I had my copy just before this debate took place, but I am not sure when the document was ultimately available in this form in the Printed Paper Office.
We on these Benches think that this is a point of considerable anxiety which deals with many matters that are important to potential buyers and to the port authorities themselves. It may well be that this form of the document will change. We take the view that it is right that considerations that will guide the Secretary of State in the sales of the trust ports are matters which should be widely known. The Minister says in paragraph 4 of the guidelines:
"If there is to be fair competition between all bona fide potential buyers it is essential that all such potential purchasers have equal access to information about the successor company".
That is indeed critical. One can go right through this document and see how critically important are some of the other considerations to which reference is made. I note that in paragraph 5 the Minister says:
"Such objectives might for example relate to plans for the future of the port".
That is something which needs to be taken into account. I should have thought that that is a matter of overriding concern rather than the way in which it is put in this particular paragraph. It is clear that the financial resources of the prospective purchasers will need to be taken into account in considering a bid. That hardly needs to be stated. Of course, nothing is said—one would not have expected it from the environmentally orientated Department of Transport—about the desirability of an environmental audit. We shall come to that later.
The burden of my remarks is that this document is of considerable significance and ought to be discussed in Parliament. The matter is so significant that, in our view, the guidance note should be a matter which requires approval by resolution of both Houses of Parliament. That is not particularly onerous. It is not appropriate for the matter to be the subject of a negative resolution—an affirmative resolution would do. I believe that that would in no way inhibit the Government's intentions. At the moment this is a document which can be varied at any time the Minister desires. However, Parliament ought to have a hand in this, and that is the purpose of the amendment. I beg to move.
Lord Geddes: My Lords, I leave it entirely to my noble friend the Minister to refer to the proposed subsections (2) and (3). However, I cannot help but think that he will reject the suggestion that such guidelines and guidance notes should come before Parliament. I can imagine the precedent that that might set in many other fields.
The reason for my intervention is two-fold. First, I hope that we are all referring to the guidelines that

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went under cover of a letter dated 10th July; at least we shall all be talking about the same document. If that is the version then the first sentence of the covering letter states:
"I attach the final version of this Guidance Note".
The noble Lord, Lord Clinton-Davis, implied that the note was still in draft form. Can my noble friend the Minister address himself to that point as to whether this is the final draft or the final version? Be that as it may, this version gives me no more comfort than I had at Committee stage in that it still remains ambiguous and rather cloudy on the extent to which the Government will or will not support management and employee buy-outs. There are contradictions within this version of the guidance note just as there were in the version which I had at Committee stage; at least, the early part of Committee stage. I should be most grateful if my noble friend the Minister could address himself to that point.
Secondly—I hope the noble Lord, Lord Clinton-Davis, will not accuse me of being either pedantic or semantic—in the version that we looked at during the Committee stage paragraph 17 was headed "Management and Employee Buy-Out". In the time available I have tried to see what happened to that paragraph 17. The answer appears to be that it has disappeared. There is a paragraph 17, but it deals with a completely different subject. I therefore found that the second part of the old paragraph 17 has been incorporated—and very rightly so—into paragraph 15. The new paragraph 15 finishes with the sentence:
"The Secretary of State will be prepared to consider a limited price preference"—
of the kind referred to above—
"in individual cases".
However, the first part of the old paragraph 17 read,
"the Secretary of State will have particular regard to the desirability of encouraging the disposal of the whole or a substantial part of the successor company's equity share capital to managers or other employees of the company".
I stress in that draft the words "The Secretary of State will have regard". I think I finally found similar words in the latest version towards the middle of paragraph 5. However, in that paragraph it reads:
"In framing their draft objectives ports should have regard to the desirability of encouraging"
I do not know whether there is anything significant in that change. However, to my mind it certainly reduces the impact in that the words "Secretary of State" have been deleted and the word "ports" has been inserted. Perhaps my noble friend can reply to that point.
Lord Brabazon of Tara: My Lords, I listened carefully to the points made by the noble Lord, Lord Clinton-Davis, in moving the amendment and to the points made thereafter by my noble friend Lord Geddes. I shall attempt to deal with them during the course of my remarks.
I do not accept that the guidance note in any way constitutes a fundamental statement of government policy. It is in fact almost entirely a procedural document intended to indicate to port authorities which are considering privatisation of their undertaking what procedures they should follow in organising and carrying out the sale. Thus, for instance, it spells out the required timetable for the sale, the necessary
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procedures to ensure that all bidders have equal and adequate access to information, what should be done in the event of a possible conflict of interest, and so on. In so far as it provides the indications of government policy necessary to clarify certain aspects of the procedure, these statements either replicate what is provided for in the Bill, such as the support being given to management and employee buy-out teams, or reiterate statements made from time to time by Ministers both in this House and in another place during the Bill's passage through Parliament. In that context I refer to the remarks of my noble friend Lord Geddes about management and employee buy-outs and the Secretary of State having particular regard to them. That requirement is on the face of the Bill and one cannot have it much stronger than that. On examination, my noble friend will find that this final draft of the guidance note is in fact, if anything, more encouraging towards management and employee buy-outs than the previous one.
Although the details of some of the required procedures have changed to some extent over the months, these basic policy statements have remained virtually unaltered since the initial draft of the note was placed in the Library of the other place by my honourable friend the Minister for Shipping as long ago as March and then by myself in the Library of this House in May. I cannot therefore accept that it is necessary or appropriate to promulgate a note of this kind as a statutory instrument subject to affirmative resolution procedures, a process that would normally apply to documents of the status of, say, the Highway Code or the codes of industrial practice under the Employment Act 1980. In any event the powers already in the Bill will allow the note to be issued in the form of a direction, but I believe that the less formal form of the guidance note is entirely suitable.
Lord Clinton-Davis: My Lords, will the noble Lord help the House and another place in this way? Will he give an undertaking to ensure that, if there are any variations of this document, those variations will be made available at the earliest opportunity in the Printed Paper Office here and in the Vote Office in another place?
Lord Brabazon of Tara: My Lords, I would give that undertaking if it were necessary. I hope to be able to satisfy the noble Lord on that point.
There is the issue of what effect the noble Lord's amendment would have on the privatisation programme under the Bill. As matters stand, the note is now in its final form, and copies were placed in the Printed Paper Office and in the Library of the House yesterday at the same time as it was sent to the British Ports Federation. Nevertheless, if the House accepts the amendment, the note will of course need to be laid before Parliament for approval. That could not be done until after the Bill had received Royal Assent, yet not a single port could begin its privatisation until the note had been approved by Parliament. In the current circumstances, that would in effect prevent any voluntary move towards privatisation for many weeks, a delay of benefit to no one wishing to see privatisation.

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Perhaps I may add to what I said to my noble friend Lord Geddes. We need to consider the extent to which we will support management buy-outs in the individual circumstances of each case. The significance of moving the part of the document about management buy-outs (paragraph 5) is to give the management buy-out preference more prominence in the discussion of the objectives. There is no significance in now saying that the ports should have regard to the objectives. They will be agreed by the Secretary of State and he expects the port to have regard to encouraging management buy-outs in proposing these objectives. Indeed, as I have already pointed out, that is on the face of the Bill. I hope that I have put noble Lords' minds at rest.
Loud Shackleton: My Lords, if a trust port like Poole has already been privatised and wishes to turn itself from a limited company into a trust, is there anything to stop it doing so? No one in Poole wants to abolish the port's trust status.
Lord Brabazon of Tara: My Lords, with the leave of the House, that is a different issue. We have not decided whether Poole should be privatised at this stage.
Lord Shackleton: I thank the noble Lord.
Lord Clinton-Davis: My Lords, I thank the Minister for the helpful way in which he has dealt with the matter. However, my worry has not totally abated. The Minister said that this is his final version, but that might be like Frank Sinatra's final appearance. If the department feels that it has made a mistake and it wants to alter the position in some way, there is nothing to stop the Minister doing so. I return to the matter in the hope that the Minister will intervene again. I do not intend to divide the House. I should like art assurance that, if there were to be a situation such as I have predicated, he would respond positively to my suggestion.
Lord Brabazon of Tara: Yes, my Lords, I certainly would This is the final version. But if under any circumstances another version were produced, I would immediately ensure that copies were not only placed in the Library but sent to all noble Lords who have taken an interest.
Lord Clinton-Davis: My Lords, perhaps the Minister would affirm with a nod of the head that a good way of doing that would be to make the document available in the Printed Paper Office here and in the Vote Office in another place. I see that he affirms that. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 [Schemes made by a relevant port authority]:
5.45 p.m.
Lord Underhill Lord Underhill moved Amendment No. 5:
Page 5, line 34, at end insert:
("(1A) A scheme prepared under subsection (1) above shall include a requirement that the following criteria will be met to the existing standards of the authority—
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(a) the functions of improving and maintaining the port;

(b) conservation and environmental protection including provision for an environmental audit;

(c) provision of facilities to local users of the port; and

(d) provision of working conditions.").

The noble Lord said: My Lords, it may be for the convenience of the House if I speak also to Amendment No. 27. This amendment relates to a scheme prepared by a port authority for submission to the appropriate Minister for the transfer of the property and so on of a company set up under the Bill. It requires that certain criteria will be included in the scheme so as at least to conform to the existing standard of the particular port authority.
There can be little, if any, criticism of the criteria listed in the amendment. On the previous amendment the noble Lord, Lord Greenway, said that the trust ports already have certain responsibilities. It will be seen from the criteria listed in the amendment that some are already the duties and responsibilities of trust ports. The criteria include improving and maintaining the port and the provision of facilities to local users of the port. In view of its recent document, I am certain that the Department of Transport would completely agree with paragraph (b) regarding conservation and environmental protection.
A similar amendment was considered in Committee but rejected by the Minister. On that occasion the noble Lord, Lord Brabazon, said that he did not believe that the amendment would serve any useful purpose. He said:
"Clause 2 already provides that the present statutory functions, powers and duties will pass to the successor companies".
He added:
"These will include functions of the kind mentioned in these amendments".—[Official Report, 26/6/91; col. 653.]
It may be useful if I turn up the actual provision as set out in the Bill. Clause 2(2) (b) states:
"all functions conferred or imposed on the authority by any local statutory provision … are transferred".
It will be noticed that there is no reference there to powers or duties. I submit that that is not good enough. That is why the criteria set out in the amendment are necessary. We want to ensure that there is no diminution of existing standards. I am certain that, as the Minister did not argue against the actual criteria listed in the amendment put forward at the Committee stage, he will not argue today that the criteria are not correct. In fact, from his own words, he would appear to accept the general principle of the criteria laid down in the amendment.
The amendment is drafted in precisely the same terms as Amendment No. 27 to Clause 22. It refers to the transfer by the PLA of the company set up to dispose of the port of Tilbury. I believe that it is generally agreed that the PLA operates satisfactorily. The amendment seeks to ensure the standards of that authority are kept by the successor company by introducing exactly the same criteria into the scheme. I beg to move.
Lord Ezra: My Lords, it seems to me that this amendment represents what is in the spirit of the Bill. However, as we are now dealing with the scheme of transfer, it seems quite appropriate to spell out what

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is intended in the detail set out in the amendment. The scheme document will be of considerable importance. The guidance document has been issued and we have just debated it. But, in addition, there should be reiterated here, in greater depth than in the earlier part of the Bill, the criteria which would need to be met to conform with the existing standards of the authority. Nothing more is being asked than to maintain the existing standards in the important respects specified. I should, therefore, like to express my support for the amendment.
Lord Brabazon of Tara: My Lords, I am grateful to the noble Lord, Lord Underhill, for his explanation of the amendment. As he said, it was considered in Committee. However, I think that we need to be clear about the context of these amendments. The noble Lord has incorporated a number of interesting and important items such as employment conditions and the environment into his proposed requirement for the transfer scheme.
When speaking to the amendments in Committee, and again today, the noble Lord expressed dissatisfaction with the provisions in the Bill relating to the contents of the scheme of transfer as these are primarily financial and legalistic and make no specific mention of any duties and requirements on the successor company. I believe that that point was made by the noble Lord, Lord Ezra.
There is, of course, a very good reason. The scheme is intended as an essential but necessarily rather technical preliminary to the privatisation. It enables the port authority to transfer its undertaking to the successor company it has set up for the purpose. It is not intended to provide for substantive alterations in the duties or functions of the port because Clause 2 of the Bill already provides that all the present statutory functions, powers and duties will pass to the successor company. All that the scheme really does is to allow the authority to cast its undertaking—or in the case of the PLA, which is referred to in the second amendment, a specified part of the undertaking—into a form which will be suitable for privatisation.
I do not, therefore, see the scheme as being a suitable vehicle for significant, if very generally expressed, additional duties to be imposed on the successor company. I am also concerned, as I have said before, about the partial nature of such an application, which would leave a handful of newly privatised ports labouring under requirements not applied to others. In addition, the obligations, as expressed in legislative terms, would be extremely vague. I ask again: how could these things be measured? Who could say, for instance, whether the successor company was improving the harbour to the same standard as the authority had improved it.
The Government intend to agree with each port which comes forward for privatisation the objectives for its sale. These objectives will be used as the criteria against which bids for a port will be considered. We recognise the extent to which the trust ports differ from one another and we intend to agree these objectives on a port-by-port basis, tailored to the circumstances of each port. We believe that this is a
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much more sensible approach than attempting to set out a list of general and vague obligations, some of which might be of little relevance to an individual port.
I do not believe that what is proposed would benefit the Bill as it stands. In the light of my explanation, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Underhill: My Lords, I am most grateful to the noble Lord, Lord Ezra, for his support. Of course, as he attached his name to the amendment, I fully expected him to support it. I note that he stressed the importance of these schemes and the fact that what the amendment seeks to do is at least to preserve existing standards. I was surprised that the Minister did not stress that aspect in his reply.
I noted carefully that the Minister referred to "duties and powers" under Clause 2. I am sorry that it seems he did not take note of what I said when moving the amendment. Therefore, I shall read again to the House Clause 2(2):
"Subject to subsection (3) below, on the date on which the scheme takes effect—

(a) all property, rights and liabilities of the authority"— although we are not concerned with that in this criteria—

"(b) all functions conferred or imposed on the authority by any local statutory provision".

