Lords Sitting of 16 July 1991

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Liverpool.

Baroness Perry of Southwark
Mrs. Pauline Perry, having been created Baroness Perry of Southwark, of Charlbury in the County of Oxfordshire, for life—Was, in her robes, introduced between the Baroness Young and the Baroness Trumpington.

Azerbaijan and Armenia: Human Rights
2.47 p.m.
The Earl of Shannon The Earl of Shannon asked Her Majesty's Government:
Whether they have received any response to their representations to the Government of the Soviet Union regarding the reported violations of human rights in Armenia and in particular the results of the promised personal inquiry by Marshal Yazov into the alleged active support by the Soviet army of i he Azerbaijani OMON militia in committing atrocities.
The Minister of State, Foreign and Commonwealth Office (The Earl of Caithness): My Lords, the Soviet authorities have assured us that they are committed to a political solution to the dispute. We have no information about a promised personal inquiry by Marshal Yazov.
The Earl of Shannon: My Lords, I thank the noble Earl for that reply. Has he or his department not read the report of the delegation headed by the noble Baroness, Lady Cox? It was quite clearly stated to the delegation that Soviet forces were being used in support of the local OMON militia and the marshal promised a personal inquiry into these matters.
The Earl of Caithness: Indeed, my Lords, we have seen tile report prepared by my noble friend Lady Cox. She is back in that part of the world at the moment. It has been discussed with her by the Foreign Office and I have answered a Question in this House put by her on the subject.
The Earl of Shannon: My Lords, did the Minister's department not see in the report that Marshal Yazov had said that he would conduct a personal inquiry? Has the department read the report?
The Earl of Caithness: Most certainly, my Lords, but we have no official confirmation that Marshal Yazov is to conduct that inquiry.
Lori Richard: My Lords, are the Government aware that the issue has caused a great deal of anxiety in all parts of the House and in many parts of the country? As President Gorbachev happens to be in the country at the moment, can the Government say
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whether this type of issue is one which might sneak itself into the talks between the president and the other leaders?
The Earl of Caithness: My Lords, I agree with the noble Lord that this is a most serious matter, as the House has registered on more than one occasion. Alas, Mr. Gorbachev is not in the country at the moment but he is due this evening. Many things will be discussed with him. The visit is a good occasion to bring to the fore again the whole question of human rights in the Soviet Union.
Lord Richard: My Lords, it is always a pleasure to acknowledge that the Government are occasionally right.
The Earl of Shannon: My Lords, will Her Majesty's Government make it perfectly clear when Mr. Gorbachev arrives here this evening, extending his begging bowl to the Western nations, that he will be told to go away with it empty unless he can show why, by the use of his military forces, he is brutalising his own people? He is no better than Saddam Hussein and should be sent away empty-handed.
The Earl of Caithness: My Lords, there are many matters to discuss with Mr. Gorbachev when he comes here. This will be a good opportunity to raise the whole question of human rights.
Lord Hylton: My Lords, on a more irenic note, do the Government agree that the concept of autono-mous regions recognised by other states may be useful and helpful in unravelling complex situations such as that in the Caucasus and in other parts of Europe?
The Earl of Caithness: My Lords, there is a most complicated situation in the Caucasus, as the noble Lord said. It is best solved by a political, not a military, solution and by the people in the area.
Lord Richard: My Lords, I am sorry to rise yet again on this issue. Will the Minister take the opportunity to dissociate himself and the Government from the remarks made by the noble Earl, Lord Shannon, and the tone in which they were made, as well as the comparison which on this side of the House at least we found offensive?
The Earl of Caithness: My Lords, what the noble Earl says is entirely up to him. He has free privilege to raise matters of that kind. I gave the reply on behalf of the Government.
Lord Stoddart of Swindon: My Lords, is the noble Earl aware that that reply will disappoint many, not only on this side of the House but, I hope, on his side as well? This is a time for building new bridges or rebuilding old ones with the Soviet Union and Eastern bloc countries. It is not a time to insult them. They need all the assistance we can give them. I sincerely hope that the noble Earl will reconsider his reply and go a little further towards meeting the request of my noble friend on the Front Bench.
The Earl of Caithness: My Lords, I hope that the noble Lord has taken careful note —as I know he will have done—of the way in which I phrased my reply to the noble Earl.
The Earl of Shannon: My Lords, will the noble Earl recognise that within the past two days 48 Armenians have been slaughtered with the approval of the Soviet army? Does that make noble Lords on my right feel happy?
The Earl of Caithness: My Lords, once again I reaffirm on behalf of the Government that we deplore the situation in that part of the world and hope that it will be resolved by political, not military means.

Housing in Rural Areas
2.54 p.m.
Lord Hylton Lord Hylton asked Her Majesty's Government:
Whether they accept the need, identified by the Rural Development Commission, to provide 80,000 affordable houses in rural areas over the next four years; and what progress has been made to date.
The Minister of State, Department of the Environment (Baroness Blatch): My Lords, housing need is not easy to quantify. Much depends on how it is defined and what assumptions are made about house prices, interest rates and incomes. Nevertheless, we believe this estimate to be overstated and we shall shortly commission research which will help us to produce our own estimate. We have made good progress with a variety of measures designed to improve the provision of affordable housing in rural areas.
Lord Hylton: My Lords, is it not a fact that there have been at least three studies of the matter by different bodies? Is it not now high time that far greater resources were made available to solve the problem?
Baroness Blatch: My Lords, perhaps I may mention some of the actions which the Government are taking which involve considerable expenditure of resources. These are: special housing corporation rural programmes for small villages below 1,000 population, with the provision of 2,250 houses by 1993–94; special capital allocations to rural local authorities of another £50 million; support for rural housing trusts to set up small rural-based housing associations; planning concessions allowing low cost rural housing on sites where commercial housing would not be permitted under the exceptions policy; and subsidised shared ownership schemes in rural areas no longer required to allow staircasing up to the full 100 per cent. We are about to commission research which will properly tell us whether resource and provision match needs.
Lord Mackie of Benshie: My Lords, is the noble Baroness aware that despite her long list of measures being taken, anyone who lives in the countryside knows that there is a great shortage of affordable
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housing? The reason is that houses which were affordable are being bought by richer people who wish to live in the country. Therefore, local people cannot afford them. The situation is quite serious. Will the Minister consider, for example, allowing councils to retain houses for retirement, instead of making them subject to sale on request?
Baroness Blatch: My Lords, it is not part of the Government's policy to inhibit the right to buy housing. However, we have put an enormous number of measures in place. We are not complacent about the issue. The reason that research has been commissioned is that we believe that there is a gap between provision and need. These measures, only some of which I have mentioned, are being put in place to make sure that housing is more affordable for young people in rural areas.
Lord Swinfen: My Lords, my noble friend said that research would be commissioned. Will she make inquiries into the demand and need for specially designed accommodation for the physically disabled? They do not just live in towns, some live in the country.
Baroness Blatch: My Lords, my noble friend makes an important point. It is very much the responsibility of the local authority not only to identify housing for people to rent or buy but also to make sure that the housing is appropriate to the needs of the people occupying it.
Lord Dean of Beswick: My Lords, the Minister said that the Government thought that the number of houses quoted was in excess of the real need. Is she aware that the people at the sharp end dealing with the problem—the local authorities out in the country—know that the need exists now? The measures taken by the Government may be desirable and the figures possibly an overestimate of the need. However, that need is there now and the delay through the Government waiting for this report can only exacerbate a serious situation. Action is required immediately, not in the future.
Baroness Blatch: My Lords, I admitted that we believe that there is a gap between the provision and the need. I also catalogued the number of measures in place now which are being implemented by housing associations, local authorities and government intervention. I believe that the measures are working. Part of the research will determine the effectiveness of the policies. However, there is no neglect of the situation and certainly no complacency.
Earl Russell: My Lords, will the Minister give an undertaking on behalf of the Government that the research will be published?
Baroness Blatch; My Lords, there is no difficulty about that whatever. It will be published.
Lord Marlesford: My Lords, as a member of the Rural Development Commission, I assure my noble friend that the estimate of 80,000 houses is the lowest of the various estimates to which the development commission had access. Have the Government

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considered the possibility of using some of the housing available through closure of the air bases, many deep in rural areas? Perhaps it could be arranged that at least some could be sold by the American or British governments to housing associations for use as low cost social housing.
Baroness Blatch: My Lords, my noble friend again makes an important point. The air bases to which he refers may become surplus and their future remains under consideration by the Ministry of Defence and the Department of the Environment. We are aware of the implications of housing there and the impact of closures in rural areas. I am afraid that it would be precipitate of me to determine the outcome of the negotiations.
Baroness Hollis of Heigham: My Lords, while we welcome any government research into rural housing, I am sure that the Minister is aware that Action for Communities in Rural England, the Conservative-controlled Association of District Councils—the previous speaker referred to this point—the Rural Development Commission and the Institute of Housing have all said that between 80,000 and 100,000 houses are needed in rural areas. It seems likely that the government research will confirm that position. If that is The case, will the Minister agree at the very least to raise the basic credit approval—that is, the permission to borrow—of local authorities, because in the past 10 years the completions of affordable housing by local authorities and housing associations have fallen to a quarter of the level of 10 years ago?
Bareness Blatch: My Lords, I cannot predict the outcome of the research. I am afraid that, like many of her noble friends, the noble Baroness is absolutely convinced that the only providers of local housing are local authorities. I have said on a number of occasions that local authorities constitute one element of the providers of housing. There has been a positive switch to housing associations in this regard. The survey that the noble Baroness referred to—ACRE and the RDC hold the same view on this survey as it was the RDC that commissioned ACRE to carry out the survey—was a small one and it was conducted in a highly unscientific manner. In some cases people were merely asked whether they would be interested in occupying subsidised houses in rural areas if that housing were available. If the answer was yes, those people became a statistic in the survey. Research must be conducted in a much more scientific manner.
Lord McIntosh of Haringey: My Lords, I hope the Minister will listen a little more carefully in future to the comments of my noble friend Lady Hollis. My noble friend made it quite clear that her statistics referred not just to local authority housing but to provision by housing associations. Is it not the case that despite the minor measures that the Minister has predictably announced, over the past three or four years government activity has been devoted to reducing both security of tenure and security of affordable rents? That affects rural housing at least to the same extent as it affects urban housing.
Baroness Blatch: My Lords, the noble Baroness was referring to allocations made by local authorities and how they had decreased over time. I was simply saying that local authorities were one part of the provision. There has not been a decrease of one-quarter in the total housing provision over the period of time the noble Baroness referred to. Research will of course either confirm or deny the information that ACRE has already supplied.
Lord Swinfen: My Lords, will my noble friend consider using the accommodation that has been made surplus by the closure of air force bases for service personnel who are leaving the forces, as those people often have to enter bed and breakfast accommodation when they have to leave their married quarters?
Baroness Blatch: My Lords, I refer my noble friend to the reply I gave to my noble friend Lord Marlesford. It is a matter between the Ministry of Defence and the Department of the Environment.
Lord Bruce of Donington: My Lords, is the Minister aware that the gap between the need for affordable housing and its provision has progressively increased ever since this Government entered office? Does she not agree that her reference to local authorities having these housing responsibilities is entirely dishonest because the Government—
Noble Lords: Order!
Lord Bruce of Donington: My Lords, does the Minister not agree that her reference to local authorities having these housing responsibilities is entirely wrong because the Government have deliberately restricted financially the powers of local authorities to replace the housing that has been sold off privately?
Baroness Blatch: My Lords, I hope I have never been dishonest at the Dispatch Box. On any occasion where I may have misled the House I have always written to the noble Lord concerned or I have apologised before the House. I have no intention of being dishonest. I totally refute any criticism that the Government are being dishonest in these matters. There has been a positive switch to housing associations. The latter have been hugely successful in this regard. Housing association provision combined with the right-to-buy policy and the special part that local authorities play in making provision for housing have meant that real attempts are being made to address the problems of rural housing. I believe the research we have commissioned will add to that bank of information to enable provision to be matched to need.
Lord Hylton: My Lords, while the research continues, will the Government urgently consult with the Rural Development Commission and the Housing Corporation so that at the end of the day effective progress may be achieved?
Baroness Blatch: My Lords, my department is always in constant dialogue with the organisations the noble Lord mentioned.

Universities: British and Overseas Students
3.5 p.m.
Earl Russell Earl Russell asked Her Majesty's Government:
Whether British universities are under any legal obligation to accept British students.
Baroness Blatch: My Lords, their charters and statutes rightly leave universities free to determine their own recruitment policies. However, substantial public funding is provided in the clear expectation that places continue to be made available for the increasing demand from well qualified UK applicants.
Earl Russell: My Lords, I thank the noble Baroness for that reply. I am aware of the point she has made. But if she has studied the press release of the Committee of Vice-Chancellors and Principals issued on 15th May she will be aware that universities believe that they are undertaking these services at a loss either of profit or of quality. Does the Minister accept that it is a good business principle to give up loss-making activities and concentrate on profitable ones? If universities should reach that conclusion, will the Government undertake to act according to their free market convictions?
Baroness Blatch: My Lords, I could answer in greater detail if I agreed with the premise in the noble Earl's remarks. Since this Government came to power the number of UK students in higher education has increased faster than the number of students from abroad. The number of full-time equivalent UK students has risen from 545,000 to 795,000; that is an increase of 46 per cent. The number of overseas students has increased to 71,000; that is an increase of only 16 per cent.
Earl Russell: My Lords, I am aware that the noble Baroness does not accept the premise of my remarks. However, is she aware that I was referring to beliefs held in the universities? In commercial matters one must act on one's own judgment and not that of someone else.
Baroness Blatch: My Lords, as regards universities alone, UK student numbers increased by 16.5 per cent. between 1979 and 1989 compared with a 32 per cent. rise in the numbers of students from abroad. However, there was an increase of 46,000 university places awarded to home students during that period. That figure was substantially larger than the increase in the number of places awarded to students from abroad. The latter were awarded only 13,000 additional places.
Baroness Blackstone: My Lords, is the Minister aware that universities are under considerable pressure to recruit overseas students paying full cost fees? That means giving priority to those from outside the European Community over those within the European Community. That policy is a result of the consistent underfunding of British universities that has occurred over some years.
Baroness Blatch: My Lords, I am afraid the noble Baroness is wrong. The greatest increase in the number of overseas students is attributable to the European Community. They of course do not pay full cost fees. The proportion of full-time overseas university students who pay full fees has remained constant over the years 1979 to 1989. In 1979 the figure was 11.7 per cent. compared with 11.8 per cent. in 1989. There was a small dip when a change in policy occurred.
Lord Peston: My Lords, I hope the noble Baroness can clarify one matter in case anyone has been misled. Will she confirm that universities are private institutions which have their own charters and that therefore they can admit whoever they like, irrespective of what the Government may say? The universities determine their own entries.
Baroness Blatch: My Lords, the noble Lord is absolutely correct. As I said in my original Answer, universities have their own charters and statutes, but the funding that the Government provide for universities is given in the expectation that they will ensure that UK students are properly provided for.
Lord Grimond: My Lords, is the Minister aware that what has been said is perfectly correct in that universities have been forced to take in as many overseas students as they can get because of their position over funding? Will she also make it clear to the House that universities have done an exceptionally good job overseas? They have run extremely efficient recruitment programmes. Does the Minister accept that the students from abroad who come to this country do a great deal of good for our country as well as for our universities?
Baroness Blatch: My Lords, I absolutely agree with the noble Lord's final point. Universities have done an exceptionally good job in this area. Overseas students add a great deal to the life of our universities. However, I positively disagree with the noble Lord when he alleges that universities are forced to take in overseas students. Over the 10-year period that has been mentioned, the percentage of full fee paying overseas students admitted to British universities has hardly changed. It has changed by only 0.1 of a per cent. There has been no element of compulsion. Universities have their own charters and statutes and are entirely free to determine their intakes.

Food and Drink Trade Gap
3.9 p.m.
Lord Gisborough Lord Gisborough asked Her Majesty's Government:
What action they are taking to reduce the British trade gap in food and drink.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, the Government recognise that there is considerable scope for producers and manufacturers to improve their performance. To help them the Government have made great efforts to improve the

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economic climate for business in the UK. They have set up and supported Food from Britain and provide support for exporters through the DTI/FCO overseas trade services. My honourable friend the Member for Skipton and Ripon has also been conducting a review of the further action which might be taken to tackle the food and drink trade gap.
Lord Gisborough: My Lords, I thank my noble friend for that Answer. In view of the fact that imports from northern EC countries exceed our exports by two and a half times, will the Government do what they can to further promote the better producer organisations and better marketing? Can the noble Baroness give, as an example, the export and import figures for Cheddar cheese?
Baroness Trumpington: My Lords, while I would not want to underestimate the importance which the Government attach to the food trade gap it has to be kept i z perspective. Over the past 10 years imports of food, feed and drink from all countries increased by 94 per cent. The value of our exports increased by 120 per cent. Regarding imports of cheese, including Cheddar, 202,000 tonnes of cheese were imported into the UK during 1990, 91 per cent. from the EC. Indeed, 91,000 tonnes was Cheddar imported mainly from the Republic of Ireland and Germany and also from third countries under bilateral cheese agreements.
Baroness Phillips: My Lords, why do we have to suffer tasteless French apples and pears when our own fruit is so good? It is very difficult to obtain British fruit. Surely we do not have to suffer this because we are in the Common Market.
Baroness Trumpington: My Lords, the short answer is that it is a free market and retailers buy what the public want.
Lord Kimball: My Lords, does my noble friend agree that the food trade gap is a major political and economic issue? Will she look at the example of our main competitor in this area, France, where a £1 billion trade deficit over five years has now been turned into a £6 billion food trade surplus?
Baroness Trumpington: My Lords, I should add to what I said earlier in reply to the noble Baroness. The apples which the French produce ripen at a different time from the apples which we produce. That is one of the reasons some of our indigenous foods are not available at the same time as similar products from other countries.
Turning to the French, in assessing the relative success of France in improving its balance of trade in food, it has to be borne in mind that agricultural output in that country is over twice that of the United Kingdom. The French are also concerned about their trade performance. The Centre for French Foreign Trade reported that for the first three months of 1991 exports of products of the agri-food sector fell by 7 per cent. and imports rose by 3 per cent. For the United Kingdom in the same period exports of food, feed and drink rose by 5 per cent. and imports fell by 8 per cent.
Lord Jay: My Lords, would not the best way of narrowing the trade gap be to reduce our food import prices by supporting the proposals of the EC farm commissioner for drastic reform of the common agricultural policy? Is it not regrettable that our Minister of Agriculture is apparently opposing those reforms?
Baroness Trumpington: My Lords, I thoroughly resent any criticism of my right honourable friend the Minister. He does a swell job fighting for this country wherever he goes.
Turning to the MacSharry proposals, the full implications of the latest MacSharry proposals have yet to be established. To some extent reduction of support should help to give encouragement for goods to be placed on the market or exported rather than put into intervention. However, the proposals could also lead to a fall in production, especially of milk, and that is likely to worsen the trade gap. The overall consequences cannot yet be predicted but the Government and my right honourable friend will resist any discrimination against the UK.
Lord Boardman: My Lords, does my noble friend agree that part of the trade gap may be attributable to the CAP under which, for example, in the case of dairy products we are limited by quota to 86 per cent. of our domestic consumption?
Baroness Trumpington: My Lords, it is important to ensure that our finite supplies of milk are used to produce high added-value products. Current milk marketing arrangements still result in too much milk being used for intervention products. The dairy industry is considering a move to more open and flexible arrangements which will enable it to compete more effectively in home and export markets. In 1989 the UK was 88 per cent. self-sufficient in butter fat and 104 per cent. self-sufficient in non-fat solids.
Lord Gallacher: My Lords, the noble Baroness referred to research into the problem by her honourable friend the Member for Skipton and Ripon. Can she say when the result of that research is likely to be made available? In the research which is being undertaken into the net visible trade deficit of £4.4 billion with the European Community in food and drink in 1990, has the growth of British retailers' own brands been taken into account? The own brands now account for 50 per cent. of the market in this country and have no or limited appeal overseas. Can the noble Baroness say whether that particular problem is being looked at by her Ministry?
Baroness Trumpington: My Lords, my colleague has only just submitted his report. When his recommendations have been considered an announcement will be made.
Did the noble Lord refer to weeds? To what did he refer?
Lord Gallacher: My Lords, I referred to the growing problem with respect to exports of the development of own brands by retailers in this country, particularly the five retailers who dominate the food market.
Baroness Trumpington: My Lords, the retailers are motivated by the desire to cut costs through shorter supply lines and to trace food back to source to aid compliance with the new Food Safety Act. I should like to add that I am delighted that Safeway is now selling nothing but British bacon on its delicatessen counters. Safeway tells me that that is worth £27 million a year to the British bacon industry. I fail to see why noble Lords find that amusing.

Business
Lord Hesketh: My Lords, we have now spent 31 minutes on Questions.
It may be for the convenience of the House to know that, subject to the progress of business, the Committee stage of the Export and Investment Guarantees Bill will be adjourned at about 7.30 p.m. for about one hour and that during that adjournment the Second Reading of the Rights of Access to Neighbouring Land Bill will be taken.

Business of the House
3.18 p.m.
The Lord Privy Seal (Lord Waddington): My Lords, I beg to move the Motion standing in my name on the Order Paper. I am moving this Business of the House Motion by agreement between the usual channels to allow the House to deal with four Bills before the Summer Recess. The Finance Bill will be taken in the House on this coming Friday, 19th July. The Armed Forces Bill and the British Railways Board (Finance) Bill will then be taken in the House on Wednesday, 24th July—both, with the agreement of the noble Earl, Lord Russell, before his Motion on the Income Support (General) Regulations. Finally, we shall take the Consolidated Fund (Appropriation) Bill on Thursday, 25th July.
Your Lordships will recognise that it is not unusual for the Government to propose the suspension of these two standing orders at this stage in the Session in order to allow the completion of business. However, 1 stress that it is by agreement through the usual channels that these Bills are being taken in this way. The suspension of the standing orders does not mean that the Government would feel free to take other Bills without the agreement of the usual channels.
Moved, That Standing Order 38 (Arrangement of the Order Paper) be suspended until the Summer Recess so far as is necessary to give Her Majesty's Government power to arrange the order of business; and that Standing Order 44 (No two stages of a Bill to he taken on one day) be suspended for the same period. —(Lord Waddington.)
Lord Cockfield: My Lords, I have a point of both legal and constitutional importance to raise on this Motion because it would appear that, if it were accepted without comment, it would jeopardise your Lordships' legal rights in relation to the Finance Bill. Under the terms of the Provisional Collection of Taxes Act 1913, as amended, your Lordships are entitled to ask that the Finance Bill should come to
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your Lordships' House no later than 5th July. It is today already 16th July and we have not yet seen the Finance Bill.
Your Lordships' rights arise in the following way. It was for many years assumed by the House of Commons—I refer to it as the House of Commons because we are talking about historical events—that it could impose taxation by mere resolution. Unfortunately, a Mr. Bowles disagreed with it and, in the case of Bowles v. The Bank of England, Mr. Justice Parker decided that Mr. Bowles was right and that the House of Commons had no pretended power of imposition of taxation and that taxation could be imposed only by Act of Parliament.
The House of Commons has never taken kindly to the judiciary, however eminent and learned, telling it how to conduct its business and it immediately promoted a Bill which became the Provisional Collection of Taxes Act 1913. That Act to some degree overruled the judgment in the Bowles case, but it did so on certain clearly stated conditions. One of those conditions was that Royal Assent should be given to the Finance Act not later than 5th August, but, because such a decision would seriously have infringed the rights of your Lordships' House properly to consider that measure, the Act also provided that your Lordships should be given a month to complete the stages of the Bill. It is for that reason that the Bill should come to your Lordships' House before 5th July.
Years ago it was regarded as a matter of honour for the Bill to be sent to your Lordships by that date. I can testify to that from personal knowledge and experience. In more recent years, however, the date has not been adhered to. Your Lordships have always taken an understanding view of that situation as they have felt that it has been due not to any malign intention on the part of another place, but merely to the inability of the business managers in another place to manage their affairs with the efficiency that we rightly expect from the business managers in your Lordships' House.
Noble Lords: Hear, hear!
Lord Cockfield: Nevertheless, my Lords, in the last year or so there has grown up an unfortunate tendency in another place to treat many of the amendments and arguments put forward by your Lordships on matters of considerable importance with a certain amount of, I might almost say, disrespect. Your Lordships will remember a number of occasions on which that has occurred. I would not for a moment suggest that noble Lords should create the kind of major financial crisis that would ensue if they stuck to their clear legal rights as enacted in the Provisional Collection of Taxes Act. Nevertheless, it is somewhat ironic that, after the treatment that your Lordships have at times received from another place, it should now seek our indulgence to accommodate its deficiencies in the management of its own business. I say this simply because I am afraid that, if no one made any protest about it, it would not be long before people came out with some bogus constitutional argument that noble Lords were not entitled to stand by their clear legal rights.

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Perhaps I may add one further word. If the Bill is not certified by the Speaker as a money Bill, the Government's position would be even worse because, legally, your Lordships would then be bound only by the Parliament Act and not by the much more stringer t conditions of the Provisional Collection of Taxes Act. I feel, therefore, that it is essential that we should place on record that we believe that our legal rights remain unimpaired in this matter and that we waive our rights simply to accommodate the wishes and requirements of another place.
I also wish to raise the question, because the Leader of the House himself has raised it, about the proposed debate on the Finance Bill taking place on a Friday —a date which is highly inconvenient to many of your Lordships and particularly inconvenient, if I may say so on a personal note, for myself, not that I would expect he Leader of the House to take that into consideration, although my arrangements long foredate any of his. He sought to justify the decision to hold the debate on a Friday on the basis of the argument that it had been agreed through the usual channe13. That astounds me.
Anyone who had sat in your Lordships' Chamber over the past few weeks and had listened to the sound and fury that had erupted from the Benches opposite during Question Time whenever the state of the economic affairs of the nation were mentioned would have thought that the Opposition would be the first people to insist on the Finance Bill being properly debated in prime time. Nevertheless, in their wisdom they have taken the view that the Finance Bill, which is the centrepiece of the Government's economic strategy, need not be debated except on a Friday in the hope that no one in particular will be here and particularly no one who understands the questions involved.
However, having made my point, I wish to leave the matter there, but we should have on the record what are my views and possibly the views of others of your Lordships about the way these matters have been handled
Lord Boyd-Carpenter: My Lords, I strongly support what my noble friend Lord Cockfield has said about the rights of this House which are being eroded and which will be further eroded if those changes are allowed to take effect without protest, but I rise mainly on the question of taking the Finance Bill on Friday.
The opportunity to debate the Finance Bill, which is the right of this House, has in the past almost always taken that shape of a full dress debate on the economy and on the Government's handling thereof. Your Lordships are well aware of the fact that, for such a debate, Friday is the least suitable day of the week. I understand that, for some mysterious reason of their own, the usual channels have accepted that, but, so far as I know, there has not been general consultation with your Lordships about it. It seems to me the greatest pity that this House, which contains people who know at least as much about public finance as they do in another place, and, perhaps I may venture to say, even a little more, should be denied the opportunity of a full and proper one-day debate, if it has to b that.
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Despite the fact that my noble friend the Leader of the House may feel bound to the Opposition, with whom he appears to have made an agreement, I ask him whether, even at this stage, he will have discussions with the Opposition to release him from that commitment and try to give this House a full day's debate on the Finance Bill during the following week. If he does not do so, that will again be an erosion of the apparent rights of this House to bring to bear its expertise on the national finances in full debate, in full and proper circumstances and with plenty of time in hand. If so, I am afraid that as Leader of the House the noble Lord is to some extent letting down the House.
Lord Bruce of Donington: My Lords, as one who for a long time up to a couple of years ago had the opportunity to deal in detail with the Finance Bill and take part in the economic debates on it, I very much endorse the observations made to the House by the noble Lords, Lord Cockfield and Lord Boyd-Carpenter.
The business of the House is a matter for the Government and in particular the Leader of the House. I trust that he will not exercise undue pressure upon the Opposition who, so far as possible, have to facilitate the business of the House. I hope that in future he will make quite sure that the debate on the Finance Bill—which, as the noble Lord, Lord Cockfield, said, provides the opportunity for a discussion in this House of the economic state of the nation and its economic affairs—takes place on a day other than Friday. To do anything other than that would not be in the best interests of the Government, the Opposition or the Back Benches on any side of the House.
Lord Jenkins of Hillhead: My Lords, when he comes to reply perhaps the noble Lord will bear in mind that since the 5th July rule was proclaimed there are two reasons why there is even less excuse than was hitherto the case for the other place to mismanage their business and send the Bill to this House late. First, it is now habitual for the Budget to be in mid-March rather than in mid-April, which was previously the habit. Secondly, when the Finance Bill is dealt with in the other place, a large part of its business is sent upstairs to committee rather than have the whole of it taken on the Floor of the House, as was the case until just over 20 years ago. Therefore we are entitled to expect more consideration from the other place.
Lord Peston: My Lords, will the noble Lord confirm that the Finance Bill has not yet left the other place and therefore any date is speculative? Secondly, is he aware that although no one who understands these matters will be speaking on the subject on Friday, I shall speak on it.
Lord Waddington: My Lords, let me say at the outset that I have some sympathy for what my noble friend Lord Cockfield had to say about this matter. One would wish to see business managed in a way which gives this House the maximum opportunity for proper consideration of measures; and by that I mean