There is no reference to duties or powers. Yet the Minister in Committee referred to "duties and powers". Moreover, he has again done so today, despite the fact that I made my point quite clear in my opening remarks by reading paragraph (b) of subsection (2). Therefore, if that is one of the reasons for the Minister's rejection of these amendments, I am rather disappointed.
Lord Brabazon of Tara: My Lords, I trust that the noble Lord will give way for a moment. If noble Lords care to look at Clause 40 which deals with the "General interpretation", they will find set out at line 29 the explanation that "functions" include "powers and duties".
Lord Underhill: My Lords, I am much obliged to the Minister. I am always prepared to admit that I have missed a particular point. However, why did not the Minister refer to that clause instead of quoting subsection (2)? It seems to me he should have referred to Clause 40 at the outset. Nevertheless, I am grateful for his correction. That does not alter the fact that I believe the criteria laid down in the amendment are most important. I agree with the noble Lord, Lord Ezra, that these are important matters which should be included in such schemes. As I have no intention of seeking the opinion of the House, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 6:
Page 5, line 37, at end insert ("which shall include a provision requiring an environmental audit to be prepared annually.").
The noble Lord said: My Lords, in moving this amendment I shall, with the leave of the House, speak also to Amendment No. 28. I can be quite brief.

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However, it is a different point. We are now dealing with the memorandum and articles of association of the successor company. Having regard to the points made in an earlier debate, we know that many ports are situated in environmentally sensitive areas. It is my contention that it would be highly appropriate if the ports concerned were to lead the way in being required to import into their memorandum and articles of association such requirements as are set out in the amendment; namely, that an environmental audit should be prepared annually.
The gravamen of the Minister's previous remarks has been that our proposals would mean importing into the Bill heavy environmental obligations for the trust or the privatised ports singularly. I do not accept that. Of course, in relation to the previous context and the amendments we discussed, the burdens were somewhat heavy; but we are now talking about an environmental audit. Environmental audits are becoming more and more popular. I predict that over the course of the next decade most reasonable companies will wish to undertake environmental audits as part of their ordinary procedures. However, the laggers will not necessarily follow that procedure unless the force of legislation makes it mandatory for them to do so.
Therefore, why not take this opportunity to impose a requirement—it is not too onerous and would not be very costly—to ensure that an environmental audit is undertaken as part and parcel of a port's activities on an annual basis. Indeed, it is quite as important as the accountancy provisions for an annual audit. Those are commonplace and are required by law. I believe that this is a matter where the Minister could show his bona fides in terms of environmental protection and securing an advance. I beg to move.
6 p.m.
Lord Greenway: My Lords, I oppose this amendment for the same reason as I opposed the amendments relating to the environment: it is wrong to deal with such a matter piecemeal. If we are to introduce these provisions, they should apply to all companies, as the noble Lord suggested. It would be much better to deal with the subject through a new environment Bill. It is wrong to impose the duty on a few ports and ignore the rest.
Lord Brabazon of Tara: My Lords, when the noble Lord, Lord Clinton-Davis, moved similar amendments in Committee, I spoke against them. I have subsequently had the opportunity to ponder the arguments used by the noble Lord on that occasion and now to listen to them afresh, but I am afraid that the more familiar I become with the proposal the more opposed to it I am.
First, I make the point that the memorandum and articles of a new company would be an inappropriate place for a general environmental commitment of this sort, which would lie outside the scope of the company's normal port operations and commercial activities. Secondly, and more importantly—the point made by the noble Lord, Lord Greenway—we should be using the handful of ports likely to privatise under
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the Bill as a sort of legislative testing ground for the use of environmental audits in the ports industry. In Committee. the noble Lord sought to justify his proposal by claiming that the Bill devised a new concept in relation to ports, and thus presumably required a new concept in relation to legislative provision on the environment.
The Bill does not do anything of the kind: it is a privatisation measure, designed merely to enable change in ownership to take place in certain ports. With over half of the ports industry, measured by tonnage handled, already in the private sector, I tend to see this as a tidying up measure, not "a new concept". To claim therefore that what a number of the trust ports wish to do is so conceptually novel that it requires burdening the new port companies with the legislative precedent of an environmental audit which would not apply to the rest of the ports industry, whether within the private sector or not, seems unnecessary, nor do I believe that the noble Lord's proposal would aid the cause of environmental protection. There is already a raft of environmental safeguards concerning the activities of the ports industry, we discussed these earlier. I do not believe that the introduction of environmental audits would add anything of substance to them. Therefore I hope that the noble Lord will withdraw the amendment.
Lord Clinton-Davis: My Lords, I had hoped to hear from the Minister—not that I expected, even in my wildest fancies, that he would accept the amendment —something about environmental orders vis à vis this industry. I hoped that he might say that, although he could not accept the amendment, the idea that advanced parts of the industry would adopt the procedure that is emerging, is something that would have Government support and something that the Government would welcome. We do not have to impose a legislative burden upon the industry to do that; but there was not a word from the Minister to that effect. I ask the Minister, with the leave of the House, to answer the point that I just made, before I withdraw the amendment.
Lord Brabazon of Tara: My Lords, with the leave of the House, if a port company—a presently privatised port, a future privatised port or a trust port—wished to undertake an environmental audit as part of its annual process, the Government would have no objection. In fact, we should be pleased to see it happening; but it should not be imposed upon one small section of the industry and not the rest.
Lord Clinton-Davis: My Lords, in the last part of the Minister's answer, when he said that the Government would be pleased to see it happening, we ferreted out a significant point. If the Government would be pleased to see it happening, I hope that they will advertise that fact. They would not impose a compulsory environmental audit, but would give companies an incentive which is what we are looking for. I am encouraged by what the Minister has just said. He looks surprised at the fact that I am encouraged. I am encouraged, and I am entitled to be

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encouraged, without having any legislative requirement imposed upon me. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 [Schemes initiated by the Secretary of Stale]:
Lord Underhill Lord Underhill moved Amendment No. 7:
Page 6, line 45, after ("until") insert:
("(a)").
The noble Lord said: My Lords, for the convenience of the House I shall speak also to Amendments Nos. 9 and 10. Similar amendments were tabled in Committee. Amendment No. 7 is a paving amendment to bring in Amendment No. 10, which introduces a new clause. The amendments relate to the compulsory purchase provisions of the clause, which will take effect at the end of two years and after Parliament has approved a compulsory company formation order.
The proposed new clause provides that before such an order is made the Secretary of State shall bring before Parliament a report setting out the matters listed in subparagraphs (a), (b), (c) and (d) of the new clause. The compulsory company formation order is an important document. In Committee, I stressed that Parliament was fully entitled to have the information included in subparagraphs (a) and (b). They cover the number and names of the authorities which have exercised their powers, first, in relation to companies for transfer; secondly, the transfer of such undertakings; and, thirdly, the disposal of successor companies.
Subparagraph (c) requires information to be given in the report as to the contribution the exercise of those powers has made towards a national ports policy and broader transport policies. That is a logical request. Subparagraph (d) requires that the Secretary of State should give reasons to the port authority for exercising his power of compulsion.
Amendment No. 9 provides that the order shall be approved by each House of Parliament. The proposals are reasonable. In Committee, I received a disappointing reply from the Minister. The reasons he gave were that the amendments would not add anything helpful to the Bill; and that before directing a port authority under the compulsory provisions there should be consultation with that port authority. We fully appreciate the value of consultation, but in various amendments moved in Committee attempts were made to widen the degree of consultation by involving other important relevant bodies. Those proposals were rejected repeatedly by the Minister.
The Minister also rejected a proposal that the Secretary of State should give reasons for his exercise of the compulsory power to privatise a particular trust port. He made an amazing justification for his rejection. He said that he was sure that the Secretary of State would be called upon to explain his reasons in parliamentary debates. The Minister is certain that matters will be raised in parliamentary debates and for
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that reason he refused to accept that the provision should be written into the Bill. It will depend merely upon what Members of Parliament raise in debates.
In a later alternative argument, the Minister said that matters proposed in the amendment could be raised when the necessary affirmative instrument was debated. If he loses in one way, he hopes that the matter will be raised when the affirmative resolution is before the House. Why should not the amendment, which requires that these matters be included in a report that the Secretary of State presents to Parliament, be accepted? I beg to move.
Lord Ezra: My Lords, many people have been worried about the compulsory powers contained within the Bill. While it might have seemed reasonable for trust ports to use the rights given to them under the Bill to convert their operations to those of quoted companies, it seemed wrong that compulsory powers should be used when they did not exercise their option. Therefore I fully support the various attempts which have so far been made to try to limit that compulsion. The amendment is the latest in a series of attempts that have been made in the other place and have been ventilated at Second Reading and Committee stage here to try to minimise that compulsory power. I therefore support it.
Lord Brabazon of Tara: My Lords, these amendments were proposed in Committee, as the noble Lord, Lord Underhill, said, and we now have another opportunity to debate them. I should therefore like to reiterate some of the points I made then.
The Secretary of State is already required under the Bill to undertake a full process of consultation with any port authority before directing it to begin the process of privatisation. In addition and importantly, any order that he makes confirming a transfer scheme made under the reserve power is subject to the approval of both Houses of Parliament. The noble Lords, Lord Underhill and Lord Ezra, will acknowledge that. Clearly, as part of that process the Secretary of State will almost certainly be called on in debate to explain his reasons for privatising a particular port. I do not feel ashamed of making that point again. At that stage I believe that the relevant points at issue, and in particular the arguments that will be of concern to the port itself, will be concerned not so much with how a change in its own status, let alone previous changes in the status of other ports, will relate to some national transport policy. They will be arguments about the position of that port, which will no doubt have been brought into play during the consultation period and which the Secretary of State may be asked to explain in the parliamentary debates on the order.
The view of the noble Lord, Lord Underhill, is apparently that that position is inadequate and that any aspect of privatisation that is important enough for possible subsequent debate in Parliament should be included in the Bill from the outset to make sure that Parliament does not forget what it should consider when the time comes. That is not a particularly constructive way of proceeding if we are

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trying to keep the scope of the Bill within reasonable limits. It was not, I should point out, the view put to the Government by the British Ports Federation, a body which is particularly qualified to consider ports from a national perspective. What the federation felt was wanted was that the confirmation, or indeed the making of a transfer scheme by the Secretary of State under the reserve power, should be subject to an affirmative order procedure. The federation's views were taken into account in another place by my honourable friend the Minister for Shipping, and the Bill amended accordingly. I hope it will be accepted that the Government have provided for the requirements of the ports industry in respect of Parliament's involvement in any subsequent privatisation under the aegis of the reserve power. I do not believe that the privatisation of a port, even under the compulsory power of my right honourable friend the Secretary of State, needs two orders to be debated in this House and in another place. That would be the effect of the amendment. I hope that the noble Lords, Lord Underhill and Lord Ezra, will see the force of that argument.
Lord Underhill: My Lords, once again I am disappointed with the Minister's reply. I draw attention to the opening words of Amendment No. 10:
"Before making a compulsory Company Formation Order the Secretary of State shall lay before Parliament a report stating',
then vie go on to the points that I mentioned.
The Minister said there was no reason to have two debates. There is indeed no reason. He could present the report at the same time as he presents the order. We are now complaining about the attitude. We are satisfied that matters will be raised in debates. If we did not expect that, then Members of Parliament would not be doing their duty, and there is therefore no need to make provision for this. We believe that such a report should be presented to Parliament. Parliament has a right to have it at the same time as it discusses the company formation order.
The noble Lord referred again to the extensive consultations that will take place with the port authority. I note that he did not make any reference to the point I made—we sought to extend the consultation because it goes far beyond the authority. There are other important bodies which should be consulted on a company formation order: for example, the users of the port, the local authorities, which play a big part in the formation of the trust ports in most cases, and other bodies ought to be considered.
The Minister dismissed rather offhandedly our suggestion that we should question whether the ports played a part in national transport policies. I am not surprised that he took that attitude, but I am disappointed. It is something that Parliament needs to know.
The noble Lord said that the view of the British Ports Federation was taken into account. I noted that carefully because in another amendment I shall refer to the attitude adopted by the British Ports Federation and shall ask whether the Government will take its
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view on that amendment into consideration. I am disappointed with the Minister's reply but I shall not press the amendment. I beg leave to withdraw it.
Amendment, by leave, withdrawn.
6.15 p.m.
Lord Underhill Lord Underhill moved Amendment No. 8:
Page 6, line 45, leave out ("two") and insert ("five").
The noble Lord said: My Lords, in moving this amendment I wish also, with the leave of the House, to speak to Amendment No. 31. The amendment relates to the provision in subsection (1) of Clause 10 that the compulsory provision shall not take effect,
"until after the end of the period of two years".
A similar amendment was raised at Committee stage. On that occasion my noble friend Lord Clinton-Davis asked why the Government had decided on a two-year period. Why should the Secretary of State interfere with the judgment of those responsible for the administration of the trust port—that is, the trustees and perhaps the commissioners—who would know what was best for their port?
A number of trust ports, particularly the larger ones, dislike the compulsory element. That point was emphasised by the noble Lord, Lord Ezra. They may support privatisation, and many do, but they wish to consider the matter in their own time. That is the view clearly expressed by the British Ports Federation but the Government have not noted it.
The Minister stated in his reply during the Committee stage on 26th June 1991 (at col. 663 of Hansard):
"A two-year delay before the reserve power becomes operative should allow ports which may be uncertain about privatisation to get some idea how those in the van are faring as a result of privatisation and to judge the likely shape of the market and its competitive pressures and opportunities as more ports privatise under the Act. For that purpose, two years should be sufficient".
The proposal in Amendment No. 8 is to extend the waiting period for the ministerial direction on the compulsion from two to five years. That would give the port authority a better opportunity to carry out the Minister's intentions which I quoted. A port authority should be able to act earlier if it so desires. It has the authority to do so. It does not have to wait for the two years. We say that the two-year period should be extended to five so as to give the port authority longer to consider two questions: first, does it wish to go into privatisation at all; secondly, when and how should it do so?
Amendment No. 31 proposes a similar provision relating to the Port of London Authority. In this case the turnover of the PLA exceeds £50 million. It is suggested that there is the opportunity for consider-able expansion. The PLA should have some provision to determine its future in the same way as other trust ports. That is why we shall move a similar amendment for other trust ports. I hope that the Minister will be able to give a sound reason why we should not extend the period to five years. I beg to move.
Lord Ezra: My Lords, I support the amendment; I believe that two years is rushing matters. If the intention is to enable the trust ports to gain by the experience of those that have opted to put forward

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schemes and become privatised, in my opinion few will be able to do it in the time. Let us consider what must happen. In the first place the ports will have to make up their minds to take this step. They may not take the decision immediately. Secondly, they will have to prepare a scheme and submit it to the Minister. That will have to be considered in due course. Thirdly, they will have to put the proposal out to tender. They must consider whom they wish to negotiate with. Having decided those factors, there will then be all the usual due diligence procedures and the other matters tied up with the sale of an enterprise. I am familiar with how long it takes to submit that information to a Minister and obtain his approval without having to prepare preliminary schemes.
I believe that the two-year period is totally inadequate if it is intended to give the trust ports the opportunity of considering privatisation as experienced by other ports. I do not believe that many trust ports, even those that wish to privatise, will have built up any kind of experience upon which a judgment can be reached in the period due to the length of time of the transfer negotiations. I therefore urgently press the Minister to extend the period of two years if it is his genuine intention that experience of privatisation should be gained.
Lord Greenway: My Lords, the compulsion element is perhaps the least attractive in the Bill. However, it is worth bearing in mind that we are approaching 1993. If everything goes according to plan, we shall enter a totally different ball game in 1993. It is not unreasonable that pressure should be applied to certain of our trust ports to encourage them to fall into line with some of the other ports that will have already taken the plunge by that date.
That brings me to the remarks of the noble Lord, Lord Underhill, on the Port of London and Tilbury. I believe his remarks on those ports were rather misplaced. Tilbury already has its feet on the starting blocks and is anxious to press ahead as soon as this Bill receives Royal Assent. There is no question of Tilbury wanting to delay matters.
Lord Brabazon of Tara: My Lords, in previous debates we have debated the subject of compulsion at length. Noble Lords will be familiar by now with the reasons why the Government consider that the reserve power is necessary. However, I hope the House will bear with me while I reiterate some of the main points involved. This is necessary to place in context the issue which noble Lords have raised of whether the reserve power of compulsion should be available to my right honourable friend the Secretary of State two or five years after enactment of the Bill.
We believe that a reserve power is necessary if the Government are to build on the benefits arising from the abolition of the dock labour scheme by opening up the ports industry more fully to market forces. The noble Lord, Lord Greenway, referred aptly to the situation that will apply in 1993. He said in effect that 1993 is just around the corner. We believe that to achieve that objective of opening up the ports industry the major trust ports should be in the private sector.
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On a number of occasions we have emphasised that we fully appreciate the extent to which the circumstances of individual ports differ. That is why the Bill departs so importantly from the normal approach to privatisation by being primarily an enabling measure instead of being the instrument for transferring this whole sector of the industry into the private sector. By accepting that there may be good reasons why some even of the major trust ports should not be privatised, at least for the time being, the Government have endeavoured to act in the longer term interests and efficiency of the ports industry as a whole and not simply on an ideological basis. We recognise therefore that both government and individual trust port boards should be involved in any future decisions about privatisation. The Secretary of State will not after two years set off on some sort of shopping expedition to privatise every qualifying port that remains a trust. Some ports may have what they regard as compelling reasons against privatisation. The port of Poole has been mentioned in this regard during our debates. We shall listen to those arguments very carefully before reaching any decision and in any case, where the decision reached is in favour of privatisation, that decision will ultimately be put before both Houses of Parliament in the form of the Secretary of State's order confirming the necessary transfer scheme.
I now move to the question of the two-year gap before the reserve power becomes enforceable. I explained to the House when we debated these same proposed amendments in Committee that a two-year delay before the reserve power becomes operative should allow ports which may be uncertain about privatisation to get some idea of how those in the van are faring as a result of privatisation and to judge the likely shape of the market and its competitive pressures and opportunities as more ports privatise under the Act. For that purpose two years should be sufficient. Many ports have already been considering the possibility of privatisation for many months. Another five years is a very long time: within two years we hope that the leading ports will have been operating as private companies for perhaps 18 months and it should by then be possible for others to draw their own conclusions. I disagree with the comments of the noble Lord, Lord Ezra, on that matter.
Lord Ezra: My Lords, I believe that it is setting an impossible task to expect all those procedures to be completed in a six-month period.
Lord Brabazon of Tara: My Lords, I do not agree with the noble Lord. I believe the noble Lord, Lord Greenway, referred to the Port of London Authority in this connection. He said it should be privatised within such a period. However, we shall have to wait and see what happens.
In Committee it was said that a two-year period might cause uncertainty. It was precisely in acknowledgment of the need to avoid unnecessary uncertainty that we introduced in Committee the amendments providing for a five-year moratorium on the reserve power for a particular port once the Secretary of State had decided not to apply it to that

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port. This amendment, by contrast, would increase the uncertainty by greatly lengthening the time during which a port would live under what the noble Lord, Lord Clinton-Davis, referred to in Committee as the sword of Damocles. Surely, if a port believes that it has convincing arguments why it should not be privatised, it will want to persuade the Secretary of State of this when the two years are up and have the assurance that the question of privatisation will not be raised for a further five years. If the power of compulsion were not available for five years, that would greatly extend the period of uncertainty for ports.
I submit that the Bill as drafted achieves the right balance. It gives ports two years to consider their position in the light of the development of the ports industry during that time. If after the end of the two years my right honourable friend the Secretary of State consults a port about its privatisation and decides against privatising it, the port will know that the matter will not be raised for a further five years. I think that these arrangements are very reasonable and I ask noble Lords to endorse them.
The amendment also sought details of the criteria to be used in deciding whether to invoke the reserve power. I hope the noble Lord, Lord Underhill, will appreciate that this cannot be a matter of providing some sort of standard list, given the greatly differing circumstances of different ports. It will be for each individual port to put forward its own arguments against privatisation, and I am sure that it would be wrong for either the Government or for noble Lords to anticipate what these might be in each individual case. I hope that the noble Lord, Lord Underhill, opposed as I know he is to the principle of "Whitehall knows best", would have approved of that.
There are two critical points to bear in mind. First, if we had believed that after two years we were going to privatise all ports above the £5 million threshold, we would not have introduced the five-year moratorium into the Bill. Secondly, and most importantly on the issue of compulsion, if we had intended to privatise all ports with a turnover of over £5 million we should have introduced a Bill which did exactly that. However, we have not done so. For those reasons I hope the noble Lord will feel able to withdraw the amendment.
Lord Underhill: My Lords, I am grateful to the Minister for explaining fully his reasons for rejecting the amendments. However, I am surprised that greater notice was not taken of the comments of the noble Lord, Lord Ezra. Whereas I am speaking as an amateur, from a political viewpoint, with the aid of information that has been supplied to me and with the aid of knowledge gained from discussions I have participated in, the noble Lord, Lord Ezra, speaks from his commercial experience. He believes that two years is inadequate for the necessary discussions and for the consideration which will have to be given to such an important matter.
We are not discussing the principle of compulsion. The noble Lord, Lord Greenway, made it quite clear that he regards the question of compulsion as being the least desirable feature of the Bill. That issue was
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dealt with at Committee stage when we discussed hether the clause should stand part of the Bill. We are discussing whether two years is sufficient time for all the discussions and consideration which will be necessary before the Secretary of State decides to proceed with the privatisation of a particular port.
I noted that the Minister did not comment on my remark about the attitude of the British Ports Federation although I gave him the opportunity to do so in the debate on the previous amendment. The federation is very much concerned about the principle of compulsion. It believes in privatisation but it believes that each port should have the fullest opportunity to consider in its own time the steps it wishes to take.
The noble Lord referred to the moratorium which the Government have introduced. We are pleased that the Government have done so. It means that, if the Government discuss the question of privatisation with a port and decide not to go ahead, then the matter cannot be raised again for a period of five years. Therefore, the Government recognise that there will be circumstances in which more than two years will be essential for the consideration of this very important matter.
The noble Lord referred to the fact that all major ports should be in private hands. We shall discuss a later amendment in which the Government emphasise that they want to see the 14 major ports covered by the privatisation measures as soon as possible.
For the reasons which I have mentioned, I am sorry that the Government are not moving in this direction. However, I shall not press the matter to a Division and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 9 and 10 not moved.]
Clause 11 [The annual turnover requirement for the purposes of section 10]:
[Amendments Nos. 11 to 13 not moved.]
6.30 p.m.
Clause 14 [Payment of levy]:
Lord Underhill Lord Underhill moved Amendment No. 14:
Page 11, line 16, at end insert ("and on receipt he shall take full account of the need for investment in the national ports infrastructure").
The noble Lord said: My Lords, at Committee stage this amendment was tabled but was not moved because of the lack of time. The amendment deals with an important matter and that is why it is brought forward again today. It relates to Clause 14(1), which reads:
"Levy chargeable on a disposal shall be paid to the appropriate Minister by the former relevant port authority by whom the disposal was made".
The amendment proposes to add:
"and on receipt he shall take full account of the need for investment in the national ports infrastructure".
As the receipts will be derived from the sale of a trust port it seems common sense that the receipts should be used for the furtherance of the ports industry. One of the objectives of a private port is the development of its port undertaking. As mentioned at Second Reading the ports may not make a profit. They have to use any surplus for port development or

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to reduce charges. The amendment will be in line with the purposes of trust ports, all of which were introduced by Private Bills.
I hope that the Minister will appreciate the common sense of the amendment and that money which is derived from such sales should be invested in the port structure of the nation. I beg to move.
Lord Brabazon of Tara: My Lords, perhaps I may touch briefly on the Government levy. The government levy was introduced because the lack of any beneficial owners of the trust ports opened up the possibility of those who bought the ports making excessive windfall profits. In effect, without the levy, the ports would be given away for nothing because the whole of the purchase price would revert to the new owner of the port who had paid the price. The concept of a 50 per cent. levy was designed to establish a balance between the respective interests of the taxpayer and the new owners of the ports. Clearly, there would have been no point in establishing that balance if the money was then to be pumped back into the ports. On what basis would it be allocated? Would it be invested in the ports being privatised, thus partially reintroducing the windfall gain that it had been designed to remove? Or would it go to other ports?
I must in any case point out that, as the amendment stands, it has little meaning, since the Bill makes it clear, in Clause 16, that the levy receipts will go to the Consolidated Fund, no matter what Ministers happen to be considering at the time those receipts are paid. As the noble Lord, Lord Clinton-Davis, pointed out during the Committee stage when he asked me to explain to him the meaning of one of his own amendments, the Government have better facilities than most for ensuring that drafting and continuity are as clear as possible. Even allowing for that, I find an amendment which would simply require the Minister to ponder ports industry investment while taking the levy receipts from a port authority and paying them into the Consolidated Fund difficult to understand and, indeed, meaningless. Presumably what the noble Lord, Lord Underhill, has in mind in moving the amendment is that the Government should decide what investment is needed in which ports. That shows the gulf which exists between the philosophy of this Government and of noble Lords opposite. We touched on that in earlier debates. We believe that, like other industries, the ports industry is a competitive industry and that it is for the boards and management of the various ports to take decisions about the investment in their ports. Noble Lords opposite seem to believe that the man in Whitehall, or perhaps even the man in Walworth Road, knows best and that he should decide in which ports there should be further investment and presumably which ports should continue in being and which are surplus to requirements. That is something which we on this side of the House must reject. Therefore, I hope that the noble Lord will not press the amendment.
Lord Underhill: My Lords, I shall not accept the Minister's challenge to justify the Labour Party's
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transport policy. I would welcome the opportunity to do so, but that is not the purpose of the amendment. However, I should like to say that a national transport policy should have regard to the development of the ports industry. There is a national ports industry, not merely an association of individual ports.
The Minister asked how the money would be allocated. Surely I do not have to spell that out in the amendment. We say that the Minister should take full account of the need for investment in the national ports infrastructure.
I said that I would not enter into the argument of the difference between the philosophies of the Conservative Government and the Labour Party. We have a certain philosophy, but throughout we have tried to make the Bill a better Bill. We have not continued to argue against privatisation. In order to make the Bill more workable, we have tried to deal with some of the factors about which many of the ports themselves have anxieties.
I have listened to what the Minister had to say and I shall read carefully in the Official Report what he said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 15 [Information for purposes of levy]:
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 15:
Page 12, line 21, leave out ("£300") and insert ("£3,000").
The noble Lord said: It may be for the convenience of the House if, in moving Amendment No. 15, I speak also to Amendments Nos. 16 and 17.
This series of amendments gives the House the opportunity to hear from the Minister the result of his excursion into the Treasury to have discussions with the Chancellor of the Exchequer about the nonsensical position which had arisen in relation to the application of the Taxes Management Act 1970 as amended by the Finance Act 1989 to the provisions of this Bill.
One only has to see how absurd the penalties are. It is a pity that the Minister was not in the House the other day when we were considering the Export and Investment Guarantees Bill. He would have heard the Treasury roundly traduced by noble Lords on all sides of the House. It was an interesting exercise.
Here we have the Minister using these two Acts as a precedent. First, I do not see that they are necessarily applicable. One would have thought that it would be appropriate here not to use them as a precedent but to try to draw a distinction, which would not be too difficult. Secondly, to provide, as in those Acts, the same penalty for fraud as for negligence is to perpetuate an absurdity. If someone undertakes a fraudulent activity for the purpose of deception, he deserves inevitably and ineluctably a higher penalty than someone who makes a mistake through negligence. The noble Lord, Lord Geddes, made some telling observations. He supported in substance the proposition that I advanced then and I hope that he is still with me now.
I trust that the Minister will say that, as the Bill must be considered in the light of the Government's own amendments, they will think again about the