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all measures, including Finance Bills. It is perhaps unfortunate that certain practices have grown up over the years, but I certainly would not like your Lordships to imagine that somehow or other I have departed from precedent and am inflicting on noble Lords habits that are foreign to them.
With the greatest respect to my noble friend Lord Cockfield, I have to remind him that it was my noble friend who moved the Second Reading and the remaining stages of the Finance Bill on Friday, 24th July 1981. So it would not be correct to say that it has been unusual to deal with Finance Bills on a Friday. Indeed, very many important Bills have been dealt with on Fridays, particularly at this time of the year.
I should also remind noble Lords that it is by no means unusual for Finance Bills to come to this House so late in July. Indeed, it would traduce this Government to suggest that somehow or other we have decided on a practice that is inconvenient to this House.
To deal with the matter briefly, the Finance Bill came to this House in 1973 on 24th July; in 1974 it came on 30th July; in 1975 it arrived on 31st July; in 1976 it was 27th July; in 1977 it was 28th July; in 1978 it was 31st July. In 1979 the Government did very well and got it here by 24th July but by the next year it was back to 31st July. I hardly need go on. It is not correct therefore to say that suddenly in recent years the House has been put to great inconvenience as a result of Finance Bills arriving late in July. Like it or not, that has become the practice. But that does not mean that my noble friend is wrong to suggest that we should get across the message that it is not convenient to this House for that habit to continue.
I take very much to heart the points made by my noble friends Lord Cockfield and Lord Boyd-Carpenter, as well as what was said by the noble Lords, Lord Bruce of Donington, and Lord Jenkins of Hillhead. In fact, I wrote yesterday to my noble friend Lord Cockfield, and that letter answers the point made by the noble Lord, Lord Peston. The position is as my noble friend said; namely, that it is hoped that the consideration of the Finance Bill will be completed in another place today, Tuesday 16th July. In my letter I went on to say that we were obliged to pass the Bill by the Summer Recess and, that being so, the best arrangement that I could make, taking into account other pressures on the Order Paper, was to ensure that a full Friday was available for the Second Reading debate on the Bill in this House. I should point out that important government Bills have increasingly had their Second Readings taken in the House of Lords on a Friday.
It was against that background that it was decided through the usual channels to take the course that we have adopted. I am grateful to all those concerned for having come to the arrangement which, rightly or wrongly, has become something of a customary arrangement, as I indicated. Perhaps we should put the arrangements into reverse and I shall bear very much in mind what my noble friend said.
The Earl of Perth: My Lords, I hope that it is in order for me to speak. The noble Lord the Leader of
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the House did not reply to the suggestion of the noble Lord, Lord Boyd-Carpenter, to the effect that after consultation through the usual channels we should make a change to one day next week. That should certainly be looked at in consultation with the usual channels.
Lord Waddington: My Lords, not from my experience in this House, because here I am a mere novice, but from my experience as a business manager in the other place, I know that negotiations of this kind are all part of a gigantic mosaic. If one little piece is taken out of its place, one has to look at how all the other Bills will fit in. When it is the wish of this House and the wish of the other place to rise must also be borne in mind.
Therefore, it was somewhat disingenuous of me to say, after the painstaking negotiations which have taken place, that we should now try to unstitch the whole deal and think in terms of a different day for the Finance Bill. An agreement has been reached, and we ought to stick to it.
On Question, Motion agreed to.

Woodgrange Park Cemetery and Crematorium Bill [H.L.]
Folkestone Harbour Bill [H.L.]
3.39 p.m.
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper. This is the first of the normal carry-over Motions for Private Bills to come before your Lordships toward the end of the Session. I beg to move.
Moved, That the promoters of each Bill have leave to suspend any further proceedings thereon in order to proceed with it, if they think fit, in the next Session of Parliament, provided that notice of their intention to do so is lodged in the Office of the Clerk of the Parliaments not later than 3 p.m. on Thursday 17th October next and that all fees due on or before that day have been paid;
That such Bill be deposited in the Office of the Clerk of the Parliaments not later than 3 p.m. on the second sitting day in the next Session with a declaration annexed, signed by the agent, stating that the Bill is the same in every respect as the Bill at the last stage of proceedings thereon in this House in the present Session;
That the proceedings on such Bill in the next Session be pro forma in regard to every stage through which the Bill has passed in the present Session, and that no new fees be charged to such stages;
That the Private Business Standing Orders apply to such Bill in the next Session only in regard to any stage through which the Bill has not passed during the present Session;
That—

(i) any petition which has been presented against such Bill in the present Session (if not withdrawn) stand referred to any Select Committee on the Bill in the next Session;

(ii) no petitioners be heard before any Select Committee on the Bill in the next Session unless their petition has been presented within the time stipulated for the deposit of petitions in the present Session or deposited pursuant to Private Business Standing Order 109 (b);

(iii) Private Business Standing Order 110 have effect as if the words "under Standing Order 109" were omitted.—(The Chairman of Committees.)

On Question, Motion agreed to, and it was ordered that a Message be sent to the Commons requesting their agreement.

Forestry Bill
Read a third time, and passed.

Police Custody (Time Limits) Bill [H.L.]
Lord Harris of Greenwich: My Lords, I understand that no amendments have been set down to this Bill and chat no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Harris of Greenwich.)
On Question, Motion agreed to.

Export and Investment Guarantees Bill
3.41 p.m.
The Lord Advocate (Lord Fraser of Carmyllie): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Fraser of Carmyllie.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Chairman of Committees in the Chair.]
Clause 8 [Scheme of transfer]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51:
Page 5, line 17, at end insert:
("( ) Without prejudice to the generality of subsection (1) above, the Secretary of State shall ensure that political risk insurance, on terms and conditions comparable to that prevailing before the transfer, shall continue to be provided to UK exporters by the Export Credits Guarantees Department").
The noble Lord said: The amendment stands also in the name of the noble Lord, Lord Ezra. It may be for the convenience of the Committee if I speak to Amendment No. 51ZA too. I gather that in the course of our discussions we shall return to Amendments Nos. 52 and 53 to which the noble and learned Lord the Lord Advocate spoke last week.
Amendment No. 51 directly addresses the question of political risk reinsurance. The problem that has arisen throughout the Bill—it is, I believe, the major
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Problem—is how the future privatised Insurance Services Group of ECGD will reinsure itself. We are all convinced that without adequate reinsurance ISG cannot survive properly. It certainly could not survive and give the service to exporters that it does at present within the context of ECGD.
Amendment No. 51 addresses the problem of political risk in the rather narrow sense because that was the issue which troubled another place in its discussions and which most troubled noble Lords at Second Reading. However, since I tabled my amendment the Government have tabled Amendments Nos. 52 and 53. The noble Lord, Lord Trefgarne, also moved an amendment at an earlier stage in Committee which went rather wider than Amendment No. 51.
I fully accept that if, as the noble and learned Lord claims, the Government accept the spirit of the amendment moved by the noble Lord, Lord Trefgarne, my amendment being much narrower than his would naturally fall. Nevertheless by moving the amendment I am giving the Committee an opportunity, which we sought last week, again to discuss insurance and reinsurance.
Amendment No. 51ZA goes a little further than Amendment No. 51. It seeks to ensure that when the Secretary of State disposes of his interest in the privatised ISG, he will make a statement to Parliament,
"on the financial viability including reinsurance arrangements available, and the business plan of the purchaser".
It is simply a mechanism to try to ensure that the reinsurance plans are open and known to Parliament before the Secretary of State disposes of any securities in the privatised ISG.
I come back to Amendments Nos. 52 and 53 in the name of the noble and learned Lord. The Committee will recall that when he spoke to those amendments on 9th July we had a short discussion. The Committee was happy to accept my suggestion that we should reserve the substantive analysis of the amendments until I moved my amendment today; we would then have had a week in which to consider whether the government amendments, which are slightly complex in their drafting, satisfied the Committee or whether we wanted something further.
At col. 1355 of the Official Report on 9th July, the noble and learned Lord said:
"Against the background of these assurances the Committee will not be surprised that I am able to say that the Government accept in principle the intent of my noble friends' new clause".
That was the expression used by the noble and learned Lord in respect of the amendment of the noble Lord, Lord Trefgarne. He later stated:
"The purpose of these amendments is to build an obligation into the Bill for the Secretary of State to determine whether there is a national interest case for him to use, by means of reinsurance, the powers in Clause I to provide assistance to encourage exports … I wish to point out that the amendment applies to all types of ECGD reinsurance and that there is no time limit".
As I understand those expressions used by the noble and learned Lord, the Government are prepared to see ECGD act as reinsurer of last resort on all classes of risk, not just political risk. He said:
"The amendment applies to all types of ECGD reinsurance".
In explanation the noble and learned Lord somewhat qualified what he had originally said about Amendment No. 52. He explained to us, quite rightly, that up to that point the Government had considered two types of assistance for market reinsurance. The first was what was described in another place and in this Chamber on Second Reading as the national interest: there would be certain political risks that were simply not acceptable to the market and the Government would ensure that ECGD stood behind those without qualification and without time limit.
Furthermore, he said that there was a second arrangement known as a top-up arrangement whereby for a period of three years the Government would ensure that ECGD became a member of the reinsurance syndicate that was going to reinsure ISG both for political risk and for commercial risk. For the moment I leave aside the anxiety that the three-year period has very little significance. A top-up facility might provide supportive capacity in value terms but it cannot do so in terms of the period. The commercial insurance market simply cannot go beyond three years on any one risk. Therefore the Government under the top-up scheme would be liable to find themselves topping up something that did not exist.
However, I believe on any reading of what the noble and learned Lord said—and I have quoted it —that the top-up scheme is no longer relevant. By saying that ECGD is and will be a reinsurer of last resort on all classes of ECGD risk, that implies to me that the top-up scheme is no longer required. According to my understanding of the noble and learned Lord's comments there will be a perpetual top-up scheme from ECGD.
I was confused by the noble and learned Lord's response to a question asked by the noble Lord, Lord Prior, and echoed by the noble Lord, Lord Ezra, and my noble friend Lord Jay. My noble friend put the matter most succinctly by asking:
"does the three-year limit disappear altogether from the Bill?" —[Official Report, 9/7/91; col. 1357.]
The noble and learned Lord said no, that was not the case. That reply threw me into confusion. If the government amendments are designed to reinsure all types of ECGD risk and there is no time limit, that must mean that the Government will stand as a reinsurer of last resort. They will be the last name on the slip—to use a technical expression—in the reinsurance treaty. If no one else is in the treaty, ECGD appears there on behalf of the Government. That must be the situation; I cannot see that it could be otherwise.
I shall wait to hear what the noble and learned Lord has to say, but if that is so there are two consequences. The first is that the Government have conceded the case of the noble Lord, Lord Trefgarne. We on this side of the Committee would welcome that, if my understanding of the noble and learned Lord's
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comments is correct. Secondly, and perhaps more importantly, the conditions under which ISG is to be privatised have radically changed. When the bidding was originally opened it was clear that a number of UK insurance companies were interested. However, they dropped out of the bidding because they were worried—and they said so openly—about the political risk problem. If the Government have now sealed off that problem, it appears to me that the bidding must be reopened.
To support that case I shall quote from a letter that I received from the Secretary of State dated 1st July. I have placed a copy in the Library. He stated:
"If the Bill were to be amended in a way which substantially changed the nature of the business to he privatised, and/or its value, it would then of course be open to us to reconsider the sale arrangements and if appropriate arrange for a new Invitation to Tender to be issued".
In my reply I thanked the Secretary of State for his courtesy in letting me know the situation. I expressed my view, which I believe will be generally supported, that if the bid is amended in the way in which I hope, the value of the business will change materially and a new invitation to tender must then be issued. If I am right in my interpretation of the noble and learned Lord's amendments, that is the situation in which we now find ourselves. It may be of interest to the Committee to note that I have placed a copy of that correspondence in the Library and sent a copy to the Chairman of the Public Accounts Committee of another place.
I hope that the noble and learned Lord will he able to clarify the slight confusion that remained after the end of our debate last Tuesday. It is in the spirit of trying to clear up that confusion, and not necessarily putting my amendment and that of the noble Lord, Lord Ezra, on the face of the Bill, that I beg to move.
Lord Ezra: I support Amendment No. 51 on two grounds. First, it is quite clear and puts forward the straightforward proposition that:
"the Secretary of State shall ensure that political risk insurance, on terms and conditions comparable to that prevailing before the transfer, shall continue to be provided to UK exporters by the Export Credits Guarantee Department".
There can be no doubt about the meaning of the amendment. Secondly, it addresses a matter about which grave anxiety has been expressed; that is, the transfer of these responsibilities to the private sector. It is the view of' those who lead in the insurance business that political risk is not a matter that can be catered for by the private sector. I have in front of me an article written by one of the leading personalities in the European insurance business. Dr. Hans Kaufmann is the managing director of Swiss Re, one of the biggest companies in the business. At the end of the article he states:
"the political risk in the sector of private export credit insurance is not insurable and in any case not reinsurable".
It is clear that in the past the Export Credits Guarantee Department provided a service which no other sector could provide. The proposition is that it should continue to do so. Our anxiety is that, subject to what may be said later, the proposition put forward by the noble and learned Lord in the amendments

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which are grouped with Amendment No. 51 is unclear in the light of the debate that we had in Committee last Tuesday.
Therefore, it is important for the benefit of the export industry in this country that we should know precisely where the Government stand on the issue. Are they prepared in one way or another to carry on political risk insurance or are they not? The wording is up to the Government; it depends how they interpret the proposal and how they explain it to us. Of the two main amendments that have been grouped together today I much prefer that with which I have associated myself which has been moved by the noble Lord, Lord Williams. I prefer it because it is clear and addresses the problem precisely. It covers the point about which we are all anxious, and I am surprised that the Government are not prepared to accept it. However, if they prefer their own amendment, a great deal of elucidation will be required on the part of the noble and learned Lord.
Lord Fraser of Carmyllie: In speaking to the amendment the noble Lord, Lord Williams, effectively restricted himself to an analysis of what I said on a previous occasion. He indicated clearly his anxieties about the Government's position in respect of their two amendments. In supporting Amendment No. 51 the noble Lord, Lord Ezra, went further and argued more fully in its favour. In reply I shall deal first with Amendment No. 51.
I have no doubt that in tabling the amendment the noble. Lords, Lord Williams and Lord Ezra, shared a common objective with my noble friends Lord Trefgarne, Lord Prior and Lord Weir. That objective was reflected in Amendment No. 14 which was considered during the first day in Committee. When considering that amendment I invited the Committee to consider Amendments Nos. 52 and 53 tabled in my name. I did so because, while I was prepared to accept what I believed to be the noble Lords' objective in proposing their new clause, it posed a number of legal and technical difficulties which my amendment sought to overcome. To a certain extent the same attitude applies to my approach to Amendment No. 51. However, it presents some additional problems which are greater and cannot be characterised simply as being legal and technical. Nevertheless, I hope that, having described the problems and explained more fully my Amendments Nos. 52 and 53, the noble Lords will be persuaded to withdraw their amendments and to support mine. I am mindful of the remark made by the noble Lord, Lord Williams, during our debate on Amendment No. 14—he was not here to draft amendments which could be written straight into the statute but was anxious to ensure that our shared objective was properly met within the statute.
I believe that this amendment fails to achieve what I understand to be its purpose because it is drawn too widely. By tackling all political risk insurance, rather than being provided under the intended reinsurance arrangements, the Secretary of State could probably satisfy the letter of the clause simply by making available under Clause 1 direct political risk insurance of the kind which ECGD will provide after
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privatisation in respect of project exports. It creates no specific obligation in relation to post-privatisation reinsurance arrangements. I understand that the noble Lord is anxious that such arrangements should be made.
While I am sure that the Secretary of State would wish to observe the spirit as well as the letter of the statute, I am sure that Members of the Committee will agree that it should be drafted in a way which most accurately and effectively imposes such an obligation.
Also, in my view the amendment is unacceptable because it seeks to freeze the terms and conditions of cover as those prevailing immediately before privatisation. That cannot be right. I have made that point before but I believe there is a general recognition —and I am not conscious that anyone has departed from it—that the Secretary of State and ECGD must retain freedom to vary terms, conditions, prices and availability of cover in accordance with their perception of changes in the quality of risk. For example, if a development such as the recent Gulf crisis should occur, the Secretary of State and ECGD must be free to respond by altering the terms on which they are prepared to make cover available on the countries most immediately affected.
4 p.m.
Lord Ezra: Would not that have applied at any time? The amendment uses the word "comparable". We do not suggest that anything should be hard and fast but that account should be taken of the developing situation.
Lord Fraser of Carmyllie: My anxiety is that the position would be frozen. I am grateful to the noble Lord for what he says; namely, that he accepts that flexibility must be given to the Secretary of State and to ECGD. I see that the noble Lord, Lord Williams, indicates his agreement with that proposition. The Secretary of State and ECGD must be free to react to changes in the economic performance of overseas countries.
In proposing that this amendment, like Amendment No. 14, should be withdrawn in favour of Amendments Nos. 52 and 53, it may be helpful if I say more about those amendments and respond to some of the points made in the course of the debate on our first Committee day. I hope also to answer the points raised by the noble Lord, Lord Williams, in the course of today's debate.
Anxiety was expressed about the effect of my proposed amendments on the so-called top-up reinsurance facilities. On reflection I accept that I should have elaborated further in response to my noble friend Lord Prior when I sought to answer his anxieties.
I should explain that my amendments create a clear obligation on the Secretary of State to determine at appropriate intervals whether there is a national interest case for him to provide reinsurance to primary insurers. That obligation applies to all types of insurance. That was picked up by the noble Lord, Lord Williams, from what I said on the amendments last week and I repeat it. That obligation applies to all