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proposition. That is why I have moved the amendment in this way. It is different from the amendment that I tabled last time because it draws a distinction between fraudulently furnishing and negligently furnishing. I beg to move.
Lord Geddes: My Lords, I was with the noble Lord, Lord Clinton-Davis, previously and I continue to be with him in the spirit of his amendments. However, I did not agree with him in Committee, and I still do not, that a precedent should be set in the Bill. He misinterpreted what I said in Committee and my noble friend the Minister rightly corrected him at col. 670. However, that apart, I strongly endorse the thrust of the amendments. They are derisory penalties under the Taxes Management Act as amended by the Finance Act. I hope that my noble friend will give the House some comfort following any conversation that he or his department may have had with his right honourable friend the Chancellor of the Exchequer.
Lord Brabazon of Tara: My Lords, as the noble Lord said, these are similar amendments to those we debated in Committee, with the important distinction that he mentioned. As I explained on that occasion, the penalties derive ultimately from the Taxes Management Act 1970, as amended by the Finance Act 1989, which lays down standard penalties for failure to supply accurate information in respect of liability to taxation. Those Acts also provide for similar penalties in respect of both negligence and fraud. The noble Lord, Lord Clinton-Davis, has criticised those precedents as irrelevant but, as the nature of the offence in each case is exactly the same as those in the earlier Act, I simply cannot accept that. The question of whether the original penalties themselves, despite the uprating in 1989, are adequate is a rather different matter.
In Committee, my noble friend Lord Geddes asked me to consult my colleagues in another place. I shall indeed draw the points that noble Lords have made to the attention of my right honourable friend the Chancellor of the Exchequer, but, as I said in Committee, I cannot promise that he will be persuaded. Be that as it may, it remains the case that these are the standard penalties for failing to provide adequate information in respect of liability to taxation. It hardly seems justified that, in this particular case, persons contravening the provisions of the Bill should be required to pay 10 times as much as other persons who incur penalties in respect of, for example, corporation tax returns.
Whatever view noble Lords may have about the penalties laid down in the Bill, I hope that they agree that it would be wrong to use the Bill set a new precedent concerning penalties for failure to provide information in the taxation area. I therefore hope that the noble Lord will withdraw the amendment.
6.45 p.m.
Lord Clinton-Davis: My Lords, I am not totally convinced, but I await with interest, as will the media, the visit that the Minister makes to the Chancellor of the Exchequer, if possible before we reach the end of the Bill. Otherwise, we shall not have the benefit of it.
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So it is next week or nothing. He must ensure that his secretary is quickly on the phone to make the necessary appointment. I am sure that the Chancellor of the Exchequer will be only too anxious to assist the Minister so that he can come back next week and say that he is in total agreement with me and that he will change the situation unilaterally. He would then have my full support. I await with interest what he will have to say. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 16 to 18 not moved.]
Clause 19 [Financial assistance for proposals to maximise employee participation in equity of successor companies]:
[Amendments Nos. 19 to 23 not moved.]
Schedule 1 [Supplementary Provisions with respect to Transfers under section 2]:
[Amendments Nos. 24 and 25 not moved.]
Clause 21 [Power of Port of London Authority to form a company to operate the port of Tilbury]:
Lord Underhill Lord Underhill moved Amendment No. 26:
Page 19, line 19, after ("activities") insert ("within the curtilage of the Port of Tilbury").
The noble Lord said: My Lords, a similar amendment was moved in Committee. The amendment seeks to define the port of Tilbury. In view of the Minister's reply, it is appropriate to run through what has transpired in various debates at different stages of the Bill.
On Second Reading in another place the Secretary of State said in his opening speech that the Bill provides for the privatisation of a trust port in its entirety except in the case of the Port of London Authority. He added that the PLA is empowered to sell off its commercial docks but will retain its conservancy and other statutory functions as regards the River Thames as a whole. He referred to factors peculiar to London, the first being the sheer size of the area for which the PLA is responsible—150 kilometres of river. When explaining Part II of the Bill, the Secretary of State did not help further. As noble Lords will know, Part II is concerned with the sale by the PLA of the port of Tilbury.
Questions were asked in Commons Standing Committee as to how the Minister proposed that the Port of London should be split and how much would be transferred to the port of Tilbury. The Opposition accepted that there are various pieces of land not within the boundary of Tilbury but connected with it. It was urged that the Minister be specific in order to ensure that Tilbury continues as a successful port. In reply, the Minister, Mr. Patrick McLoughlin, certainly did not answer those important questions.
At Report stage in the other place it was stressed that it would be wrong to pass the Bill without incorporating a schedule setting out the property to be transferred to the port of Tilbury. Again, reading carefully Mr. McLoughlin's closing speech, it is obvious that he failed to answer those questions. He referred to activities outside the port of Tilbury which it might be sensible to transfer to the port, but he gave no specific details.
On Second Reading in this House the same questions were put, and, with all due respect to the

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Minister, no clarification was given. I have read carefully the debate at cols. 1321 to 1327. There was no specific mention by the Minister of the PLA; nor did he answer those questions.
So to the Committee stage in this House. My noble friend Lord Clinton-Davis introduced the amendment. He explained that he had failed to read my writing, so I have typed my notes this time. He emphasised that there was still no definition of the port of Tilbury and that it was necessary to know precisely what the Government envisaged as the port of Tilbury. He stressed that a legal definition was needed.
Time and again it has been said that the Port of London Authority is a very complex body. It functions with three divisions: the port of Tilbury, the river with its statutory conservancy responsibilities and the Port of London properties. These facts were confirmed in a recent Parliamentary Maritime Review publication. We also know that the Port of London Authority has 16 property subsidiaries.
It may be helpful for me to quote part of the reply of the Minister at Committee stage. He said:
"As regards land, I can inform the Committee that the transfer will involve only the current operating land within the Tilbury perimeter plus the Tilbury fort land to the east of the port of Tilbury, most of which is already earmarked for a riverside berth and cargo handling back-up for the port. It is not proposed that any other land outside Tilbury perimeter should be transferred". [Official Report, 26/6/91; col. 688.]
The Minister then mentioned that the transfer of any incidental and connected activities would be a matter for the PLA to determine.
Having gone through the history of the discussions, we want to know quite clearly the Government's view on the legal description of the port of Tilbury which is to be disposed of by the Port of London Authority. At all stages of the Bill questions have been asked but no replies given. As I said, despite the questions asked at the Second Reading debate, the noble Lord, Lord Brabazon, did not reply to them at that stage. In Committee he dealt with the matter in the terms that I have mentioned. I beg to move.
Lord Brabazon of Tara: My Lords, I recall that the noble Lord, Lord Clinton-Davis, tabled an identical amendment at Committee stage, when he was uncertain about the extent of the land to be transferred as part of the Tilbury transfer. I made clear then that, so far as the transfer of land was concerned, only the operating land within the Tilbury perimeter and the Tilbury fort land to the east of the port of Tilbury would be involved.
As I said then, the incidental and connected activities appropriate to the transfer will be for the authority itself to identify in the first instance. To restrict the scope of the transfer from the authority to the new company, as the amendment proposes, could well jeopardise efficiency. In point of fact, there are a number of activities which have involved members of the Tilbury workforce outside the port of Tilbury itself. For instance, an inland clearance depot at Orsett, some five or six miles inland from the port, has used Tilbury labour. Tilbury workers are also employed under contract to load and unload
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explosives for ships at the Chapman anchorage, a considerably greater distance down river from the port.
The PLA is currently the biggest employer of dock labour in London; all the workforce concerned is based at Tilbury and will be transferred to the new company on privatisation. I am sure the noble Lord will agree that it would make no sense at all for these people to be arbitrarily restricted to working within the perimeter of the Tilbury port when there will be other opportunities for the exercise of their skills, for which the new company will no doubt wish to compete on equal terms with other private firms in the field, which would be hampered by no such statutory restrictions as this amendment would impose.
I appreciate that I have not given any more exact specification than previously. That will be in the PLA's scheme of transfer. However, I hope that the noble Lord will see that his amendment would damage the interests of the workers of the port of Tilbury.
Lord Underhill: My Lords, I cannot see anything in the amendment which would damage the port of Tilbury. It is intended to define precisely what is the port of Tilbury. The Minister repeated what he said at Committee stage. There is still nothing in the Bill, nothing in the schedule and nothing defining the port of Tilbury of which the PLA will dispose. It is for that reason we tabled the amendment at Committee stage and again today.
I shall not weary the House further. We have not had a further explanation but a repetition of what the Minister said at Committee stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22 [Transfer to the company of relevant property, etc., of the Port Authority]:
[Amendments Nos. 27 and 28 not moved.]
Clause 24 [The required provision for the protection of pension rights]:
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 29:
Page 22, line 42, leave out from second ("position") to end of line 43 and insert ("had he continued to be a member of the Fund, subject to the conditions in subsection (2) above.").
The noble Lord said: This amendment deals with a continuing source of anxiety on the part of the workforce. I want to make clear that I am grateful to the Minister for having written to me about this fairly complicated matter. Immediately I concede that it is one for which complete solutions are difficult. This amendment is intended to probe the situation a little further.
As it stands, Clause 24 seems only to guarantee whatever rights exist at the time of transfer so that an employee is able to continue in employment for a further 15 or 20 years and finish up with the same pension that he would have received at the time of the transfer. There is no mention of protection against inflation for the guaranteed pension. Indeed, if the employee is unfortunate enough to fail to improve his position so far as the pension is concerned after the transfer, he will have had its value eroded by whatever cost of living increases may have taken place. I do not