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types of insurance. Thus, the use of the phrase "expedient in the national interest"—and this may be where the confusion arose—does not restrict the obligation to the type of business which is to be handled under what we have been calling in a shorthand way the national interest reinsurance facility. It will apply to all classes of insurance and will, therefore, embrace the type of insurance to be reinsured by ECGD under the top-up arrangements. That is the statutory position.
The policy position remains as I told the Committee last week. The top-up reinsurance facility, as the Secretary of State has indicated, will be available for up to three years. Our confident expectation is that it will not be required beyond that period or indeed, as the way things are going at present, it will not be required for the fullness of that three-year period. However, if those confident expectations of the Secretary of State are misplaced —and that seems to be the ground for worry here—and the private market has failed to take over ECGD's top-up share of the new company's global reinsurance, my amendments create an obligation on the part of the Secretary of State to decide whether a national interest case exists for him to continue the facility.
He does not reach that judgment or decision wholly in isolation because the second amendment requires that he must consult the advisory council before reaching his decision. If he concludes that there is such a national interest case, the powers exist under Clause 1 to provide the reinsurance. In other words, none of those powers is time limited.
Another anxiety was that the amendment referred to "reinsuring persons providing insurance". I should explain that the intention is to impose an obligation on the Secretary of State to determine whether he should reinsure other insurers. Obviously we have in mind the privatised insurance services but the amendment does not restrict the obligation to insurance provided by that company alone. The Secretary of State already has the power to provide direct insurance in the national interest to exporters and banks under Clause 1 as I explained.
A further point was that the amendments say nothing about "reasonable terms". Amendment No. 14 used that expression in the context of requiring the Secretary of State to make reinsurance available, when he considered it to be in the national interest to do so, and in circumstances where such reinsurance was not otherwise available or not available on reasonable terms.
I do not believe it essential for such a concept to be included in the statute. When the Secretary of State is determining whether there is a national interest case for him to provide reinsurance, I am sure that one consideration will have to be whether the terms on which reinsurance is available from elsewhere—if it is available at all—are so onerous that they would place UK exporters at a significant competitive disadvantage. I do not see how the national interest can be judged without such an assessment being made, but I see no need for that to be specifically included in the Bill. Indeed, since there is no legal definition of
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reasonableness in those circumstances, its inclusion would be ineffective because in the final analysis the Secretary of State must exercise his judgment about what is or is not reasonable.
I have been asked a number of further questions. The noble Lord, Lord Williams, said that ECGD always stood in the background as reinsurer of last resort for all classes of risk. The answer is that that is so, where the Secretary of State considers it in the national interest to do so. In such circumstances it would be reinsurance which could cover both commercial and political risks.
I hope that I have fully explained the situation as regards the top-up reinsurance. There is already a policy commitment which continues beyond that period, as I have said on a number of occasions.
Finally, the noble Lord was anxious that the terms and conditions of sale may have been so significantly changed by the Government that the matter should go out to tender in order to allow fresh opportunities for others. The terms on which reinsurance is likely to be available to the preferred purchaser have not changed throughout the sale process. The terms and conditions of the privatisation, and of the tenders submitted to the Secretary of State, reflect that position.
This is undoubtedly the most important amendment and it has attracted a great deal of interest on all sides of the Committee. Having had the opportunity to expand on the points which appear to me to give rise to concern, I hope that I have been able to answer those points. Also I hope that it is appreciated that the top-up reinsurance could be covered beyond three years if it was deemed to be in the national interest by the Secretary of State.
Lord Jay: I must confess that I am still a little puzzled by the Minister's explanation. That may be my fault. We agree that if the government amendments contain the appropriate proposals, the Government are far more capable of drafting them correctly than anyone else in the Chamber. But the Committee wants to know whether, under the Minister's proposals, through the ECGD the Government will have powers to provide political risk insurance in all cases and without any time limit.
I thought that that was what the Minister said. If so, I do not understand why the shadow of the three-year time limit must remain in the Bill. The Minister appeared to be saying that after three years the Secretary of State will stop and think and may then decide to do one thing or another. Why is that time limit necessary? An efficient department is capable of thinking all the time, and if it was necessary to vary arrangements later, it would be free to do so. The industry and exporters, the most important elements in all this, would know that the situation is clear and that in the future as in the past there will be in the last resort government cover for political risks that cannot be covered by commercial insurance. Can the Minister say without qualification whether that is so? If it is so, perhaps he will explain the need for this three-year stopping point.
Lord Fraser of Carmyllie: Perhaps I can pick up the language used by the noble Lord when he said, "stop

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and think". I am saying that the Secretary of State indicated that in the first three years he will not stop and think because he has already committed himself to ensuring that such top-up cover will be provided when necessary. From the moment the Bill goes through there will be a continuing obligation upon him to,
"from time to time determine, in relation to such classes of risk determined by him as might be insured by him under section 1 of this Act, whether it is expedient in the national interest for him to exercise his powers under that section".
That is all I am indicating by reference to the three-year undertaking given by the Minister of State in another place. I hope that the noble Lord is reassured by that explanation. There is nothing sinister in it. I do not want to seem to be retreating from any commitment given by the Minister of State.
Lard Trefgarne: I speak for myself in this matter. My noble friends Lord Prior and Lord Weir, and the noble Lord, Lord Tombs, who added their names to my amendment, will speak for themselves if they see fit. From my point of view, my noble and learned friend has gone as far as he could reasonably have been expected to go, and I am grateful for that.
If my noble and learned friend's amendments are accepted, as I hope they will be, the Bill will be greatly improved and will broadly cover the anxieties I expressed to your Lordships both at Second Reading and at the first Committee stage. My sentiment in that regard is reinforced by the second amendment tabled by my noble and learned friend regarding the need for the Secretary of State to consult the relevant advisory committee. I have no doubt that that committee, consisting as it does of important, competent and distinguished people in the exporting world, will not hesitate to give my right honourable friend—if he is still the Secretary of State when the time comes—the most cogent advice that it thinks necessary.
I am greatly obliged to my noble and learned friend for the amendments he has tabled. I shall support them I am not in favour of Amendment No. 51 moved by the noble Lord, Lord Williams, which suffers from some important defects. I recognise that the noble Lord's heart was in the right place when he tabled his amendments. I am sorry that they were not as erective as they might have been. I prefer the solution of my noble and learned friend and hope that the Committee do likewise.
4.15 p.m.
Lord Prior: I rather like the Opposition amendment. The noble Lord, Lord Ezra, made only one mistake. The amendment to which he spoke is written in plain English. We have all come to understand that nothing written in plain English is ever acceptable to parliamentary draftsmen. Therefore, to that extent, it is unacceptable. On the other hand, I am told that the amendment tabled by my noble and learned friend, which I find extremely difficult to understand, meets all the objections contained in the amendment tabled by my noble friend and others. It is therefore acceptable.
I am grateful to my noble and learned friend for tabling his amendment. It meets both the political risk
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and top-up problems which were two areas of anxiety. The words spoken by my noble and learned friend this afternoon give us the satisfaction that we require. I am grateful to him and I shall support his amendment.
I add only one other comment. As a fairly recent Member of your Lordships' House, I believe that this debate again justifies the work that this Chamber performs. A sensible amendment was proposed. The Government accepted that there was a case to answer. The matter is of great importance to exporters, manufacturing industry and business generally in this country. If we did not have a second Chamber that would not have been possible. Once again the House of Lords has done its job very well.
Lord Ezra: Before the noble Lord, Lord Williams, concludes, perhaps I may ask for a little further elucidation. With regard to the top-up, which is firm for three years, is my understanding correct that, subject to the Secretary of State thinking it in the national interest, it could be continued for an indefinite period beyond? I hope that is a correct interpretation.
Secondly, with regard to the political risk reinsurance, presumably that would be available subject to the Secretary of State considering it to be in the national interest after suitable consultation, but that it is widened to include commercial risk as well. In that respect it goes somewhat further than the amendment proposed by the noble Lord, Lord Williams, and myself. Perhaps the Minister can indicate whether that is a correct interpretation.
Lord Fraser of Carmyllie: It is an admirable and succinct summary of the amendments that I tabled.
Lord Williams of Elvel: Perhaps I could press the noble and learned Lord following the question put by the noble Lord, Lord Ezra. If it is the case, as the noble and learned Lord said, that the Secretary of State does not have to stop and think for three years, is the implication that the top-up insurance is automatic without regard to national interest or anything? Is that what the Minister said? In that case, it would seem to be odd for there to be a distinction between the three-year period, which to my mind means nothing, and the subsequent period where the national interest in some curious manner is taken into account in the Secretary of State's decision.
Furthermore, perhaps I could press the Minister regarding the words "reasonable" and "expedient". We must assume—and I hope that the noble and learned Lord will encourage me in this assumption —that those words were used by the parliamentary draftsman to make the amendment acceptable in parliamentary language. We are saying that the Secretary of State will encourage exporters; he will stand behind reinsurance of any risk that the market will not reinsure but that he must have some kind of let-out, with which I agree, and that is the reason it is drafted in that way. Essentially it means that the ECGD will be the reinsurer of last resort at all times unless the Secretary of State can make a grave exception. Am I right in that assumption?
Lord Fraser of Carmyllie: The Secretary of State does not need to stop and think during the three-year period. He has given the undertaking that if necessary top-up cover will be provided. I sought to add words of explanation and not, I hope, words of confusion that in fact the arrangements that have been made thus far to provide reinsurance within the private markets, have been very successful. While he has given that commitment, the expectation is that he will not have to deliver on it because it will all have been provided for in the private market.
Lord Williams of Elvel: Does that include the political risk element of the insurance treaty?
Lord Fraser of Carmyllie: No, and that is what I am talking about. The noble Lord is seeking to confuse me. I made it clear from Second Reading onwards that in dealing with these matters there is the political risk in countries where there is no prospect whatever of reinsurance. However, in the area of the top-up, it is anticipated that if it is not entirely covered the risk will be almost entirely covered. The noble Lord is looking anxious.
Lord Williams of Elvel: As I understand it, what used to be called the "national interest reinsurance" is for countries where political risk cover is simply not available at any price. But within the main reinsurance treaty to which the top-up applies, there is an element of political risk which can be covered normally by the market, assuming that the market has the capacity to do so. But there is still a political risk element. I was asking the noble and learned Lord to assure me that the top-up and the subsequent arrangement applied to the major reinsurance treaty.
Lord Fraser of Carmyllie: That is correct. Somewhere we found ourselves at cross purposes. I believe that the final question I was asked related to the phraseology in the original Amendment No. 14 and that something should be said about reasonable terms. I ask the noble Lord to look to my words when I answered immediately during the debate. I made it clear that I would certainly envisage that situation in circumstances where the Secretary of State had to decide whether it is expedient and in the national interest to ensure that such reinsurance is available. Clearly he does not just have to have regard to whether such cover is available. It is a necessary part of the assessment that he looks to see the terms on which such reinsurance cover might be obtained.
As my noble friend Lord Trefgarne rightly points out, where such a matter was under consideration, I have no doubt whatever that the advisory council—which he rightly says is made up of some very distinguished people in the field of exports—would be making it very clear to the Secretary of State whether the terms available in the market were reasonable or not.
Lord Trefgarne: I am most grateful to my noble and learned friend. Perhaps I may ask him one other point. I hope that his words about my right honourable friend not having to stop and think for at least three years will not come back to haunt him. Be that as it
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may, the noble Lord, Lord Williams, referred to a letter which he had received from my right honourable friend concerning my right honourable friend's willingness to re-open the lists as regards the bidding. We know now that the Report stage of the Bill cannot be held until the overspill Session of this Parliament. A number of us have expressed some concern about the thinness of the list—I put it in no other terms. It would be nice if more British firms expressed a firmer interest. It may be that, as a result of the amendments which my noble and learned friend has tabled and to which I hope the Committee will agree, other British firms will then become interested. Therefore, can my noble and learned friend say whether my right honourable friend is now willing to re-open the lists, and if not, why not?
Lord Fraser of Carmyllie: As I indicated at the outset, the terms on which reinsurance is likely to be available to the preferred purchaser have not changed throughout the sale process. The terms and conditions of the privatisation and of the tenders submitted to the Secretary of State reflect that position. My noble friend is correct in that the remaining stages of the Bill cannot be considered until the spill-over period of this Session. I cannot indicate to him that I envisage that the process will be re-opened. As he appreciates, we are not at the stage of a concluded contract. The Secretary of State has indicated that he has a preferred purchaser.
Lord Taylor of Gryfe: Like the noble Lord, Lord Prior, I too prefer the wording of Amendment No. 51 which seems to be entirely straightforward. I am delighted that the Government have reacted to the very considerable concern expressed at Second Reading by speakers in all parts of the House. In my experience I cannot recall a debate on a major government Bill where there was no support of any kind for particular legislation apart from that given by the Minister. It is a tribute to the Chamber, and its ability to influence legislation to some extent, that the new Amendments Nos. 52 and 53 are available.
As regards the discussions with industry—particularly with the heavy engineering side which is engaged in the export business and which is finding it extremely difficult —there is universal welcome for the amendment proposed by the Government. I certainly support it. I was not quite sure of the reply, but that is entirely my fault. I confirm the point made by the noble Lord, Lord Williams of Elvel, concerning the fact that this amendment is a very important one. It might change the attractiveness of the privatisation to some of the people who looked at it in the first instance and who decided that they could not take it on their books. The consequence was that the number of bidders fell to two, both of them being foreign.
As this is such a fundamental amendment affecting the risks in export credit insurance, I am not sure whether the Minister will now look again at giving British companies and others the opportunity of bidding for what is an entirely different product from that which was offered in the first instance.
Lord Williams of Elvel: I am grateful to all Members of the Committee who have taken part in the debate. I am particularly grateful to the noble and learned Lord who has striven to explain as carefully as he can the government amendments. I am sure that he recognises that they are rather complicated in their drafting. I believe that we can now be quite clear that the Government have done what they said they were going to do, and that is to accept the spirit of the amendment tabled by the noble Lord, Lord Trefgarne, and to put it into proper parliamentary language.
I still have some residual difficulties as regards Amendments Nos. 52 and 53. The noble and learned Lord quite rightly said that the Report stage will take place during the spill-over Session. At that time I may seek to persuade your Lordships that the amendments can be tightened up. At this stage I do not intend to oppose Amendments Nos. 52 and 53 when they are moved.
However, I make clear to the noble and learned Lord. if I have not done so before, that I agree wholeheartedly with my noble friend Lord Taylor of Gryfe and the noble Lord, Lord Trefgarne, that these amendments change fundamentally the value of the business that is going to be sold. But without any guarantee on political risk reinsurance or continued top-up reinsurance after a three-year period, the business had a value significantly less than the value of the business at the moment. I urge the Government in their Own interests to reconsider the decision not to go out to tender again. I believe that if they do not accept our advice they will find themselves in very considerable difficulty. However, I can do no more than warn the Government of that problem and, like the "stop and think" expression, it will come back to haunt them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51A:
Page 5, line 20, at end insert ("Such a certificate shall be subject to scrutiny by the National Audit Office and no scheme shall be made until written approval of the certificate has been issued by that body".).
The noble Lord said: This is one of a number of amendments designed to inject greater transparency into these issues than perhaps otherwise would be the case. The intention behind this particular amendment is to permit a proper audit to be undertaken and published before the sale of ISG takes place to a private buyer. Through the National Audit Office the public will become aware of the profit involved in the sale and of precisely what is to be sold or has been sold. The point is that the public will determine whether, out of the privatisation measure, value for money is obtained. Another important point to which we shill be adverting later in a number of amendments —and which my noble friend will also be pursuing on clause stand part—is the whole question of sweeteners. I wait with interest to hear what the Minister has to say in answer to this point. I beg to move.
4.30 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): The invitation to tender already provides considerable detail on the scope of the property, rights and liabilities involved in the sale. This will be further developed in detailed negotiations with NCM. As part of the transfer process the Bill provides that the Secretary of State may issue a certificate to clarify the scope of the business to be sold. This would be issued to complement the contractual arrangements, following discussion with NCM and its advisers and in light of the advice of the Government's professional advisers, who include accountants and solicitors. Scrutiny by the National Audit Office would not be appropriate since it would effectively make it part of the executive process and would potentially prejudice its subsequent position as auditors. The National Audit Office would be free to examine the certificate, and the basis on which it had been prepared, at a later date.
In any event, and in accordance with normal practice, the Comptroller and Auditor-General has already advised ECGD that the NAO plans to examine the privatisation of insurance services and to conduct a value-for-money study on the privatisation. I hope with that assurance and that brief explanation the noble Lord will accept this amendment is, if not redundant, unnecessary.
Lord Clinton-Davis: I have listened to what the noble Lord has said. I shall consider his words very carefully. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51B:
Page 5, line 27, after ("scheme") insert ("hut no day shall be specified unless that day has been agreed following consultation with the relevant trade and exporting organisations and the accredited representatives of the employees' trades unions".).
The noble Lord said: The purpose of this amendment is to ensure that ISG is not transferred into the private sector until exporters and ISG's trade union members are confident that their needs will be met by the privatised company.
One of the difficulties about Clause 8 as it stands is that the powers which are accorded to the Secretary of State are extremely wide and in some respects rather vague. When it comes to interpretation—possibly by the courts—that gives rise to some difficulty. Yet despite that fact, the Secretary of State could introduce these undefined provisions without reference to Parliament, or to trade and exporting organisations, or their staff and their trade unions. Subsection (5) states:
"A scheme under this section may contain such supplementary, incidental, consequential or transitional provisions as appear to the Secretary of State to be necessary or expedient".
What would be deemed to be expedient? What does that mean in law? How does the Minister envisage its interpretation? We on these Benches are seeking to make the point that the wider and more vague these provisions are, the more important it is that a