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argue that this amendment provides the right answer but 1 urge the Minister to give further attention to these matters.
It is of interest that, when the noble Lord, Lord Belstead, spoke at a meeting marking the commencement of Water Week, he gave his attention to the new pension arrangements for employees of the water industry. He said:
"One current issue is the knowledge that water authorities are considering new pension arrangements for their employees. Whatever decisions are reached on new schemes, one important and reassuring factor is clear—for existing employees any new scheme will be an option and, even after privatisation, they will be able to remain in a scheme with the same benefits, and requiring the same contributions, as the local government superannuation scheme. The existing rights of current employees and pensioners (and deferred pensioners) will not be affected. A key feature is that I include full index-linking in the no change assurance".
There is another matter of importance in relation to that point and perhaps the Minister will give some attention to it subsequently, if not tonight. When dealing with the Water Bill on 4th May 1989 the noble Earl, Lord Caithness, said that,
"the trust decd will contain two provisions which will give members of I he scheme particular reassurance about the protection of their future rights. These are, first, that the trustees of the mirror image scheme shall include at least two representatives of members. Secondly, while there remain potential beneficiaries of the mirror image scheme, it shall not be wound up or its benefits altered if any trustee objects". —[Official Report, 4/5/89; col. 304.]
I realise that that is not wholly germane to this amendment but I raise the matter because I believe that it is very important. It may well be that we must return, albeit briefly, to this issue when we come to Third Reading. I wonder whether the Minister can reply to those brief points tonight. If he is not in a position fully to do that, perhaps he will write to me before the next stage of the Bill, but in ample time for me to table a suitable amendment. I beg to move.
7 p.m.
Lord Brabazon of Tara: My Lords, I am grateful to the noble Lord, Lord Clinton-Davis, for explaining the thinking behind this amendment, since pensions issues are invariably complex; at least I certainly find them so, and I think I am not alone in that.
At Committee stage the noble Lord suggested that the division of the PLA pension fund would work to the disadvantage of those employees who were transferred to the new Tilbury company. I undertook to write to the noble Lord on the subject and have done so, and placed a copy in the Library. Whatever division of the fund is decided upon will be based on an actuarial calculation taking account of all the available evidence on the future commitments of both the PLA fund and the new Tilbury fund. The ratio of actual and deferred PLA pensioners who no longer contribute anything to the fund to active members is substantial, and the very heavy financial burden that those groups impose will remain with the PLA and it is therefore right that the bulk of the funding will also remain with the PLA. But that does not in any way represent an inequitable division of the funding. There is no reason on that ground for believing that it will be possible for the PLA pension fund to improve benefits to pensioners beyond their present level.
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The Bill already provides that an employee transferring to the Tilbury company will not he placed in any worse position as regards pension rights than he enjoyed on leaving the PLA pension fund. And this applies not only to the pension entitlement to which he was entitled on leaving the PLA scheme. It also applies to his acquiring future pension entitlements on the basis of the rules of the PLA fund as they stood at the time when the employee left the fund.
The amendment is apparently intended to ensure that a Tilbury employee shall reap the benefits of any improvements in pension terms which the PLA pension fund introduces after he has left the fund. I have already explained that the scope for such improvements is unlikely to arise simply from the division of the fund which will take place. But no doubt the noble Lord has in mind the possibility that the PLA pension fund will prosper in future years to the extent that it will be able to improve benefits. But I think we have to look at the practical possibilities. Even if investment returns are good over the medium term, it might be existing pensioners rather than existing employees who would benefit from any improvements in the terms of the PLA fund, since many pensioners' pensions are significantly below their original purchasing power. The Tilbury fund on the other hand would be likely to be in a better position to withstand a period of poor investment returns because of the absence of current pensioner liabilities. So there is no particular reason for supposing that benefits in future will be improved to a greater extent under the PLA fund than under the Tilbury fund. And I cannot believe that it would be right to provide in the Bill for Tilbury employees to benefit from future improvements in pension terms under either the PLA pension fund or the Tilbury fund, whichever were the greater.
I believe that it would be wrong for the Bill to impose on the Tilbury company an obligation to improve pension benefits in line with any benefits introduced by the PLA after the transfer had taken place. It would be unreasonable to expect the new company to accept as a basis for changes in its pension fund changes in a quite separate pension fund over which the company had no control. In any case there is no reason to believe that the scope for improvements will be greater under the PLA fund than under the Tilbury fund.
I hope that I been able to clarify at least some of the points that the noble Lord raised when moving the amendment. I shall need to read most carefully what he said. I shall write to him on any points which I have not covered. With that assurance, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Clinton-Davis: My Lords, I thank the Minister for that explanation. He had been kind enough to write to me. On the other points raised, the difficulty is the timescale. I do not imagine that I shall wish to divide the House on the issue. However, I may well wish to return to it. I hope therefore that the Minister will ensure that I receive a reply urgently. I do not blame him for dealing with the matter as he did. I had given him no notice.
Lord Brabazon of Tara: My Lords, I shall do my best to get the reply to the noble Lord as soon as possible and in good time for the next stage of the Bill —even if it means that I shall not find time to make an appointment with my right honourable friend the Chancellor of the Exchequer.
Lord Clinton-Davis: My Lords, the two matters are not mutually exclusive. I insist that the Minister meets with the Chancellor of the Exchequer. I assure him that I shall do my best to advise the media of that significant meeting. Having regard to what the Minister has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 26 [Powers of disposal in relation to the company]:
Lord Brabazon of Tara Lord Brabazon of Tara: moved Amendment No. 30:
Page 24, line 33, leave out from ("disposal") to end of line 34 and insert ("of the whole or a substantial part of the equity share capital of the company to—

(a) managers or other persons employed by the company; or

(b) another company the whole or a substantial part of whose equity share capital is owned by managers or other persons so employed.").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 2. I beg to move. On Question, amendment agreed to.
Clause 27 [Power of Secretary of State to require exercise of Port Authority's powers under sections 21 and 22]:
[Amendment No. 31 not moved.]
Clause 28 [Financial assistance for proposals to maximise employee participation in equity of the company]:
[Amendments Nos. 32 to 37 not moved.]
Clause 40 [General interpretation]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 38:
Page 32, leave out lines 10 to 15 and insert ("securing the disposal of the whole or a substantial part of its equity share capital ("the relevant equity") to—

(i) managers or other persons employed by the company; or

(ii) another company ("the acquiring company") the whole or a substantial part of whose equity share capital is owned by managers or other persons so employed;

where the persons so employed participating in acquiring the relevant equity or (as the case may be) in ownership of the acquiring company's equity share capital comprise the greatest possible number of persons so employed; and").
The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 2. I beg to move.
On Question, amendment agreed to.

Atomic Weapons Establishment Bill
7.6 p.m.
Report received.
Clause 1 [Arrangements for the carrying on of certain activities]:
Lord Mayhew Lord Mayhew moved Amendment No. 1:
Page 1, line 22, after ("company") insert (", being a company registered under the Companies Act 1985 and
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beneficially owned as to 95 per cent. or more of the shares by United Kingdom citizens resident in the United Kingdom and, so far as it is not owned by individuals, by a company or companies which are themselves so registered and owned,").
The noble Lord said: My Lords, I have not put the amendment down in order to divide the House again, although the previous Division in Committee indicated a great deal of all Party support. It is in order to ask the Minister to explain more fully some of the remarks that he made which were designed to reassure us that foreign shareholdings in the contracting country were desirable and were not nominees for Saddam Hussein or Gaddafi. The noble Earl agreed that the Government should and would keep a vigilant eye on the shareholdings of the contracting company. He said:
"Indeed it is likely that we may specify in the contract that shares in the … company should not be transferred without the consent of the Secretary of State".—[Official Report, 2/7/91; col. 906.]
The Government thereby admit that there is this problem and claim that they will take powers to overcome it.
I hope that the Minister will explain how he proposes to control the transfer of shares, short of cancelling the contract. If the contract is cancelled, one has a new contracting company and the same problem arises. Short of cancelling the contract, how does the Minister propose to prevent, for example, an American bank selling its shares to somebody who is an undesirable shareholder, or to nominees of the shareholder? I think that we are entitled to a reply. It is an important question on which many Members from all sides showed considerable concern at Committee stage. If we do not receive a reply, ill natured noble Lords such as myself may conclude that the Government do not know how to control the transfer of those shares and do not intend to make a serious effort to do so.
I wish to put forward another point that was not raised at Committee stage. The defence by the Government was that our amendment rules out American shareholding, which was said to be desirable. We can concede that there is no security objection to American shareholdings. When we look back in history, that is acceptable. However, we ask about the political consequences of having substantial American shareholdings.
We have been a good friend and ally of the United States for decades. However, on nuclear matters the Americans can be extremely unsentimental and ruthless, as we learnt soon after the end of the war. The American and Soviet Governments are about to agree to a drastic reduction in their strategic nuclear capability. When that happens the United States will turn to the United Kingdom Government and ask for the Trident programme to be cut. That is for sure. Therefore, may there not be difficulties for the major American shareholders as regards loyalty to the contract and to the contracting company, on the one hand, and not observing the wishes of their own Government, on the other? I shall not repeat the many other good reasons for supporting the amendment which was put forward in Committee. However, I ask the Minister to reply to those points. I beg to move.
Lord Williams of Elvel: My Lords, naturally I support the amendment tabled by the noble Lord, Lord Mayhew. It is the amendment that I moved in Committee with the support of the noble Lord. The matter was then settled by a Division, but it is the right of any noble Lord to table any amendment that he feels to be appropriate. But we on these Benches respect the self-denying ordinance which the Government also respect—that if a matter is decided at any stage of a Bill we will not seek to revert to it at a later stage.
However, having tabled the amendment the noble Lord, Lord Mayhew, has asked several questions which need a considered reply. He said that he will not divide the House and we respect that decision. But the question is: how do the Government intend to ensure by whatever means available that shares in the contractor company are not transferred in ways that we know not of—there are many ways of which we know —to parties which may have sinister interests? That is the point that the noble Lord makes and that is the point that I wish the Minister to reply to.
7.15 p.m.
The Parliamentary Under-Secretary of State, Ministry of Defence (The Earl of Arran): My Lords, the amendment is identical to that which was debated and voted on in Committee on 2nd July. I do not propose to occupy the House by repeating everything that I said then.
I remind the House that the Government have no intention of letting the AWE contract to a foreign firm. I am sure that, no other country would put itself in that position; neither shall we. I have assured the House unequivocally that the contractor will be a UK-based and UK-controlled company. There is no doubt about that. The question then arises: in view of those assurances, why not accept the amendment and put the matter on the face of the Bill? Perhaps I may answer that a little more fully.
First, the amendment is unsuitable and inadequate from the point of view of national security. Security is a much. wider matter. Share ownership does not entitle shareholders to be told the company's secrets, let alone the company's customer's secrets. In the case of sensitive defence information, access to such information within industrial companies, just as within the Civil Service, is carefully controlled on an individual basis in accordance with the requirements of MOD security authorities. Stringent vetting procedures must be undergone before anyone can receive such information. Even among security cleared personnel, such information is restricted to those who have a proven need to know it.
These procedures are important because if a hostile intelligence agency trying to get at our secrets could bribe or blackmail an employee into passing information, that would be an effective way of spending money. It would be far more effective than buying shares in the vain hope of obtaining sensitive information in that way. Alternatively, if hostile foreign interests really thought that they could obtain information or influence via a shareholding, they could simply find a British sympathiser, give him some
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cash and get him to buy the shares and tell them anything that he finds out. Although ineffective as a way of gaining information, that would be an easy way around any statutory restriction on foreign share ownership. That is one reason why the amendment would be hopelessly inadequate as a means of protecting national security. A far more stringent security regime is required, and that is what we shall ensure through our security procedures.
I have of course explained that our security concerns will include taking a close look into any foreign connections that a potential AWE contractor may have. That would include anything which might possibly render its personnel open to undesirable influences, foreign or otherwise. I hope that noble Lords will forgive me if I do not go into great detail about our security vetting procedures for personnel with access to highly-classified defence information. But I can assure the House that they are strict and apply just as much to contractor personnel as to civil servants.
The second main strand of the argument is whether there should be a statutory requirement by amendment to this Bill to bind the Secretary of State to do his duty, as the Government have promised. The Secretary of State's duties are not limited to ensuring that the AWE contractor is UK owned. Surely he has many other duties. What about ensuring that the AWE contractor is not owned by or connected with UK nationals who happen to be IRA terrorists? There is not a word about terrorism in this Bill. Should we have an amendment to bind the Secretary of State to choose a contractor with no connections with terrorism? To take another example, there is nothing on the face of the Bill about choosing a contractor who is competent to fulfil the task. Clearly it is essential that the chosen contractor is competent. Why not, therefore, have a clause in the Bill to provide that the Secretary of State must on no account choose a contractor who is not up to the job? It would be an extremely long Bill if we expanded it so as to compel every future Secretary of State to do his duty in every essential respect and to honour every commitment made to this House by Ministers in the course of this Bill. Hence we would prefer to follow the normal practice and put in the Bill only those things which need to be provided in fresh legislation.
During the debate on 2nd July a number of noble Lords asked whether other capitalist countries with nuclear weapons would allow foreign ownership of shares in their atomic weapon manufacturing. Perhaps, therefore, your Lordships would find it helpful if I described the arrangements which operate in the United States.
There are no fixed limits on foreign ownership of US nuclear weapon contractors. Instead, US companies are required to disclose any foreign ownership when bidding for management contracts to operate a Department of Energy nuclear weapon facility. Any level of foreign ownership would be referred to the US security branch for investigation and assessment of risk regarding the handling of classified information. In other words, the system operated in the US is very much the same as the one

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which we intend to operate at AWE. I might add that this system has proved satisfactory over the many years during which the US nuclear weapon industry has been operated on a GOCO basis.
I have referred previously to our view that, although we should look closely at any foreign connections that a potential contractor may have, United States connections would be acceptable in view of the long history of Anglo-US nuclear co-operation. That does not mean that we intend letting the contract to an American company. It does not even mean letting the contract to a consortium involving an American company. What it means is that we should not rule out minority participation by a British firm which happens to have a US parent. That is in fact already the case at AWE. The interim management contractor is Hunting-BRAE, a consortium (properly called a joint venture company) involving Brown and Root (UK), the "BR" of Hunting-BRAE, as a substantial minority shareholder. Brown and Root (UK) is British in terms of operating and being registered in the UK. It is a significant company within the British defence industry but its parent company is Brown & Root Inc of the USA.
I remind the House that Hunting-BRAE is operating AWE under an interim management contract while the staff remain for the time being within the Civil Service; that includes the 20 Hunting-BRAE staff who are on secondment to the Civil Service. The effect of the amendment proposed by the noble Lord, Lord Mayhew, would be to rule out Hunting-BRAE from the competition for the full AWE contract next year. I cannot imagine anything more unreasonable or disruptive than a statutory ban on the incumbent contractor at AWE forbidding him from competing in future. For that reason I strongly urge your Lordships not to vote for the amendment.
The noble Lord, Lord Mayhew, asked about the share ownership of the contractor. If, as will almost certainly be the case, the contractor is a company set up for the specific purpose of fulfilling the AWE contract, we shall include a provision in that contract to the effect that the share ownership of the contractor should not change without the consent of the Secretary of State.
As regards parent companies, we would require the company to inform us of the identity of all significant shareholders and in particular any foreign shareholders. That would include any new shareholders buying into the company. The Secretary of State would have the right to terminate the contract if a parent company were to be taken over. With those assurances, I hope that the noble Lord will not press the amendment.
Lord Mayhew: My Lords, I am most grateful to the noble Earl for the concluding part of his speech. For a long time I felt that he illustrated how unwise it is to table an amendment which has already been discussed in Committee because he repeated at great length the arguments which he used then and which did not carry conviction with many noble Lords.
However, towards the end of his remarks he answered directly the question which I asked; namely, how the Secretary of State will control the transfer of
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shares. He said that in the contract the Secretary of State would look at all the existing shareholders, would survey them and make sure that they are not nominees for, for example, Mr. Gaddafi or Saddam Hussein. Thereafter, each share transaction would come to his attention and he would approve or disapprove it.
That is a considerable advance on the position of the Minister at the beginning of our discussions. I do not know how the system will work. It seems to me rather difficult and elaborate and easy to circumvent. However, I thank the Minister for the latter part of his speech and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 2:
Page 2, line 8, at end insert:
("( ) In pursuance of the arrangements made hereunder the Secretary of State shall establish a funded redundancy provision for employees of any company which shall be equivalent to those presently embodied in the Principal Civil Service Pension Scheme.").
The noble Lord said: My Lords, this amendment has been retabled following our discussion in Committee on the redundancy scheme for employees.
In the debate which we had in Committee the Minister claimed that our amendments showed a misunderstanding of the concept of redundancy. We do not believe that that is right. It is perfectly possible for a separate fund to be set aside to guarantee that in all circumstances the employers' redundancy obligation will be met. That has been the practice in the past and should be the practice in this case.
The present position is that the staff at AWE are civil servants and as such their redundancy provisions are guaranteed by statute. Uniquely, the principal Civil Service pension scheme also covers redundancy. The argument which I put forward is that that guarantee should continue in the future and that staff should be no worse or better off than they are at present.
The Minister replied to the amendment in Committee, but there are two difficulties in respect of his reply. The first is that the contractor may seek to worsen the redundancy provisions if he were in financial difficulties. The Ministry of Defence has said that the requirement for redundancy compensation at Civil Service terms as a minimum will be written into the contract. However, we have not seen the contract and in Committee we learned that it will not be available until towards the end of 1992. Furthermore, the noble Earl said in Committee that the contract would be a classified document. Therefore, we simply do not know what will be the terms of the contract. We are seeking ministerial assurances that the contract will contain what we require.
It is also the case that when the contract arrives, which we are told will be towards the end of next year, it will be between the Ministry of Defence and the contractor. Trade unions will not be a party to the contract and trade unions could not bring any action if the contractor breached the terms of the contract. In response to that point in Committee the noble Earl said that it is always possible for an individual to bring a case for breach of contract if its terms were changed