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consultation procedure should be built into the Bill along the lines that we are suggesting. Quite apart from whether the Secretary of State should be under a duty to consult, consultation in itself can be positively advantageous. Ministers in this and another place have asserted that the consultation procedures have been satisfactory. However, that is not the view of the people who are entitled to be consulted. Therefore, we say that consultation is a critically important element in running an enterprise successfully quite apart from the obligations that we seek to impose.
Listening has not always been a faculty perceived to be important by this Government. However, they need to be able to listen to customers and employees in order to ensure that they maximise good will and efficiency and indeed help to avoid errors. We are dealing with a staff that is singularly experienced in this field; it is certainly able to proffer useful advice —advice that in some respects it might be folly to ignore. Nobody has ever disputed the fact that they are an extremely loyal and hard working staff. Yet they are deeply worried that although the Government say they are proposing to effect the transfer of staff to the government company on a voluntary basis, there is a distinct possibility—even a probability—that insufficient numbers of staff would he prepared to volunteer. The Government accordingly may have to resort to coercion. Therefore, a commitment to meaningful consultation might help to dissipate those very real anxieties. I simply cannot understand why it should not be conceded to be on the face of the Bill.
On 5th March the Minister of State argued in Committee in another place (at col. 191 of the Official Report) that Clause 8, and subsection (5) in particular, were merely technical issues. I am not prepared to accept that that is the case. The onus is on the Minister to divulge to the House what are the issues to be considered here and in particular under subsection (5).
Having regard to all those circumstances, we think it appropriate that a provision of the kind we envisage should be included in the Bill. I beg to move.
Lord Fraser of Carmyllie: In our view it would not be appropriate or necessary to have a further round of consultation before setting the day for the scheme to come into effect. I should explain that the scheme provides the structure for implementing the sale and privatisation. It will not specify those detailed aspects of the process of which consultation involving the trade unions might be appropriate.
Since the outset of discussions leading to the proposal for privatisation, ECGD has been careful to involve and consult interested parties including the staff, their trades unions and relevant exporting associations.
Before the decision to privatise was taken, both Mr. Kemp (during his review) and the inter-departmental working group of officials set up to study the options in the Kemp Report invited and received comments from all interested parties, including the trades unions.
Major exporters and exporting organisations submitted their views to the Select Committee when it
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examined the future of ECGD, and numerous written representations have been taken into account. The trades unions also submitted evidence to the Select Committee through the Council of Civil Service Unions.
Since the intention to privatise Insurance Services was announced on 18th December 1989, the trades unions have been kept informed of developments and have had numerous occasions for making their views known to ECGD's management at meetings of the departmental Whitley Committee and its subcommittees, including a special sub-committee relating to privatisation issues. That committee meets monthly.
They have also had meetings from time to time with management and with the chairmen of various sub-committees dealing with particular aspects of the privatisation. Topics covered include personnel records and preliminary staff projections for the new company as well as the proposed organisation of ECGD post-privatisation. Also, as I think the noble Lord will appreciate, the ECGD trade unions will continue to be fully consulted, as required by the TUPE provisions. With that explanation, I hope the noble Lord will feel that he can withdraw his amendment. He addressed specific remarks to possible redundancies. As I understand the matter, there are amendments down for discussion later in Committee. So, if he does not mind, I shall not address myself to them at this stage.
Lord Clinton-Davis: I have listened with care to what the noble and learned Lord said and, if the position as regards consultations was quite as roseate as he has suggested, one would have thought that anxieties would not have been raised with us and other Members of your Lordships' House about the way in which the consultations have been undertaken. The conclusion I have been advised to draw is that they have been less than satisfactory: otherwise we would not have come forward with these propositions. I do not think any words that have been uttered by the noble and learned Lord this afternoon will have assuaged those anxieties.
He is quite right: we shall be coming to questions of redundancy at a later stage. However, they are germane to this particular point because nothing could be more appropriate in dealing with the anxieties that have been expressed, which go to the very heart of people's problems about whether they are going to be redundant or not together with the basis of their employment in the future. These matters have not been in any sense satisfied by the scope of the discussions that have taken place. They have been kept informed, yes, but there is a world of difference between people being kept informed and having opportunities to present views in writing and having the opportunity to engage in wholehearted discussions and consultations with the people who are making the decisions. We do not think this has actually taken place.
We are dealing here—I do not think the Minister has ever suggested otherwise—with very loyal and hardworking staff. I would ask the Minister to look again at the procedures which have taken place to see

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whether they might be improved so that the anxieties to which I have alluded may be allayed. I will not press the matter to a vote but I would ask the Minister to reply to that point before I beg leave to withdraw the amendment.
Lord Fraser of Carmyllie: I should be grateful if the noble Lord would consider what I have said in responding to him immediately. What is of concern, it seems to me, is to understand what this scheme is. Obviously there will continue to be consultations, but the idea that it is the preparation of the scheme that is the crucial step for consultation seems to me, if I may say so to the noble Lord, to be misplaced. However, I hope he will be reassured that there will be continuing consultation both before and after the scheme's preparation.
Lord Clinton-Davis: I will confer with those who have Invited my noble friends and me to put down this amendment, and I will see what is their reaction to what the Minister has said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.45 p.m.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51C:
Page 5, line 27, after ("scheme") insert ("but no day shall he specified until the Secretary of State has laid before Parliament, for approval by both Houses of Parliament, a report on the proposed operation of that scheme including the name of any transferee and the arrangements proposed by that transferee for the future operation of any property, rights and liabilities transferred to him.").
The noble Lord said: I beg to move this amendment standing in my name and that of my noble friend Lord Williams of Elvel. The amendment provides for parliamentary accountability for the sale of ISG to a private buyer. It will ensure that parliamentary scrutiny of the accepted bid and the future business plan for the privatised ISG will take place. It may also have the effect of creating greater transparency as regards any possibility of "sweeteners" being offered to induce the buyers to complete the purchase. There have been a number of occasions in the past when the Government have been in the business of offering bags of saccharine and "Sweet 'n Low" to all sorts of people. It is right that there should be maximum transparency as regards such issues, and that has not always been the order of the day. It should not be a matter that is left simply to probing by the Opposition or by sections of the media to ascertain whether in fact sweeteners have been used. We are saying that here is another possible opportunity for introducing greater transparency. The amendment would facilitate that.
Lord Fraser of Carmyllie: The areas identified in the proposed amendment have naturally been of key concern to the Secretary of State in his assessment of responses to the invitation to tender. In selecting the preferred purchaser, the Secretary of State has been satisfied that NCM, which is one of the largest private credit insurers in the world, is committed to the business as well as to its development into other areas such is domestic credit insurance, to the benefit of United Kingdom companies.
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The Secretary of State has also taken into account the financial robustness of the proposals and it is significant that NCM is prepared to buy ISG and to operate it as a business in the private sector broadly on the basis proposed in the invitation to tender. The establishment of adequate reinsurance arrangements will of course be a matter of primary concern both to the Government and to the purchaser.
It is intended that further information about NCM and its plans for the business, together with details of the proposed terms and conditions of employment, will be provided to ECGD staff. As with the previous similar information, copies of this further written information will be made available to Parliament, through copies being placed in the Libraries of both Houses.
The noble Lord seems particularly concerned that there might be provided by Government what he described in a colloquial way as "sweeteners". I have to say to the noble Lord there is no question of that. The sale price and the sale process have been fully commercial, and value for money will be achieved. I should also say to the noble Lord that in any event the National Audit Office has already indicated that it will be conducting its audit during 1992–93, so, if that is his primary concern, I hope he will accept my assurance on the point. However, if that is not enough for him he will at least know that the matter will be examined by the NAO in due course.
Lord Clinton-Davis: I am grateful to the noble and learned Lord for indicating that further information is to be provided for staff and for others also by NCM, if indeed NCM is to be permitted to proceed alone. Perhaps the Minister can indicate when it is intended that information should be available, both externally and within this Chamber.
So far as sweeteners are concerned, I know of no situation where the Government have voluntarily conceded that sweeteners are going to be permitted or made available, so I do not find the information given by the noble and learned Lord in that regard in any sense satisfactory. I accept it from him, of course, but then he is not the Minister primarily concerned. Perhaps the Minister will indicate his answers to the specific points that I have just raised.
Lord Fraser of Carmyllie: I regret that I do not think I can give him any specific date for the provision of this information. Had we been able to proceed with this Bill as I had wanted, it might have received the Royal Assent before your Lordships rose for the Summer Recess and I think I would have been able to have given him a more precise and definite answer. However, he will appreciate that the Secretary of State has indicated his preferred purchaser and in those circumstances discussion and negotiation continue. I hope the noble Lord will take it from me that, although I cannot give him a precise time or date, my original assurance stands and, when it is available and appropriate, the information I have indicated will be made available. It will not only be made available to ECGD staff but will also be placed in the Libraries.
Lord Clinton-Davis: I am grateful to the Minister for that reply. I shall simply conclude on the following note. When the noble and learned Lord refers to NCM being committed to the benefit of United Kingdom companies, and so on, one has to say that UK companies remain deeply worried. They are deeply worried that NCM appears to be the favoured company so far as concerns the Government. The noble and learned Lord will know that from the various reports which have appeared in the press.
As regards exporters, my understanding is that they have not been consulted or approached in any way. I should have thought that it would have been timely for some discussions to have taken place up to the present time. However, I have taken note of the Minister's remarks. I shall further consider the matter with my noble friend in due course. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51D:
Page 5, line 32, at end insert:
("(5A) A scheme under this section shall contain a provision that the government shall retain control of the Insurance Services Group for a period of not less than three years and during that period no private capital shall be introduced.").
The noble Lord said: When the Kemp Review made its recommendations that ECGD's insurance service business should be turned into a government-owned company with a minimum lifespan of three years, it did so for three reasons. Those three reasons were essentially as follows. First, that a three-year period would permit the company to establish a market identity and a trading record, in preparation for the eventual introduction of private capital. Secondly, it would also have the advantage of retaining some flexibility for the Government in the event of any new European Community legislation in the area of export credits emerging. Thirdly, it would reduce the amount of capital the Government would have to inject into the privatised company because the government company's profits during its three years of existence could be used as start up capital for the private company.
Existing European Community legislation on official export credit insurance—and by the word "official" I mean state backed—does not prohibit the ECGD from providing insurance for United Kingdom exporters which are exporting to other European Community markets. If new legislation were to be introduced to prohibit such insurance, or if the restrictions under Article 92 of the treaty were to be interpreted in relation to official export credit insurance in a way that has not been envisaged up until now, then official export credit insurers like ECGD would have—as is the case with existing single market legislation—sufficient time in which to adjust to the necessary extent. They would probably have two or three years in which to do so. I made that point on Second Reading. I do not know whether those words are imprinted on the noble and learned Lord's mind. I see that he is nodding his head in assent. I am stupefied that he has done so. However, I am glad that they made their mark.
Bearing the results of that situation in mind, I believe that it is unnecessary at this particular juncture to push ahead with full privatisation of ISG so far as concerns European Community legislation. If it were to be changed to a government-owned company, the Government could continue to provide full, but not as direct as present, backing for United Kingdom exporters while retaining flexibility to effect a full privatisation if—and I emphasise the word "if—any new EC legislation in this particular area were to arise.
The question of increased competition for ISG's services to United Kingdom exporters from other EC export credit insurers is somewhat different. As from 1st July 1990—that being the date when the second non-life insurance directive came into force—European Community insurers have been able to provide insurance for exporters in one member state in the Community without needing to have a representative or branch office in that member state.
On the other hand, it is true that some state-backed credit insurers, notably Coface in France, have had offices in the United Kingdom for many years without causing any impact on ECGD. But the directive has certainly forced the pace of change. It has meant that ISG could face greater competition for its services. However, that has not yet happened. Nonetheless, it is a factor that must be taken into account because its future viability could be threatened and it would be unable to counter the situation. That is because the Act under which the ECGD operates relates only to United Kingdom exporters. The Government are very unlikely, in any event, to agree to a change of the Act to allow the ECGD to insure exports from other European Community countries and so compete on an equal basis with other credit insurers within the Community. Although such other Community business would probably be profitable, the insurance provided for it by the Government would be regarded as an additional contingent liability.
It must be the case that a government-owned company could provide such a service. Indeed, as it is currently constituted, ISG could provide export credit insurance for other European Community exporters just as easily as a privatised ISG. Such insurance could be provided under a separate account operated on a strictly commercial basis. We believe that this is a relevant amendment. We hope that it meets with the Government's approval. I beg to move.
Lord Fraser of Carmyllie: The noble Lord was surprised that I recollected what he said on Second Reading about the possibility of some future legal challenge within the European Community. I do indeed recollect what he said. However, where we part company is that I continue to argue that there appears to us to be a problem of a possible future legal challenge to official credit insurance support for exports to the EC and OECD countries. It is possible that a government-owned company which differed from a private sector insurer, only to the extent that its capital was provided by government, would be proof against such challenge. Nevertheless, there has been an element of doubt about this which certainly does not arise in the event of privatisation.

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I should like to make clear to the noble Lord the fact that that is not the primary reason for undertaking this approach to privatisation. We are concerned to provide a permanent solution to meet the real problems which currently face the organisation. The most serious of these is the need for the Insurance Services Group to remain competitive as the pressures arising from the creation of the single market increase. Failure here would be serious for both the organisation and its important customers; namely, the British exporters.
For it to compete fully, we would have to create a company which was free both to conduct domestic credit insurance in the United Kingdom and to provide credit insurance of other countries' exports. The first of these is an area which is fully commercial and the private sector is perfectly able to give industry the service it needs. It may be an acceptable approach to the noble Lord, but it will come as no surprise to him if I say that it would seem to me to be extremely difficult to justify creating a new public sector player in this field with the consequence that we were rolling forward the frontiers of the state rather than causing them to retreat.
I accept that there was a recommendation in the Kemp Report that such a government company status should be provided for and that it should be regarded as a stepping stone towards an eventual privatisation. Mr. Kemp saw the need for insurance services to operate as a government-owned company for at least three years in order that it could acquire reinsurance backing and a track record for profitable trading so that it could then be sold. But since he wrote that report discussions with the reinsurance market and advice from the Government's financial advisers have shown such a delay to be unnecessary and early privatisation to be a real possibility.
There is a further argument which I invite the noble Lord to contemplate very carefully indeed. He referred to the quality and calibre of the staff employed by ECGD. I wholeheartedly accept all that he had to say about that. But if we are to embark on the process of privatisation, an interim government company stage might prove to be particularly unsettling for the insurance services staff and customers. Under the one-step privatisation, the staff will have the opportunity to assess the new owner and the employment terms he is offering. They will then be able to express their preference for joining the new company or remaining in the Civil Service. Under the two-stage process, they would not know at the time of expressing their preference—in this instance, between the government company and the Civil Service—who their eventual employer would be. Such uncertainty might well mean that they would be less willing voluntarily to choose to join the new company than would be the case under the one-step route. I understand the apprehension that the staff may feel about a major change which lies before them, but I am confident that the way in which the process will be managed will provide the reassurance they need. That would be less easy to achieve under a two-stage approach and is a further reason for avoiding it.
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To sum up, the Government do not accept that a case exists for establishing a government company in preference to a private sector solution. More importantly, as a permanent arrangement, it fails adequately to meet the real challenges and creates problems of its own; and as a temporary expedient it is simply unnecessary. We now have a preferred purchaser. In concluding his remarks on a previous amendment the noble Lord indicated that there had been some criticism of NCM. I would say that was not a wholly universal response. If he looked to see who commented on it he would find that a number of individuals indicated support for the Secretary of State's choice of a preferred purchaser. The deputy chairman of the British Exports Association said that the choice was excellent.
5 p.m.
Lord Clinton-Davis: I shall put the question back to the noble and learned Lord. Is he suggesting that the choice is universally popular? He knows that the criticism has far outweighed—
Lord Fraser of Carmyllie: I certainly do not accept that that is the position.
Lord Williams of Elvel: Does the noble and learned Lord accept that the choice lay between two bidders, one Dutch and the other Italian?
Lord Clinton-Davis: I am perfectly prepared for the noble and learned Lord to answer that question.
Lord Fraser of Carmyllie: I am not used to this system. I thought that I had intervened during the speech of the noble Lord, Lord Clinton-Davis. The noble Lord, Lord Williams, has now intervened in my intervention. That is at least unconventional and I am surprised that it is permitted.
An objective assessment was made of the Secretary of State's choice. I invite the noble Lord to look at what public comments have been made. A number of individuals have commented, including the one to whom I referred who regarded the choice as excellent. Whether there were 100 or two such comments is neither here nor there. The individual to whom I referred said that the choice was excellent. I stand by that.
Lord Williams of Elvel: We are in Committee and we are allowed to speak whenever we feel it appropriate. Members of the Committee can say at any stage what they feel they have to say. NCM is a perfectly respectable organisation. There is no doubt about that. However, in the end, the bidding came down to two companies, one Italian and the other Dutch. I come back to what I said in regard to an earlier amendment. With the amendments that the Government are about to move, the bidding should be reopened as the whole nature of the transaction has changed. That is the point which my noble friend was trying to make.
Lord Fraser of Carmyllie: I am sorry that the noble Lord should feel that his noble friend cannot answer the points that I am making as we deal with this amendment. From my previous experience, the noble

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Lord, Lord Clinton-Davis, is more than able to hold his own. I have indicated that the objective assessment of the preferred purchaser was excellent. It is not just that it is a well known company. The decision was considered to be an excellent one. In the debate on an earlier amendment the noble Lord indicated that there had been no support for that. I wanted to set the record straight. The British Exports Association, which is actively involved in exporting from this country, described the Secretary of State's choice as excellent.
Lord Clinton-Davis: With respect, I did not say that at all. I said that the Minister was seeking to suggest that the choice was universally popular. I am saying that substantial criticisms were launched. The Minister knows that only too well. Criticisms have been made in this Chamber. Those do not in any sense impugn the probity of NCM. One does not have to do that. We believe that the way in which the process has developed is less than satisfactory. That is why my noble friend has suggested that the process should perhaps be reopened. I fully support him in that.
The noble and learned Lord referred to the problem of an official legal challenge. I really do think that he has not begun to answer the points that were made previously and indeed today about the imminent effect of that. He will know only too well that the process undertaken by the Commission in relation to such matters in terms of changing the law will take a considerable period of time. There would be a substantial running-in period before any new law could take effect. The challenge in the courts is materialising but the fact remains that even then the judgment of the European Court of Justice would have to be carefully considered by the Commission. There is therefore no case for asserting that there is an imminent requirement for change. That is what the Minister sought to suggest on that point.
The Minister then went on to another point because he was defeated on that point. He referred to the merits.
Lord Fraser of Carmyllie: We shall progress a little more speedily and expeditiously if the noble Lord takes on board my points. I made it quite clear in seeking to answer his point that, whether I am right or wrong in the matter, that has never been put forward as the primary reason for privatisation. I appreciate that the noble Lord does not think that the primary reason I indicated for trying to bring the arrangements up to date is a particularly good one. Be that as it may, it is only fair and correct as regards the Government's position that he orders the priorities in the way that I have made it clear to the Committee they stand.
Lord Clinton-Davis: I am grateful to the noble and learned Lord for that intervention. I have read the Committee and Report stage proceedings in another place. I have seen Ministers' responses. They have never gone quite so far as the noble and learned Lord has just gone. He says that he may be right or he may be wrong. I think he is wrong, but I concede at once
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that the main point behind the Government's proposal is a political one. It is not based upon the legal propositions that have hitherto been defended.
The Minister suggests that somehow in the period since Kemp reported the recommendation for a government-owned company with a minimum lifespan of three years has become redundant. I see absolutely no evidence for that suggestion. Then he comes to the point that the staff would find the establishment of a government-owned company extremely unsettling. They would be full of apprehension about the consequences. We have gone to some trouble to undertake consultations within the limited possibilities that are open to us. I readily agree that we cannot consult everyone; we do not have the facilities. However, within the constraints there is absolutely no evidence to suggest that the staff have formed that degree of apprehension or have that feeling at all. Had proper consultations been carried out, perhaps the Government would have learnt more of the view of the staff.
We believe that the Government have not answered these points. However, I shall consider with care what the Minister said, and meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis: moved Amendment No. 51E:
Page 5, line 32, at end insert:
("(5A) A scheme under this section shall make provision to ensure that any transferee as specified in subsection (7) below shall operate to encourage, directly or indirectly, supplies by persons carrying on business in the United Kingdom of goods or services to persons carrying on business outside the United Kingdom.").
The noble Lord said: I beg to move Amendment No. 51E in my name and that of my noble friend Lord Williams. I keep almost referring to him as "learned"; indeed he is learned in the colloquial sense. It would be for the convenience of the Committee if we also considered Amendment No. 51Z.
Under the Export Guarantees and Overseas Investment Act 1978, a statutory duty is imposed on the ECGD to encourage United Kingdom trade by the provision of insurance and insurance-related export support facilities for exporters from this country. A privatised insurance services company would have a somewhat different motivation. Its paramount concern would be to maximise profit for its shareholders. I am not in any sense joining issue over profit-making being desirable in the private sector—of course it is. But there are other important considerations in this area of policy. There is a risk that the private company would reject export business which it considers to be somewhat too risky. On the other hand, or in conjunction with that, it may increase premium charges to exporters for engaging in such business.
The difficulty about that is that short-term export credit insurance would conceivably not be available for a number of overseas markets. It is equally conceivable that export premium costs could become prohibitive, with the result that exporters, particularly the smaller ones, may be in a position where they felt themselves unable to undertake export orders.

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However, their overseas competitors would be able to do so because satisfactory support had been made available to them through their governments. Frankly, it is a case of the level playing field gone mad. The 'Government are busy levelling the playing field well in advance of everyone else. I do not believe that it will be to the advantage of our exporters, particularly the smaller ones.
In moving the amendment, I ask the Government whether they take the view that the United Kingdom's economic recovery can safely be left to private institutions which are not committed to encouraging exports. Another question I ask is whether any statements or pledges given to the Government by the purchaser in respect, for example, of the future development of the insurance services business are in any way legally binding on the purchaser.
Those are important considerations, but even more important is the matter of the smaller exporter, to which I have already referred. It would be a serious state of affairs if the conjecture—because it can only be cc njecture—were to be translated into reality. It would be a blow to our export trade and to many businesses. The Minister too can only engage in conjecture because there is no hard evidence at this point. Thus it would be much more prudent of the Government to move more cautiously than they have opted to do so far.
5.15 p.m.
Lord Peyton of Yeovil: Before my noble and learned friend replies, I wish to intervene, if only to break the silence from this side of the Committee. I have not been deafened by the applause in the ranks of British industry for the Bill. I am still puzzled by the question to which I do not believe my noble and learned friend gave an answer just now. Can he tell us today that his right honourable friend is wholly satisfied with the range of choice of purchaser available to him, or is he ever so slightly disappointed?
Amendment No. 51Z seems to me to be a fairly mode it requirement to impose upon the Government. I have never looked with great favour upon legislation which enables governments to take actions without some idea of what they are doing. For that reason, I hope that when my noble and learned friend replies on the amendment he will be able to say something to the effect that Parliament will be informed at a later stage of the Bill, before matters have progressed too far. The requirement contained in the amendment is modest.
Lord Fraser of Carmyllie: I am grateful to my noble friend for joining this otherwise somewhat endless duologue. I can say no more than that the Secretary of State invited a number of companies to tender. At the end of the day it is true that there were only two. One has been selected by him at this stage to be a preferred purchaser. My noble friend will appreciate that as yet there is no concluded contract, for obvious reasons. No contract could be concluded to privatise this part of ECGD until the Bill has reached the statute book. The answer is yes, the Secretary of State is satisfied with the preferred purchaser that he has secured.
Lord Peyton of Yeovil: Will my noble and learned friend allow me to intervene? I asked whether he was satisfied with the range of choice that he had had or whether he was ever so slightly disappointed.
Lord Fraser of Carmyllie: I do not know whether my right honourable friend was ever so slightly disappointed. A number of companies approached him. If the noble Lord, Lord Peyton, were to try to sell his house for example, irrespective of how many prospective purchasers appear on the scene, the essential point is that the noble Lord should obtain a satisfactory purchaser. Although the Government have not yet reached a contractually agreed stage in this matter—and cannot yet do so—the preferred purchaser who has been selected by the Secretary of State meets with the latter's approval. That has been indicated in Written Answers both in this Chamber and in another place. My noble friend has said that he is not conscious of overwhelming support for this Bill or for NCM. However, I am sure he will have detected a suppressed xenophobia in some of the comments that have been made.
The commitment to ISG's business and to its existing customers has been a key factor in selecting the Government's preferred purchaser for ISG. NCM has stated publicly that, with its support, ISG in its privatised form will be able to strengthen further the range and quality of services it provides to UK companies. It would be quite inappropriate for the new company to be encumbered with statutory obligations which apply to none of its competitors.
In order to meet the competition, the company will be strongly motivated to provide the best possible quality of service to its customers. Privatisation will be good for exporters and other UK companies because they will be able to obtain combined export and domestic credit insurance, better service, greater flexibility and the ability to insure foreign subsidiaries, among other matters.
The interests of UK companies will, of course, continue to be protected by the continuance of ECGD, which is to remain a government department. As I have already pointed out, ECGD will continue to provide encouragement of medium and long-term exports and overseas investment through the provision of insurance against credit risks. It will also provide support for the new company's short-term business—we have dealt with that matter at some length this afternoon—including support in the national interest for certain higher risk markets to ensure no sudden change in the facilities available to exporters.
Amendment No. 51 E appears to seek a guarantee. Does that mean that the new company would be in breach if it refused to insure risks which it knew would produce a loss? The proposed amendment, as worded, could be held to oblige the new owners to provide credit insurance regardless of the risk. The noble Lord may not have intended that effect but that is the way I read the amendment. As I am sure the noble Lord would accept, that would constitute a ridiculous policy for ECGD as a government department, let