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without agreement. That is true; nevertheless, it is an extremely difficult case to bring for an individual employee if he or she should deem that there has been a breach of contract.
The second major problem is that the Government have said that the Secretary of State could bring back the employing company—and we understand from our discussions in Committee that the employing company may be different from the contracting company—into sole ownership (ownership of the Secretary of State) if it got into difficulties. Although the Secretary of State could do that, there is, first, no guarantee that he would and, secondly, no guarantee that the Ministry of Defence would take the view that the contractor should seek to get out of any difficulty by reducing overheads. In other words, there is no guarar tee that the Secretary of State is underwriting the Civil Service arrangements which are in place at present.
I adduce as a further argument for a funded redundancy scheme that Civil Service pay has for many years been abated to take into account the provisions of the principal Civil Service pension schema:. That may be right and proper. The Civil Service pension scheme is relatively generous. However, it includes redundancy. In that way civil servants at AWE—and at present they are civil servants—have effectively contributed towards their future redundancy provisions. For that reason, because there has been an abatement in their salaries and they have contributed to the fund, money for future redundancies, if there are any, should be guaranteed in a separate fund. I beg to move.
The Earl of Arran: My Lords, this amendment is similar to an amendment moved in Committee by the noble Lord, Lord Williams. It seeks to provide the transferred staff with equivalent redundancy benefits as they have at present and to provide some protection for those benefits by means of the Secretary of State establishing a funded redundancy provision.
I explained in Committee that a new redundancy payments scheme will be set up that will, when taken together with the pension scheme benefits, provide redundancy conditions at least as good as at present. The Government have already said categorically that this will be so and I am happy to repeat that assurance. This requirement will be written into the contract and the contractor will be obliged to comply. I believe that this assurance is potentially more beneficial than that proposa1 in the amendment, which seeks only that redundancy benefits should be "equivalent" to the present arrangements.
The amendment also proposes a funded redundancy provision. There are two aspects to that: first, the possibility of the contractor being unable to meet his obligations, possibly through bankruptcy and, secondly, substantial redundancies arising through government decisions to reduce the workload at AWE. Redundancy payments in the former situation would be safeguarded because the Bill already allows the Secretary of State to take back the employing company into his ownership, thus safeguarding pay and redundancy.
In the event of substantial redundancy payments
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arising from a reduction in the nuclear programme, I am also pleased to assure your Lordships that the redundancy costs would be fully funded. I understand the reason for the noble Lord wishing to obtain an assurance about this aspect, especially in view of the article about defence options in the Guardian newspaper of 9th July 1991 written by a senior trade unionist, who happens to be the chairman of the AWE National Union Co-ordinating Committee. He recommends a review of our strategic nuclear force. That presumably would impact upon the AWE order book, and thus jobs.
In summary, we have already given assurances that redundancy conditions will be at least as good as at present. There is no need for fresh legislation on this point, the requirement for which will be written into the contract.
In addition to some of the points which the noble Lord, Lord Williams, raised, I can assure the noble Lord that it is normal for an employer to meet redundancy payments from cash flow rather than from a previously established fund, as in the case of pensions.
The noble Lord indicated that he would like an amendment to the Bill in order to control through the law the levels of redundancy payment, but the law already does that. The contract will specify that civil servants' redundancy payment levels must be continued. That will be binding in law. In any case it would be unlawful for the employer to breach the individual's contract of employment by reducing his redundancy payments without his consent.
The noble Lord said that there was no guarantee that the Secretary of State would use his undoubted power to take back possession of the employing company if the contractor ran into severe financial difficulties. I must point out that if matters reached that stage the Secretary of State would have little choice but to take action in order to keep AWE a going concern.
I hope that with those reassurances the noble Lord will feel obliged not to press his amendment.
7.30 p.m.
Lord Williams of Elvel: My Lords, I am most grateful to the noble Earl for that statement. It takes us some way—I believe, a long way—towards what we are trying to achieve, which is protection of the workforce in case of redundancies. Nevertheless, there remains the question of whether there should not be a separate fund which should be run by separate trustees divorced from anything that the contractor may produce. We have not yet seen the contract and we shall not see it until the end of the 1992 if we are to believe the noble Earl's assurances in Committee. If we are to believe that this is to be done in a contract, all I can say is that we have to wait and see whether the contract is as the noble Earl describes.
I see no reason why there should not be a redundancy fund put into the Bill. Nevertheless, at this stage I shall read and take advice on what the noble Earl has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel moved Amendment No. 3:
Page 2, line 21, at end insert:
(""premises" means any buildings that are fit for the purpose for which they are constructed.").
The noble Lord said: My Lords, we had a long discussion in Committee about the premises, and we were really talking about the premises at Aldermaston, Burghfield and the other two establishments concerned in AWE. Following that discussion the noble Earl was kind enough to write to me and to my noble friend Lord Kennet in certain reassuring terms.
I move the amendment to ensure two things. The first is that the Government, who are going to retain ownership of the establishments in question, will make absolutely certain, indeed a governmental responsibility, that the premises to be used for the production of nuclear warheads and for ancillary and connected purposes will be up to the same standards as they have been hitherto under wholly government-owned and government-operated conditions.
Secondly, assuming that we have that strong assurance from the Government, who is to pay for the necessary maintenance provisions and no doubt future construction that will be necessary in order to keep the establishments up to date and in proper working order with the appropriate security? If the Ministry of Defence is to pay, we need to know that. If the contractor is to participate in the payments, we need to know that. That is the reason for my re-tabling the amendment at this stage.
The Earl of Arran: My Lords, the amendment states that the premises to which this Act would apply would be any buildings that are fit for the purpose for which they are constructed. The noble Lord, Lord Williams, explained that the intention of the amendment is to ensure in particular that those specialist buildings at AWE which are intended for the use or storage of radioactive materials are fit for such purposes.
I have previously summarised to the House the history of the Aldermaston capital programme. This is a £1 billion programme of investment in new buildings and facilities, the centrepiece of which is the new A90 building for the manufacture and processing of fissile components for nuclear warheads. These matters were considered in detail in successive reports by the Public Accounts and Defence Select Committees in another place.
I do not propose to burden your Lordships again with the detailed background. It is complicated, and many of the versions publicised by the Government's critics—other than noble Lords opposite—have been highly garbled, confusing all sorts of different aspects together. I can, however, confirm, in answer to points raised in Committee, that the Property Services Agency had a major role in the AWE capital programme, before NNC Limited was appointed as the facilities project management contractor. The divided responsibility between PSA on the one hand and MoD/AWE on the other was considered to be a factor in the problems experienced with the capital programme in the mid-1980s. As I explained in Committee, the capital programme is now in much
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better shape. That is notwithstanding the corrosion problem identified in the new treatment plant for radioactive liquid waste. The building, known as A91, is built but not yet commissioned. The commissioning programme for A91 has been successful in detecting points of corrosion in stainless steel, thus enabling the Ministry of Defence to investigate the problem and solve it before A91 comes into operational use. Although the investigation is not yet complete, we are confident that a safe and effective solution will be found. The building will not be used for radioactive materials—indeed the commissioning of it will not be resumed—until such a solution has been identified.
Clearly, the matter of corrosion in A91, and any costs it may involve, are not matters for the future AWE contractor, who has not yet been chosen. The future contractorised AWE will be the operator of AWE facilities, old and new. This is separate from MoD's use of building contractors, equipment contractors, installation contractors and so forth involved in the AWE capital programme and collectively project managed by NNC Ltd. as the facilities project management contractor.
I was also asked in Committee about the compliance office's function in the context of the capital programme. That is not the context in which we see the compliance office functioning. The MoD compliance office at AWE will basically be concerned with the way the contractorised AWE complies with its contract, not with how other MoD contractors comply with theirs. For instance, if a problem was identified relating to performance under an MoD contract to which the overall AWE contractor had not been a party, then it would not be a matter for the compliance office. It would be a matter for whoever in the MoD procurement executive was concerned with that contract.
I have spoken about new buildings, including those not yet in use. I should also say that AWE's production work in existing buildings is proceeding well and in good time for Trident's entry into service in the mid-1990s. I must emphasise that existing buildings for production of components using radioactive materials at AWE have been updated wherever necessary, and safety standards maintained. The same applies to the research building from which there was a small release of tritium gas last February. I gave reassurance during Committee that neither the workforce nor the general public were at risk from that release.
Finally, let me say once again that ownership of building and facilities at AWE will remain with MoD. Buildings at AWE are fit for their intended use.
Further to the two points raised by the noble Lord, Lord Williams, I can assure him that the Government will make absolutely certain that premises will be kept up to a totally safe standard. As regards who will pay for future maintenance construction, it will be the Ministry of Defence, as now. I hope that those reassurances will have gone some way toward enabling the noble Lord, Lord Williams, not to move the amendment.
Lord Williams of Elvel: My Lords, I have already moved the amendment but I do not intend to press it

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to a Division. I shall be grateful if the noble Earl will explain to the House how, if the MoD is to be responsible for keeping the establishment—by that I mean all the extensive high technology and the difficult security arrangements for the buildings and all the paraphernalia that goes with them which the taxpayer has to pay for to be kept up to the proper security standards that we all want—how will the burden be split between the taxpayer and the contractor? Will the contractor get the benefit of the entire investment made by the taxpayer or will the contractor hear part of the burden? That is the question that I would like the noble Earl to answer when he has a little more time to consider the matter in furl her detail.
The Earl of Arran: My Lords, as I have said already, the ownership of the new facilities and other capital assets will remain with the MoD. The actual operational user of the facilities will be the contractorised AWE. The detailed arrangements for future new buildings post-1992, including that part of the capital programme which will not be complete by vesting day, have not yet been finalised. The detailed arrangements between the facilities project management contractor, NNC Limited, and the overall AWE contractor have yet to be determined. We shall ensure that the arrangements are clear and unambiguous and do not lead to divided responsibility in the problematical sense that occurred between the MoD and th29PSA in previous times. The burden will not be split. The contractor is running the establishment for us. I hope that that has helped to explain the situation.
Lord Williams of Elvel: My Lords, it has helped partially to explain the situation. As always, we have to wail for the contract, which we are not allowed to see because it is classified. The assumption is that the MoD will continue to put taxpayers' money into ensuring that the establishments, taken in the round, are kept up to date and properly secure and that the contractor will not pay any of that burden. I would find that rather difficult to accept if we were going in for a C OCO arrangement. However, I do not wish to detain your Lordships. I shall study what the noble Earl has said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Loki Williams of Elvel Loki Williams of Elvel moved Amendment No. 4:
After Clause 1, insert the following new clause:
("Inspection of accounts by Comptroller and Auditor General
Subject to section 1(2) above an account of the contractor shall be open to the inspection of the Comptroller and Auditor General.").
The noble Lord said: My Lords, this amendment again refers to a discussion that we had at Committee stage. When replying to the amendment, the noble Earl made one or two statements which I found to be rather odd. I wish to take up the statements again in order to obtain clarification. He said:
"If, however. the amendment is seeking a wider remit for the Comptroller and Auditor General in respect of the contracting company, to enable him to see all their internal papers, then I must say that I believe it would be wrong to attempt such an effect".—[Official Report, 2/7/91; col. 946.]
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I note what the noble Earl said on that occasion and I dispute it. I do not believe that it would be wrong to attempt such an effect; it would be wholly right to do so. A few sentences later the noble Earl continued:
"the contractor's accounts will be published in accordance with the requirements of the Companies Act".
I assume that that refers to the Companies Act 1985 as amended by the 1989 Act. The Act is quite clear on the matter: a private company—which presumably the company will be because it will not be a quoted company—will file its accounts with the appropriate companies' office. Those accounts will be available for public inspection. That is certainly true. But there are 18 months between the requirement to file the accounts and the time when the DTI takes action to make sure that companies are filing them.
Furthermore, the accounts of the contractor will be of a consortium nature. It is a private company and it is perfectly entitled to file unconsolidated accounts. Therefore, the information that is available either to the Comptroller and Auditor General or to the public will be limited. Noble Lords will know that anyone who relies on company accounts filed in the company registration office is whistling in the wind.
We believe that this contractor will be in a very special situation. After all, he will be the contractor who is to produce our nuclear warheads. Special situations require special remedies. The special remedy that I propose is that the contractor should be subject to rather more stringent requirements on his accounts than are normal in the case of any other company operating in the United Kingdom. That is why I am suggesting that the Comptroller and Auditor General should be able to go into the contractor's accounts and find out exactly what is happening in financial terms. If we have to wait for years before accounts are properly filed, then there is no control over them. I beg to move.
7.45 p.m.
Lord Ironside: My Lords, when the noble Lord introduced the amendment in Committee he said that the AWE was involved in government work only. That is true, as we know. He said that the MoD is the sole purchaser. I do not believe that that is true. AWE carries out forensic activities for the Home Office and it probably does other work for other budget holders and support agencies. Therefore, it is not quite true that it only works for the MoD.
The noble Lord also said that the new contractor is not just any other defence contractor, as he will have no other business whatsoever which, in his view, justifies having the Comptroller and Auditor General audit the accounts. I support my noble friend Lord Arran in what he has already said, in that the accounts will be available. But I shall be interested to hear what he has to say about the point raised by the noble Lord, Lord Williams. The Comptroller and Auditor General has access to all the documents anyway and the contractor should not be put in a different position just because he is at AWE.
I declare an interest again which I declared at Second Reading. I hope that the House will accept it as a hands-on, informed and responsible interest, in