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alone a privatised ISG. What sanctions would the Secretary of State be able to exercise if the amendment were accepted?
Amendment No. 51Z concerns a further guarantee. As I have indicated, as this matter progresses not only will the employees of ECGD be kept fully advised but also full information of what is going on will be placed before the Chamber.
Lord Clinton-Davis: I am grateful for the intervention of the noble Lord, Lord Peyton. In a characteristic way he has done much to lift the veil over this unfortunate state of affairs. It is absurd for anyone to pretend that the Government could have been satisfied with a state of affairs in which only two undertakings have expressed an interest in this matter. There is less than full support—the Minister knows that —for the fact that the procedures which have been evolved have produced the result that they have. The noble and learned Lord said that there has been suppressed xenophobia in this matter. That is absolute nonsense. There is great disappointment, but one must ask why that is so. Surely even the Secretary of State on any reasonable showing must have been disappointed with the end product of this case.
The Minister has not begun to reply to the other points that I have raised in support of this amendment. It is not a question of whether risk is involved in this business—we all know that it is—it is a question of whether export business would be adjudicated on a somewhat conservative view (I emphasise "conservative" with a small "c") to be too risky in the circumstances. Will the Government be discouraging the kind of export possibilities that have hitherto occurred? That is the real issue we are discussing. With respect the Minister has dodged that issue, and I say that in the friendliest way. If that is to be the case, is it not likely that our exporters will be in a far inferior position compared with exporting companies overseas where governments will make satisfactory support available? The Minister has not answered those points. However, I do not propose to pursue the matter further at this stage. We shall consider what the Minister has said and in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51F:
Page 5, line 32, at end insert:
("(5A) The Secretary of State shall ensure that the aim of equal terms of competition within the European Community is not in any way distorted by any scheme made under this section.").
The noble Lord said: As regards credit insurance, we need to address two aspects of the concept of a level playing field within the European Community. First, we need to consider the question of a level playing field between official and private export credit insurers. That matter is being pushed by the Government, the private insurers, and, according to the Government, the European Commission. We dealt with that matter earlier.
Secondly, we need to examine the question of a level playing field between the United Kingdom and
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other exporters. Kemp gave great emphasis to the requirement for the level playing field between official and private export credit insurers in the Community; that is to say that the perceived advantages enjoyed by official credit insurers such as ECGD should be removed and complete parity should be introduced. It is the private sector insurers who are placing great emphasis on the whole concept of the level playing field. We have a situation where a Belgian insurer, Namur, is litigating before the European Court of Justice. That firm is arguing that the Commission has breached its duty in relation to the first non-life insurance directive which exempts official credit insurers and also ECGD's major rival in the UK, Trade Indemnity.
Kemp has stated:
"the arguments about a level playing-field do not all run in one direction. The state insurers generally provide a much wider scope of cover than do those in the private sector many of which focus on a fairly narrow area of specialisation in which they are confident of operating profitably. The state agencies, on the other hand, have a responsibility to support national exports generally and a constitutional duty to treat all applicants equally. For those reasons, they regularly have to provide cover for risks or to types of client that the private sector would reject as not commercially interesting. Advantages such as freedom from corporation tax enjoyed by the official agencies could be seen as no more than reasonable compensation for the more onerous duties laid upon them. As a matter of fact, there is no evidence that the official agencies are regularly and significantly undercutting the private companies in price at the present time".
Those were cogent arguments. At no time have the arguments adduced by Kemp been replaced by the cogency of government submissions. There are markets in which private market reinsurance could pose enormous problems—for example, the Soviet Union, China or India. However, in another place the Minister of State seemed to deny that self-evident proposition.
In answering the debate will the Minister give a categorical assurance to anxious exporters who wanted their anxieties ventilated that they face no peril and that they will not lose out in risky markets or in non-traditional markets? Those are the anxieties. It is high time the Government began to address them. I beg to move.
5.30 p.m.
Lord Fraser of Carmyllie: The amendment would require the Secretary of State to ensure that the aim of equal terms of competition within the European Community is not in any way distorted by any scheme made under this clause. The Government conclude that privatisation will assist United Kingdom export competitiveness.
I accept, and the Government accept, that the insurance services business already provides a first-class service to United Kingdom exporters. That is under threat from competitive and legal challenges which, without a change of status, the insurance services business cannot meet.
The noble Lord said that our apprehension about legal challenge was premature or misplaced. As he well knows from his long experience in Europe, whether that is right or wrong most of our competitors within Europe are taking steps to reduce state involvement in

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the provision of export credit and guarantees. The Government are concerned, particularly because of the competitive challenges that lie ahead, that failure to make such a change would lead to a gradual deterioration in the quality of service which British exporters enjoy.
The primary objective is not only to avoid such a deterioration but also to free the insurance services business from public sector constraints so that it can provide a more comprehensive, flexible and up-to-date service. The short-term export credit insurance market is fiercely competitive. To thrive in it as a private sector organisation the insurance services business will need to offer services which are at least as good as those of its competitors. That can only be of advantage to United Kingdom exporters.
Privatisation of the insurance services business will allow the successor company the same freedom as other private sector credit insurers, including many of ECGD's European counterparts, to offer cover for all the types of business from which it is presently excluded. That will enable the company to provide complete one-stop packages for credit insurance, including cover for domestic and foreign business, which many of its customers, particularly large international companies, seek.
After privatisation the UK structure for providing export credit insurance will mirror that in most other EC member states, namely, a company providing export credit insurance partly on its own account and partly on account of the state. Therefore, far from putting us out of line with the practice in the rest of the EC, the new set-up will place us in the mainstream of EC development.
The "national interest" reinsurance facility will be the UK equivalent of the state account arrangements in other EC countries. It will ensure that insurance services customers will continue to have the support to enable them to compete for business in the more risky markets.
While the noble Lord may be sceptical about what we shall achieve, there can be no doubt that the Government intend to achieve that very competitiveness and to provide the opportunity to operate on the level playing field to which he referred.
Lord Taylor of Gryfe: I am interested in the proposition that has been put forward that the purpose of the exercise is to assist exporters by giving them "one-stop shopping", greater encouragement and so on. If that were so one would expect the exporters of this country to be lining up to support the Government in this exercise, but exactly the opposite is taking place. The noble and learned Lord has not convinced the export industry that these changes are desirable. He has said that the proposals are forward looking, that they will help exporters and that private enterprise will do the job. The state-supported export credit insurance service is highly regarded by industry. Industry seeks to retain the present arrangements. To maintain that selling off the service to a private company in Holland will in some way give British exporters a better deal than they presently enjoy is a fantastic proposition.
Lord Fraser of Carmyllie: Perhaps the noble Lord will do me a favour. That is the fourth time that he has said that no one supports the principle of privatisation. I should like to make one small request. Perhaps he will examine the Second Reading speeches of those of my noble friends who are engaged in exporting. He will find that so far as concerns the privatisation of this part of ECGD there was general support in principle. The noble Lord can look at the Official Report, and he can write to me with an apology if I am right.
The noble Lord is confusing the fact that concern has been expressed by British exporters regarding the changes to portfolio management. Noble Lords took the opportunity of the Second Reading of the Bill to express their anxieties. However, I cannot accept that there has been such universality of disapproval of what we are attempting to achieve in the privatisation of this short-term business of ECGD.
Lord Clinton-Davis: The Minister continues to say that this proposal will be enormously beneficial and will be a panacea for export trade. With the greatest good will in the world, that optimism is not shared by very large numbers of exporters, particularly smaller exporters. I agree with my noble friend Lord Taylor of Gryfe. If the Minister read into the Second Reading debate that there was overwhelming support for the proposed privatisation of the sector to which he has just referred, he is looking at the matter in a somewhat partial manner. Of course major anxieties were expressed by virtually everyone in the Chamber, but I did not sense that noble Lords who spoke in that debate greeted the idea presented in the Bill with great acclamation. The Minister is deluding himself if he comes to that conclusion.
The Government have decided to go much further than most other countries in the European Community. Of course different procedures are being evolved in individual member states. However, the British Exporters' Association said in a letter to the Financial Times that there was serious concern among United Kingdom exporters at the seemingly precipitate rush to privatisation and the dangers which that poses in terms of retaining a competitive edge in the harsh world of exporting. That was the voice of the British Exporters' Association itself.
The Government are hell-bent on this idea. They do not listen and they ignore the anxieties of exporters and of the staff. We shall press matters further, but ultimately it will be for the Government to determine whether this exercise in ideology is to be pursued, because that is what it is all about. I shall read with care what the Minister has said. We may well come back to the issue later, but meanwhile I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51G:
Page 5, line 32, at end insert:
("(5A) The Secretary of State shall ensure that no scheme shall be made under this section such that any United Kingdom exporters requiring insurance against losses as specified in Part I of this Act shall be disadvantaged by virtue of the amount of business for which insurance is required.").
The noble Lord said: In moving this amendment we seek to ensure that the smaller exporters are not faced with discrimination by the privatised ISG. The expectation is that small exporters will not be considered to generate adequate income to justify the administrative costs involved in handling their policies. That expectation is based on the practice of other insurers at the present time. Excessively high premium rates which discourage smaller exporters from seeking cover are frequently charged. That matter was raised in Committee in another place and the Minister of State then argued that a privatised ISG operating in a commercial market would be unlikely to increase its prices in a way that would discourage its customers and result in their seeking cover elsewhere. He included the smaller exporters among those customers, but he agreed that ISG already operated in a competitive market.
At a conference held in May this year, a prominent exporter expressed a view of ISG's operations in that market. I refer here to a speech made on the impact of the Export and Investment Guarantees Bill on the future of export credit insurance. The speaker, Mr. David Perry, listed a number of safeguards which exporters should attempt to secure from the Government should ISG be privatised. Among the safeguards was,
"an assurance that they will not discriminate against the small volume insured (more so than they are now)."
That gentleman was the Export Finance Director of the Massey Ferguson Group Ltd., a prominent exporter, and someone who knows what he is talking about. Those anxieties should now be addressed by the Minister. I beg to move.
Lord Fraser of Carmyllie: Small exporters represent by far the greater proportion of ISG's customer base. Because of their number, the diversity of their trades and the export markets in which they sell, they help considerably in creating the desirable spread of risk in the ISG portfolio. ISG also makes available a variety of managed credit insurance schemes via banks and other intermediaries designed to offer the small exporter an administratively simple means of obtaining the cover required.
There is no intention that that comprehensive support for smaller exporters will be changed to their disadvantage after privatisation, though obviously decisions about the new company's business strategy will be for its owners to take. For the reasons that I have mentioned, it would not be in the company's interest to do so, particularly since ISG already has, unlike some of its competitors, the facilities and systems to provide that support.
The commercial interests of ISG and its privatised successor company will best be served by continuing to support the smaller exporters. It is therefore unnecessary, even if it were practical to do so, to seek statutory protection for them in the manner proposed in the amendment.
5.45 p.m.
Lord Clinton-Davis: We are dealing with assertion and counter-assertion and we are entering into conjecture. Basically, our case is that the system was working well, helped by smaller exporters, did not prejudice them and did not put the question of the paramountcy of profit above their interests in all circumstances. The Government say that none of that will be prejudiced, but they have not been able to resolve the doubts and anxieties that have been expressed, notably by people who are in the smaller area of the exporting trade. If they insist upon going ahead blindly, ignoring those anxieties and not carrying out proper consultations, it is all very well to say that the damage will be on their heads. Unfortunately, the damage will be caused to this country. It is obvious that I shall not be able to persuade the Minister to make any movement here. We may well come back to the matter, but in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51H:
Page 5, line 32, at end insert:
("(5A) A scheme under this section shall contain a provision that there should be a period of not less than three months for consultation and agreement on employment terms and conditions at transfer between the transferee and the employee's trade unions. This period shall commence from the day specified under subsection (4) above.").
The noble Lord said: We embark here on a series of amendments which concern the staff of ISG who are to be transferred, assuming that the Bill is enacted, to a vehicle company under terms and conditions which remain to be decided.
I must tell the noble and learned Lord that to date there has been little consultation between the ECGD trade union side and the department's management. It was necessary for a start to go to the Central Arbitration Committee to require management to release a report prepared by Coopers & Lybrand Deloitte on the terms, conditions and pension arrangements that are likely to apply to existing staff who agree to transfer to the newly privatised company. Subsequently, management argued that the report had not been completed at the time of the request and, once published, the report was released in full. However, the report was unavailable some time after the deadline imposed on the consultants had expired and there was a suggestion that the terms of reference had been changed.
More recently, the trade union side has again prepared an approach to the Central Arbitration Committee, seeking release of information which has been made available to the shortlisted bidders for ISG —a shortlist which, as we know, disappeared rather rapidly, like the snow in springtime. Consultation within the department has been effected by a committee of the departmental Whitley Council which acts as an interface between the management committees handling various aspects of the ISG privatisation. The trade union side naturally requested a seat on each of those committees. That was refused. Subsequent attempts to arrange meetings with

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representative committees have largely been fruitless. Little information is passed from those committees to the trade union side via the departmental Whitley Committee, so there is no real opportunity for trade union input or serious consultation.
I understand that it was management's intention that, once the purchaser of ISG had been selected, the package of employment terms and conditions offered by the purchaser would simply be presented to ISG staff, who would then have only one month to consider the package and decide whether to join the privatised company or remain in the Civil Service. Under some pressure, management has agreed to allow a period of at least two weeks, apparently for clarificatory discussions with the preferred bidder, before the release of the employment terms package to ISG staff. However, we on this side do not believe that that gives the staff sufficient time to obtain proper advice on the terms and conditions offered or for serious consultation to take place.
I understood the noble and learned Lord to have said earlier that at the moment members of staff can express a preference as to whether they will continue with the privatised ISG or remain within the Civil Service. But will they be able to express that preference? Will they have a serious choice or will they be forced out of the Civil Service against their will, as happened with the Property Services Agency? If they do not wish to work for NCM—if at the end of the day NCM is the purchaser—will they be allowed to stay on in the Civil Service? Under what terms and conditions will they be re-employed? All these matters require a period of consultation which is rather longer than the department, the management or indeed the Government have proposed at present.
I do not intend to press the amendment. It is a probing amendment to discover the Government's view c f the matter. But this is an important point. As we go through the amendments which deal with staff, I hope that the noble and learned Lord will accept that there is serious disquiet on the staff side that the trade unions are not being given the opportunity for proper consultation. I beg to move.
Lord Fraser of Carmyllie: This amendment would provide for three months' consultation and agreement between the intended new owner and the trade unions on the terms and conditions to be offered to transferring staff after the transfer of the business had taken place. That would have the effect of the stafis existing Civil Service terms and conditions transferring across when the business transfers, instead of staff knowing at the outset, before expressing a final preference as to whether they wish to join the new company, what their eventual terms and conditions would be.
As the noble Lord appears to have understood from previous statements, it has always been the intention to present to staff a package of terms and conditions on offer before they are requested to express their final preferences about joining the new company. The trade unions will continue to be fully consulted, as indeed is required under the 1981 TUPE regulations. Once the proposed package of terms and conditions on offer is finalised, the trade unions will be
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given a period in which to discuss them with the intended new owners before the package is formally presented to all staff. When that has been done the staff will be given at least one month to express their individual preferences.
In our view that will be an adequate timescale and there is no need to specify one in the Bill. Indeed, it is unreasonable to leave the staff in doubt as to their terms and conditions before they express their individual preferences. It is also unreasonable to include in the statute a requirement that the parties involved should reach an agreement on terms and conditions within a set period, whether the period for achieving it was a matter of days, weeks or months.
The noble Lord indicated that he begins this series of amendments on trade unions with a probing amendment. Although it is in fairly short compass, I hope that I have explained to him what has seemed to be an appropriate timetable for discussion and why it has been thought best to approach it in this way.
Lord Williams of Elvel: I should like to ask the noble and learned Lord for clarification on one point. He reiterated that at the end of the day (if I may use that expression) staff would be able to express a preference as to whether they wish to remain in the Civil Service or join the newly privatised transferee company. What happens if a significant number of staff decide that they do not wish to go into the private sector but want to remain in the Civil Service? Can the noble and learned Lord give me an absolutely clear undertaking that the preference expressed by each member of staff will be properly respected?
Lord Fraser of Carmyllie: I shall deal with this matter now although there are other amendments which may also bring it into focus. As the noble Lord will appreciate, staff who do not transfer will remain as civil servants on Civil Service terms and conditions. Volunteers will be transferred only so far as that can be achieved. But regard will have to be paid to the new company's need for sufficient numbers and staff who have the right range of experience.
Lord Williams of Elvel: We may have to pursue this matter. I am afraid that I am not entirely satisfied with the noble and learned Lord's reply. I understood that if staff were able to express a preference and preferred to take course A rather than course B, that preference would be respected. The noble and learned Lord said something slightly different; namely, that they may prefer to take course A, but may be pushed into course B. I understand that is what he said. We shall come back to that point when discussing later amendments. It is a very important point and one which will give us a great number of problems. We shall return to that point.
Leaving that matter aside for the moment, I still hold the view that the trade unions need to have a much more serious period of consultation on all these matters than the management and the department propose to give them. I hope that the noble and learned Lord will accept my point that ISG is not a company with major physical assets. Its assets are staff and the expertise of staff. Unless the staff are kept