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that I am closely involved with the Trident programme. We have come a long way with that programme. I believe that the House should look at the AWE enabling arrangements in a way that reflects the needs of project management in defence, if there is to be a successful conclusion, within the framework of new management strategy.
In 1954 the naval section of AWE was launched, with secondment of people from Rolls-Royce. That was to look at the nuclear steam-raising plant. In 1957 a contractor's team, with Crown servants, was assembled at Rolls-Royce at Derby. In 1959 Rolls-Royce and Associates was formed and in 1965 it became the delegated design authority, nominated supplier and operator of the Vulcan reactor at Dounreay.
The position was that the Government wanted Rolls-Royce and Associates to be seen to stand in a special relationship with MoD. In 1982 Rolls-Royce and Associates was allowed to take on non-naval work. Rolls-Royce and Associates is now 100 per cent. Rolls-Royce and earns fees based on ascertained costs. The fees are assessed on achievement of milestones and this has proved to be a very successful basis on which to operate. No doubt negotiations also take place with the review board for government contracts based on the agreed formula from which a profit rate is set.
In 1990, for increased effectiveness and efficiency, risk pricing arrangements were introduced to cover greater reward for increased risks hitherto borne by MoD and are now accepted by Rolls-Royce and Associates. Rolls-Royce is involved in a nuclear submarine programme from concept stage to the in-service support stage. The responsibility for safe design and operation of the nuclear steam raising plant is vested in the MoD and the supply of safe plant is vested in Rolls-Royce. The safety and reliability directorate of AEA is retained by MoD as an independent assessor and adviser.
The point I am coming to is this: in weapons we can see the same pattern of management of the project developing. The contractor is responsible for design through to production and beyond; MoD is responsible for safety through the compliance office. The contractor works for government to start with but may, under the Phase 2 contract take on work at a later stage for other customers. I am sure, whoever he is, that he will insist on that in his negotiations and that that will be acceptable to the Government provided certain qualifications are met.
As we all know, the nuclear industry is shrinking. Options for Change has reduced the business of Rolls-Royce and Associates by 30 per cent., and it is looking for new links throughout Europe. I believe that the Comptroller and Auditor General's powers are sufficient and that the contractor at AWE will develop a special relationship with MoD in weapons as Rolls-Royce has done with main and auxiliary propulsion. That meets the requirement of integrated logistic design where the through-life support must be considered as an integral part of the design process. That can only be done where there is a designated
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authority with designated activities as proposed; an authority which covers design as well as manufacture. I hope therefore that the House will see the amendment as unnecessary and superfluous and will reject it.
Lord Mayhew: My Lords, the noble Lord paid a deserved tribute to Rolls-Royce to whom the British defence effort owes a great deal. He stirred a happy memory when he spoke of the navy handing over a reactor to Rolls-Royce at Dounreay in 1965. I handed it over myself and had a suitably lucullan meal with the Rolls-Royce directors. What we have here is a question as to whether any private company should produce weapons of mass destruction—nuclear, biological or chemical. At this stage of the Bill we need not go into that matter again but I think it is in the minds of my noble friends; I think particularly of the noble Lord, Lord Williams.
I think I detected the noble Lord saying that the Government would have access to the papers of the contractor. A very strong reason for supporting the limited appeal of the noble Lord, Lord Williams, that financial papers should be made publicly available is that the compliance officer, the Government, will have no access to the papers of the contracting company.
Lord Ironside: My Lords, perhaps I may interrupt the noble Lord for one moment. I was saying that the Comptroller and Auditor General would have access to all the documents. I thought that that was what I said.
Lord Mayhew: My Lords, with great respect to the noble Lord, I think he will find that when the Minister replies he will say, "No, we are not going to let the Comptroller and Auditor General anywhere near even the financial papers". I asked him whether the compliance officer will have access to the papers of the contracting company. I shall leave it at that and wait to hear what the Minister has to say.
The Earl of Arran: My Lords, the effect of this amendment would be to open the accounts of the contractor to the inspection of the Comptroller and Auditor General. Your Lordships will recall that an identical amendment was moved in Committee by the noble Lord, Lord Williams.
I explained in Committee that, in our view, the additional powers conferred by this amendment are not needed because the contractor's accounts must be published to meet the requirements of the Companies Act, and powers already exist for the Comptroller and Auditor General to consider MoD's relations with the contractor. It would be inappropriate to make the contractor subject to inspection by the Comptroller and Auditor General as that would put him in an entirely different position from any other defence contractor, including the dockyard contractors, who do not have that requirement imposed upon them.
I was not persuaded by the point made in Committee by the noble Lord, Lord Williams, that the AWE contractor is in a quite different position from any other defence contractor because he will have no other business apart from running the AWE. Although there are some very special aspects to this

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particular contractoristion—and specific safeguards are being provided covering, for example, safety aspects—the principle of a contractor undertaking work for the Government, which applies in this case, is by no means new; nor is it novel. We do not require other contractors to submit to a Comptroller and Auditor General inspection of their accounts and we see no reason to depart from that principle. To do so would be to widen the Comptroller and Auditor General's remit to inspect the accounts of private sector companies which we cannot accept as either necessary or desirable.
Moreover, the argument that the contractor will have no other business apart from that awarded him by MoD is, in our view, based upon a false premise. In discussing this amendment during Committee the noble Lord, Lord Williams, assumed that a prime contractor would be, to use his words, "set up" as a result of the passage of this Bill. Although we acknowledge that it is likely a joint venture company will be established to undertake the contract, that will not inevitably happen. It is wrong to assume that Hunting-BRAE, or another joint venture company, will necessarily win the contract for full contractorisation: a full and fair competition will be run by the Ministry of Defence. It is possible that the company winning that competition will not wish to set up a separate company to act as prime contractor. In that event, the amendment would require Comptroller and Auditor General inspection of the parent company's accounts, which would be clearly inappropriate—the more so as they would cover other, non-MoD, business.
We fully accept, however, that the Comptroller and Auditor General and the Public Accounts Committee of another place have an important role in ensuring that the taxpayers' money is wisely spent; and they will no doubt wish to consider further the contractorisation of AWE. However, they do not need this amendment and an inspection of the contractor's accounts in order to do so. The Comptroller and Auditor General already has the right of access to papers held by the Ministry of Defence and the right to look at its relationship with the AWE contractor —just as he has the right to consider MoD's relationship with any defence contractor. The Comptroller and Auditor General has not reported any difficulty in obtaining any information that he has required concerning the Royal dockyards since contractorisation.
In summary, we believe the amendment to be unnecessary and based upon a false premise of the possible organisation of the company awarded the prime contract.
In answer to several points raised by the noble Lord, Lord Williams, the requirements of the Companies Act is the normal way of regulating public companies. It is the considered way that Parliament has determined to regulate private companies. I can tell the noble Lords, Lord Williams and Lord Mayhew, that the compliance office will have access to the contractorised AWE's papers relating to all matters of safety and security.
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I am grateful to my noble friend Lord Ironside for his intervention. He made the same point that the Comptroller and Auditor General's function is to audit government organisations. It would be a dubious precedent to give him fresh powers under the Bill to inspect a company. With those assurances, I hope that the noble Lord, Lord Williams, will not feel obliged to press the amendment.
8 p.m.
Lord Williams of Elvel: My Lords, I find the noble Earl's response somewhat odd. First, perhaps I may respond to the noble Lord, Lord Ironside. The Atomic Weapons Establishment does not carry out forensic tests for the Home Office. That is not a function of AWE. The Home Office occupies property on the same site. Secondly, we are here discussing not a public company such as Rolls-Royce, but a private company—like Hunting-BRAE which has the Phase 1 contract. We are talking about a private company—probably a consortium company—which has interests but is nevertheless not a listed company on the Stock Exchange like Rolls-Royce, whose accounts are open and are immediately available to the shareholders.
The contractor at AWE will be using Ministry of Defence facilities. I emphasise this point. The only customer will be the Ministry of Defence, which will commission these weapons of mass destruction. The noble Lord, Lord Mayhew, has consistently made that point. It will effectively provide all the funds. The Ministry of Defence will be a monopoly buyer. If the Ministry of Defence is to be a monopoly buyer using public funds, that must be a reason for ensuring that the taxpayers' interests are safeguarded through an examination by the Comptroller and Auditor General.
Thirdly, the noble Lord, Lord Ironside, mentioned the possibility of other customers. The idea that this new consortium which is to be set up specifically for this purpose could take on other customers makes it even more important that the accounts should be examined by the Comptroller and Auditor General and that there should be no fudging and mudging about where the money comes from. We need to know.
Finally, the contractor is in a quite different position from contractors in the dockyards. I do not want to continue to refer to what the noble Lord, Lord Mayhew, said, but he is quite right. These are special anxieties. We are talking about weapons of mass destruction. We are not talking about dockyards; we are talking about nuclear bombs. I wish the Government would recognise that.
I thought that I had already dealt with the noble Earl's assertion that the normal way of regulating public companies is through the Companies Act 1985, as amended by the Companies Act 1989. We all know that, unless a company is listed on the market, its accounts are filed perhaps 18 months late and are open only to investigation of the most primary nature. There is no shareholders' meeting. What goes on is private. No one can ask questions about those accounts. No one can get into the detail of those accounts. They are simply filed. That is the procedure.

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If the noble Earl thinks that that is right for this major contractor on this important operation, then I am bound to say that we have a very serious difference of opinion.
Furthermore, unless the Comptroller and Auditor General is allowed access to the contractor's accounts, he will not be able, we will not be able, Parliament will not be able and the taxpayer will not be able, to see what underlies those accounts. As the noble Earl knows perfectly well, the accounts filed in Companies House are statutory accounts. They do not deal with the management accounts. They do not deal with how much was spent on this and how much was spent on that. They do not deal with the costings on this and the costings on that. There is no way of getting at that information through the published accounts. That is the kind of information we need to know about the contractor. It is quite extraordinary that the Government are not prepared to make this extension —I agree that it is an extension—of the Comptroller and Auditor General's powers in this vitally important case.
I see that there is silence from the Government Front Bench. If the noble Earl wishes, with the leave of the House, to respond to what I have said, perhaps he will be good enough to do so.
The Earl of Arran: My Lords, I am grateful to the noble Lord, Lord Williams, for allowing the Government to respond. With the leave of the House, I shall do exactly that. The problem here is that we have a difference of opinion on a point of principle. In addition to what I have already said to the noble Lord, I can say that the Comptroller and Auditor General will have ready access to papers in the Ministry of Defence, including those originating from the contractor. The dockyard contractors also use Ministry of Defence owned facilities. The Comptroller and Auditor General does not have access to those contractors' internal financial papers, but he has full access to all Ministry of Defence papers on expenditure with those contractors. That arrangement has been found perfectly satisfactory.
Lord Williams of Elvel: My Lords, I am grateful to the noble Earl. I think that he is right. We have a difference of opinion on a matter of principle. I do not have to remind the noble Earl that we believe the whole concept of contractorisation to be rubbish. However, we went through that at Second Reading and in Committee. What I am trying to do is to prevent any possible abuse of taxpayers' funds. I accept that the Comptroller and Auditor General has access to MoD papers. But to pretend that this new contractor can be monitored by the Government, by the taxpayer or by anyone else simply on the basis of accounts produced under the Companies Act 1905 as amended by the Companies Act 1989 is a travesty. Nevertheless, at this time, I do not wish to divide the House. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 [Privileges and immunities: application of certain enactments]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 5:
Page 3, line 10, at end insert:
("(4) Schedule (Compliance Office) to this Act shall have effect for the purpose of providing means of monitoring and supervising the designated and other activities of any contractor appointed under section 1 above, and providing advice to the Secretary of State on the incurring of expenses under section 5 above.").
The noble Lord said: My Lords, this amendment stands in my name and that of the noble Lord, Lord Mayhew. It may be for the convenience of the House if I speak also to Amendments Nos. 6 and 7.
In Committee we discussed the role of the compliance office. The noble Earl will recognise that the amendments before the House today are identical to the amendments we discussed in Committee. I should like to make two points. First, I was unhappy about our discussion in Committee of the compliance office. I did not believe that the Government had really understood the importance to Parliament of the compliance office. When we discussed the matter in Committee I did not believe that there was any serious definition inside government as to what the compliance office would consist of, how it would operate, what its terms of reference would be and what it should do.
The Government's position appears to be that they agree that the compliance office will be important but they refuse to give it statutory backing. That must be contrasted with the regulatory authorities which were set up under different privatisation Acts that your Lordships have considered over time. For example, we have had Oftel, Ofgas and many others. But in this case we do not have a proper compliance office which will govern the operations of the contractor.
I accept that AWE is not in exactly the same position as British Telecom, British Gas, National Power, PowerGen or the electricity authority. But, to my mind, that does not reduce the requirement for a proper regulatory and controlling authority. Further, it must be arguable that in this case the requirements for safety and security are much greater than in those other companies which the Government have privatised.
In Committee the noble Earl quite correctly said that the purpose of such amendments would be to write the functions and powers of the compliance office on to the statute book. I am not ashamed about that; I believe that it is the right thing to do. The present position is that the Government have refused to give us any information about the compliance office; for example, how it will be staffed, details about its relationship with the Minister of Defence or with the contractor or details about the powers which it will have. The Government's position that the powers of the compliance office will flow directly from the statutory authority of the Secretary of State is simply not good enough. It is not a satisfactory position.
I am sure that we all agree that the final decisions should be taken by the Secretary of State, who is answerable to Parliament. There is no division between ourselves and the Government on that. But that makes it even more important that there should

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be a compliance office and a compliance director whose tasks and responsibilities are set out in the legislation.
I do not believe that the Government have thought through what the compliance office should be. If the noble Earl can reassure me in any form at all that that is not the case, I shall be reasonably happy. On the other hand, if he cannot reassure me, I assure him that this is an issue—and I believe that I speak for the noble Lord, Lord Mayhew, too—which has now become the fundamental issue of the Bill. I beg to move.
8.15 p.m.
Lord Mayhew: My Lords, I have no hesitation in rising to support the noble Lord on this point. In Committee we expressed our profound distrust of the Government's attitude towards the compliance office because of their failure to spell out its duties and to give us any assurances about its status and its numbers. The replies we received were far from satisfactory.
However, I believe that I can encourage the noble Lord, Lord Williams, who may not have seen the report of the House of Commons Defence Committee on The Progress of the Trident Programme which was published this morning. It bears out all we said and confirms our suspicions. For example, at paragraph 70 the committee says:
"In fact the total strength of the Compliance Directorate is seven staff: given that this presumably includes some administrative support staff, the number hardly suggests a vigorous and wide-ranging organisation".
Then in the following paragraph it refers to,
"new pay scales being awarded".
That is an issue on which I should like the Minister to reply. Under the contract, when contractorisation starts it looks as if higher pay will be awarded to those employed by the contracting company. But what about the staff of the compliance directorate? Presumably they are employed by the Minister and given Civil Service pay. As time goes on their conditions and their pay will, therefore, depreciate compared with those of their colleagues who are working for the contracting company. May we also have an assurance from the Minister that that will not happen and that appropriate pay increases will be made to the staff of the directorate at least to keep them in line with their other colleagues?
Our amendments would give a proper status to the compliance directorate. Incidentally, I take the point made by the noble Earl that it will have access to those papers of the contracting company which deal with security and safety. But what about the rest of the business of the compliance directorate, whatever it is —and it is has not been very well defined? Is it not also concerned with monitoring the performance of the contracting company? Will it be denied access to papers which refer to the performance record or to environmental or health questions? It seems to me that by denying the papers of the contracting company to the compliance officers in these fields the Government are further underrating the importance
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which should be attached to the compliance directorate. I profoundly hope that the noble Earl can reassure us on those points.
Lord Ironside: My Lords, originally in Committee I believe that the noble Lord, Lord Williams, was more concerned about the privatisation of the compliance office than the safety aspect. However, as I understand it, he is now concentrating on safety. My noble friend on the Front Bench has made it quite clear to me that the safety organisation is an integral part of the establishment and will remain so after transfer to full contractual operation.
As I understand it, the contract will make it quite clear to the contractor that safety is his business. Responsibility for design and production safety is vested in the MoD and the contractor's responsibility is to deliver it. Apparently the compliance office consists of seven people at present. The future needs for Phase 2 are currently being addressed and I suppose that considerably more people will be needed. I do not know how many more will be required. But, as I suggested—and my noble friend confirms this fact—Dr. Glue, the compliance director, can contract out if he is short of staff and does not have the right specialties. Nevertheless, it appears that it will be some time before the manpower problems are resolved at AWE as regards getting the right mix of skills, as natural wastage is now running at something like 600 per year.
As I understand it, the interim contract covers the safety aspect and lays down strict requirements to ensure that the contractor complies with all the appropriate safeguards and that the establishment continues to operate to the existing high standards of health and safety. Of course the compliance office is closely interfaced with the AWE staff. It appears unnecessary to give the compliance director any statutory powers.
The Earl of Arran: My Lords, the effect of the amendments would be to write the functions and powers of the compliance office on to the statute book and to bind the Secretary of State to comply with recommendations made by the compliance director. Your Lordships may recall that I spoke against a similar set of amendments which were moved in Committee on 2nd July and subsequently withdrawn. I must resist the amendments we are now discussing for the same reasons as I resisted the earlier ones; namely, that statutory provision is not necessary in order to establish the compliance office and define its functions; nor is it an appropriate means of doing so.
I must begin by restating once again the Government's commitment to ensuring that the compliance office has the powers and the resources effectively to regulate the contractor, and in particular to enforce environmental, health and safety standards and compliance with the terms of the contract. During the debate on 2nd July the noble Lord, Lord Williams, asked for more detail about the compliance office. I believe, therefore, that it will be helpful if I say some words on this subject before explaining our objections to the amendment.

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In its report on the Trident programme which was published yesterday the House of Commons Defence Select Committee stressed the need for the compliance office to have access to any relevant documentation, and to have devoted to it human and financial resources commensurate to the scale of its task. The Government agree entirely with those views, as I hope will become clear to your Lordships from what I am about to say.
There is, of course, already a compliance office at AWE, headed by a compliance director. It was established on the first day of the interim, or Phase 1, management contract—1st October 1990. Its present duties are: to ensure that Hunting-BRAE complies with the Phase 1 contract; to assist MoD HQ in setting up and implementing the arrangements for full contractorisation; and to determine the structure and resources needed for the larger compliance office which will monitor the Phase 2 contract, which will begin late next year.
The compliance director's staff is small at present —some half a dozen individuals. But that is because full contractorisation is still some way off. Part of the director's task, as I have said, is to determine the structure and resources that will be needed for the larger compliance office which will monitor and audit the contractor after full contractorisation. It would be wrong to pre-empt that process by attempting to forecast at this stage the precise structure and size of the compliance office under Phase 2. What I can say, however, is that it will be considerably larger and more complex than at present. It will be subdivided into separate offices dealing with particular areas of responsibility such as safety, security and site engineering. Each office will include staff with the expertise appropriate to its function: thus the security office will contain staff with MoD security experience, and the safety office will contain professional safety staff, including health physicists and radiological experts.
The compliance office will monitor the contractor's performance on a day-to-day basis, and will provide regular reports to MoD covering a wide range of areas. In order to fulfil that role the compliance director's staff will have access to all relevant documentation, and, in addition, will be able to call for special reports or studies on particular issues. They will also have unrestricted access to all AWE facilities. It is intended that compliance staff will be permanently located in certain important AWE facilities, and will visit all the others to review, monitor and evaluate all processes and procedures. Particular attention will be focused on those facilities which deal with fissile, radioactive or toxic materials.
I should make it clear that we do not intend the compliance office to take over the role of the existing safety organisation at AWE. It is important that the contractor should not feel that safety is someone else's responsibility. The contractor will inherit AWE's existing safety personnel, and will be expected to maintain the safety culture which has been the main factor in AWE's excellent safety record over recent years. The compliance office will be there to make sure
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that he does so, and specific performance indicators and criteria will be established to that end. Specific safety criteria will be defined in the contract and will be based not only on statutory requirements, but on the ALARP principle that radiation exposures should be kept as low as reasonably practicable.
As well as day-to-day monitoring of the contractor's activities, the compliance office will carry out audits in particular areas where appropriate—for example, to validate the documentation provided by the contractor or to assess security procedures.
If the compliance director believes that the contractor's performance needs to improve in a particular area, he will ask for the necessary changes to be made. The intention, of course, is to nip any potential problem in the bud before it can become serious. There are, however, a variety of sanctions available to reinforce the compliance director's authority if necessary. First, there are two levels of financial sanction. The compliance director will be responsible for authorising the regular payments to the contractor. He will approve such payments only when he is satisfied that the required progress has been made, and that it has been made within the prescribed safety and security environment. In addition, there will be discretionary award payments tied to areas such as safety and security. In the unlikely event that despite all the financial sanctions the contractor's safety performance was still unsatisfactory, the compliance director would be able to close down any facility which was not being operated to a satisfactory safety standard. In the last resort he could recommend the cancellation of the contract.
Perhaps I have digressed enough and should return to the subject of the amendments. My main objection to them is that they cut across the constitutional responsibilities of the Secretary of State. The Secretary of State for Defence is responsible for all that happens within the sphere of his department's function, which of course includes the activities of AWE. I must stress once again that we are not privatising AWE. The Secretary of State for Defence will continue to own all the establishment's assets; all he is doing is bringing in a contractor to operate them for a fixed period of time and under strict contractual control. That does not alter the fact that he will still be ultimately responsible for the establishment, and he will remain accountable for it to Parliament.
The Secretary of State does not need a statutory provision to enable him to establish a compliance office, and indeed, as I have said, the compliance office is already in existence. The amendments would therefore compel the Secretary of State to do what he has already done.
There is another aspect to the amendments, however, which is even more objectionable. Paragraph 4(1) of the proposed schedule states:
"The Director may make recommendations to the Secretary of State concerning stage or incentive payments to a contractor, and no such payment may be made by the Secretary of State in contravention of such a recommendation."
In other words, the amendment would compel a Minister by statute to do what one of his own officials tells him to do. I ask your Lordships to consider the

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constitutional implications of that. It is Ministers and not civil servants who are answerable to Parliament for the activities of departments but how could the Secretary of State continue to be responsible to Parliament for the regulation of AWE if the final decision had been taken out of his hands, as it would be if the amendment were adopted?
We should find it hard to conceive of a situation in which the Secretary of State would not accept the recommendation of the compliance director. My point is that it would be wrong to bind him by statute to do so. We also have our doubts about paragraph 2(1) of the Proposed schedule, which seems to wrest responsibility for the enforcement of health and safety legislation away from the Health and Safety Executive. In fact, the HSE is already responsible for enforcing the Health and Safety at Work etc. Act and associated enactments at AWE, and will continue to be so after vesting day.
In conclusion, from one point of view the amendments are superfluous, because they seek to compel the Secretary of State to do what he has already done; that is, to establish a compliance office. Furthermore, when one looks at the detail of the amendments, they are also objectionable, since they interfere with the constitutional responsibility of the Secretary of State.
I hope that in the past few minutes I have been able to reassure the noble Lord, Lord Williams, and other noble Lords about how the compliance office will work in future.
Lord Williams of Elvel: My Lords, I am grateful to the Minister for giving that lengthy dissertation on how he believes the compliance office will work. I shall make only two responses. The first is that the important amendment is Amendment No. 6, since that insists that the compliance directorate should be wholly effective and in place before contractorisation. We of course take on trust what the Minister has said, but as the contract will not be available until the end of 1992, we should like to have the compliance directorate's functions on the record clearly and in some identifiable manner before that contract is laid.
Secondly, the Minister waxed eloquent over the constitutional arrangements involved in the amendments. I do not have to remind him that the Secretary of State in another capacity is bound on many
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occasions by outside bodies. Under the Fair Trading Act 1973 the Secretary of State is bound by decisions of the Monopolies and Mergers Commission. He cannot go against them. There is nothing unconstitutional in anything we suggest.
Finally, I am grateful to the noble Lord, Lord Mayhew, for drawing my attention to the report of the Select Committee in the House of Commons on The Progress of the Trident Programme. I shall quote from paragraph 73:
"It is therefore essential that MoD continue to keep developments at AWE under close review, and that general oversight be in no way diminished as a result of the introduction of management contractorisation".
For us, that is the fundamental point. The House of Commons Select Committee put its finger on the point. Unless we have the position of the compliance office or the compliance directorate in the statute before contractorisation, we will not be satisfied.
I do not wish to continue the debate at this late stage unless the carrier pigeon has arrived with further information for the noble Earl. He may wish, with the leave of the House, to respond to some of the points that I made or he may not.
The Earl of Arran: My Lords, with the leave of the House, again there is a fundamental difference of opinion here. However, it may help the noble Lord if we take up the points that he has mentioned. I shall correspond with him in order to enlarge upon the points that I have made and I shall endeavour to show him why we do not accept them. I shall send a copy of the correspondence to the noble Lord, Lord Mayhew, and put a copy in your Lordships' Library.
Lord Williams of Elvel: My Lords, I am grateful to the noble Earl for that little bit of comfort at the end of the debate. I am not satisfied with the Government's response to the amendment. Nevertheless, at this time of the evening I do not intend to divide the House. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 6 and 7 not moved.]

Torquay Market Bill [H.L.]
Reported from the Unopposed Bill Committee.
House adjourned at twenty-nine minutes before nine o'clock.