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happy and they and their representatives are happy about the way in which the transfer is being handled, the business will be worth very little to the purchaser.
I shall come back to this matter in later amendments because I wish to pursue the thought that the noble and learned Lord has introduced. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51J:
Page 5, line 32, at end insert:
("(5A) No scheme shall be set up until such time as the pension arrangements in the new organisation have been agreed with the relevant trade unions. Such arrangements shall be no worse than those described in the Principal Civil Service Pension Scheme.").
The noble Lord said: This amendment stands in my name and that of my noble friend Lord Clinton-Davis. It may be for the convenience of the Committee if I speak also to Amendments Nos. 51R and 51V. We embark here on the vexed question of the pension scheme which will be available to staff in the new organisation. The Committee will know that the terms and conditions of employment of ISG staff who decide to transfer to the privatised company will be protected by the regulations known by the shorthand term of TUPE 81. I hope that that shorthand language will be acceptable in Committee.
Those regulations specifically exclude pensions. The principal Civil Service pension scheme is generally considered to be better than pension schemes available in the private sector, in particular because it is index-linked. There has been a great deal of discussion about index-linked pensions. I should like to draw the Committee's attention to the fact that the chairmen of both British Gas and British Telecom, who have announced substantial pay rises for themselves, continued to enjoy index-linked pension arrangements when those bodies transferred from the public to the private sector. What is good for the chairmen of British Gas and British Telecom should be good for the staff of ISG.
We simply seek to ensure that the pension scheme that is agreed has been fully discussed with the trade unions and that the terms are no worse than those described in the principal Civil Service pension scheme. The point is that civil servants are not necessarily paid salaries as high as those in the private sector. They forfeit some of their potential worth as private sector employees because they have the benefit of index-linked and properly funded pension schemes. The Government and the state stand behind the payment of those pensions. Once employees transfer, either they will be paid more or they will retain their Civil Service pension arrangements or the equivalent thereof.
Amendment No. 51R addresses the provision of benefits and index linking of benefits. During 1990 the Skills Training Agency was sold somewhat piecemeal to a number of private buyers. Many of those small offices were sold to a company. Since then consultation on the terms and conditions of
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employment has become acrimonious, and still continues. Amendment No. 51R therefore seeks to prevent such action being taken by the privatised ISG.
Amendment No. 51V, which also stands in my name, makes sure that the added years which can be purchased voluntarily by staff under the principal Civil Service pension scheme are respected. That will enable staff who join the scheme late in life to enhance their eventual pensions by increasing their own pension contributions.
They are important and fundamental amendments. I do not intend to press them to a Division. However, I expect a serious response from the Government. I beg to move.
6 p.m.
Lord Fraser of Carmyllie: The concerns reflected in these amendments are likely to be covered in the discussions between the various parties during the course of this privatisation. That is the proper place to resolve these issues.
The noble Lord will appreciate that it is unlikely that a private sector pension scheme on offer would be identical to the principal Civil Service pension scheme. It can be expected to be better in some details, and not so good in others.
The potential new owners have been required to offer a pension scheme which overall is at least comparable to the principal Civil Service pension scheme. The Government Actuary will certify that both the pension scheme and the overall package of terms and conditions are at least equivalent to those which staff presently enjoy. I hope that that general indication of the principles on which the discussions are properly carried forward between the various parties is helpful to the noble Lord.
The trade unions will be involved in the discussions about the terms and conditions, including pension arrangements, and will no doubt take an early opportunity to raise those issues. They will include the question of continuing purchase of added years—referred to in Amendment No. 51V—which I am afraid under the rules of the PCSPS, are precluded from continuing under that scheme after a person has left the Civil Service but, depending on the nature of the private sector pension scheme agreed, it may be possible for staff who had been buying added years under the PCSPS to continue doing so under the private sector scheme, in relation to that scheme. With regard to Amendment No. 51V there is clearly a substantial technical objection with reference to the Civil Service scheme.
I hope that I have reassured the noble Lord, not least by what I said about certification by the Government Actuary.
Baroness Phillips: I wish strongly to reinforce what my noble friend said. I saw the terrible trauma that people experienced when the metropolitan counties disappeared and the pensioners of the Greater London Council had to fight to retain in particular the index-linked pension. My father was a civil servant. I remember that when my mother complained about the low salary he comforted her by saying, "I shall receive

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a pension". The position cannot be different now. In many cases when people accept lower salaries they have in mind that they will receive some pension. I recall that it was only due to the concentrated efforts of many people that those pensioners were able to achieve a satisfactory arrangement. The present situation seems all the more important because it will involve even more people.
Lord Williams of Elvel: I am grateful for the support of my noble friend Lady Phillips with her great experience in these matters. She reinforces what I said earlier and what the trade unions have been saying all along.
I am grateful to the noble and learned Lord for the assurances that he has given so far as they go. I hope he has understood that it is a matter of intense interest to the staff and we shall not simply let the matter go at that. Having taken advice on what the noble and learned Lord said, I shall consider how we may proceed in the future and whether it will be necessary to put some provision in the Bill at Report stage. I am grateful to the noble and learned Lord for going so far as he has done. We may have to push him rather further at a later stage of the Bill. In the meantime, I beg leave to withdraw the amendment.
On Question, amendment, by leave, withdrawn.
On Question, Whether Clause 8 shall stand part of the Bill?
Lord Williams of Elvel: Before we leave Clause 8 I should like to put some questions to the Government. I have had difficulty in framing amendments around the issues. The major point that I wish to explore is the nature of the scheme outlined in Clause 8. It seems essential for Parliament to understand how the scheme will work. We need to know what net sum the Government will receive for the sale of the securities they hold in the vehicle company. There are many ways of skinning this particular cat—if I may use that rather vulgar expression. For instance, the Government could inject a substantial capital sum into tie company and then sell off the company for exactly that capital sum. In that case the net proceeds to the taxpayer will be zero. The company will have to maintain solvency requirements because it will be in the private sector. As I pointed out at Second Reading, the solvency requirements in the private sector will be rather more onerous under the new European arrangements than some companies understand.
In the view of some experts, the injection of capital required could be of the order of £35 million. If NCM —if it is the final bidder—pays £50 million the net sum to the taxpayer is only £15 million. There is then the question of what happens if there is no capital injection but some requirement by the purchaser for future support in some manner. The Bill provides that the Secretary of State is empowered to make loans to the vehicle company on such terms and conditions as he may determine. Is it the idea that the Secretary of State will make loans to the company? Will the Secretary of State introduce debt into the company's balance sheet and redeem it immediately? How will
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the system work? Will the noble and learned Lord give us some idea how it is proposed that the scheme should operate?
Furthermore, will he give us an absolute and categoric assurance that we shall not have a repeat of some previous privatisations on which the Government have offered sweeteners to companies in order to encourage them to take public assets off their hands? The noble and learned Lord will be aware that the issue has engaged a good deal of public attention during the past two years. We need to know that this deal will be clean.
My final point relates to the transfer of good will and the way in which it will be valued. For example, ISG is to be sold as a going concern. If NCM had to begin to sell export credit insurance to UK exporters from scratch it would need to invest enormous sums of money and resources in establishing a viable customer base. It is difficult to quantify how much NCM would have to spend to compete effectively with ISG but in our view it would be a large sum of money.
I instance those matters in order to explore with the noble and learned Lord the way in which the scheme might operate. My only requirement is that we must have an assurance from the Government that the sale will be clean and will not involve underhand dealings such as we have seen in a number of previous cases.
Lord Fraser of Carmyllie: I shall attempt to answer briefly the queries that the noble Lord has raised in this short debate. Copies of the draft scheme have been placed in the Library and perhaps Members of the Committee will find it helpful to refer to them. In the current proposals for the capitalising of the company it is not envisaged that there will be loans. The noble Lord's Amendment No. 51W seeks to address that proposal. I shall combine my comments on that amendment with those relating to this debate because the two matters are interrelated.
We have allowed for the flexibility that was provided in other privatisation legislation to allow for loans. However, I cannot say at present whether loans will be required or whether the capitalisation of the company will be by loan rather than direct cash injection. It is a possibility and I can say no more than that at present. The proceeds of the sale of the company will represent an inflow to government funds.
The company's capital requirements will be determined in discussions between the preferred purchaser and the DTI regulatory authorities in the light of the profile of the business to be privatised. The noble Lord indicated that £35 million might be necessary. For reasons that he will appreciate, discussions between the preferred purchaser and the regulatory authorities are confidential and it would not be appropriate for me to confirm or deny that figure at this stage. It is envisaged that the capital amount will be subscribed initially by the Government so that the company may be authorised before it is sold. The amount of the capital will be recovered by the Government in the sale of the proceeds. I can assure the noble Lord in the terminology that he used,

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as did his noble friend, that no "sweeteners" will be involved in the arrangements with the preferred purchaser.
Lord Williams of Elvel: Perhaps the noble and learned Lord will give me an assurance about one issue. I understand that under the proposed scheme the initial purchaser of ISG will be required to hold the shares for three years. Will there be any restriction on resale after three years or will it then be up for grabs?
Lord Fraser of Carmyllie: If the noble Lord would like me to return to the matter at a later stage or to write to him I shall do so. I should be careful about commenting on the matter without advance warning.
Lord Williams of Elvel: Perhaps the noble and learned Lord will consider my question and respond in due course. We shall then consider whether to pursue the matter in a more formal manner on Report.
Clause 8 agreed to.
Clause 9 [Transferred stuff]:
6.15 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51K:
Page 5, line 39, leave out ("Transfer of Undertakings (Protection of Employment Regulations 1981") and insert ("EEC Directive 77/187 (The Acquired Rights Directive)").
The noble Lord said: We return to the status of the staff who arc to be transferred. I am advised that there is a discrepancy between the TUPE 81 regulations and the EC Acquired Rights Directive No. 77/187 under which they were introduced in the United Kingdom. Article 6 of the directive states:
"The transferor and the transferee shall be required to inform the representatives of their respective employees affected by a transfer within the meaning of Article 1(1) of the following: the reasons for the transfer, the legal, economic and social implications of the transfer for the employees, measures envisaged in relation to the employees. The transferor must give such information to the representatives of his employees in good time before the transfer is carried out".
We return to the thrust of an earlier amendment about the period of time required for consultation. The directive continues:
"If the transferor or the transferee envisages measures in relation to his employees, he shall consult his representatives of the employees in good time on such measures with a view to seeking agreement".
TUPE 81 regulations only require employees to inform recognised representatives long enough before a relevant transfer to enable consultations to take place and make no reference to the requirement to seek agreement. I am advised that if the management of ISG takes no steps to reach an agreement, it will be possible to apply to an industrial tribunal under the acquired rights directive. However, since the whole issue is untested in the courts it is probable that it would go to the European Court in order to be resolved. I doubt whether anyone in this instance will want that because it would destroy the value of the business.
The amendment seeks explicitly to invoke the acquired rights directive to cover the transfer of ISG
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to a private buyer. It imposes a greater obligation on the ECGD management to consult the unions about the transfer. However, we believe that that is in keeping with the directive and that it is right to bring ourselves into line with the rest of Europe. We do not believe that TUPE 81 truly reflects the directive. I beg to move.
Lord Henley: The Government recognise the good intentions that lie behind this amendment and they share the desire to ensure that the interests of the transferred staff are protected on transfer. It is for that reason that Clause 9, which is a perfectly normal provision in a Bill of this nature, exists. Despite what I said about the amendment's intentions, it is misguided, unnecessary and will not have the intended effect.
The Committee will be aware that the transfer of undertakings regulations—that is, TUPE 81—were passed to implement the EC acquired rights directive. The regulations already require the transfer of the transferor's rights, powers, duties and liabilities on completion of a relevant transfer. Nothing would be gained by inclusion of the directive that is not already covered by the regulations, which are well established in our law and which have the benefit of interpretation by the courts. To substitute the directive for the regulations in the way proposed in this amendment would inevitably create uncertainty and confusion. In so doing it would be detrimental to the interests of transferring staff. For that reason alone I hope that the noble Lord will not pursue the amendment.
However, I must also comment on the allegation made by the noble Lord and made at the Report stage of the Bill in another place that the information and consultation provisions of the regulations are an inadequate implementation of the requirements of the directive. It has been said that Article 6 of the directive provides a greater obligation to consult meaningfully than do the regulations. The Government do not accept that view. The criticism is based on the requirement in the directive for employers to provide information "in good time", whereas the regulations use the term:
"long enough before the relevant transfer to enable consultation to take place".
It is also said that the regulations make no reference to seeking agreement in the consultations.
Any concerns on these points are easily dispelled. On the first point, the words "in good time" are not defined in the directive. The words themselves are unspecific. In order to give them some meaning the regulations were drafted in a way which would be generally understood to require information to be given in sufficient time for meaningful consultation to occur.
As to the second point, I must agree that the regulations do not state explicitly that consultations should be,
"with a view to reaching agreement".
However, the words were omitted because they are unnecessary. It is clearly implicit in the regulations that agreement should be reached if at all possible. Otherwise there would be no purpose to the

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regulation. Our courts are sensitive to these issues. The Employment Appeal Tribunal, for example, has stated that,
"consultation must not be a sham",
and has referred to the need for "meaningful consultation".
Those points bring me back to my earlier remarks. The amendment, however well intentioned, is unnecessary and will only cause uncertainty. I hope that the noble Lord will feel able to withdraw the amendment.
Lord Williams of Elvel: I am grateful to the Minister for that reply. I perceive that there is a difference of opinion between us as to the status of the regulations and whether they fulfil the acquired rights directive. We have legal advice which says something rather different. However, two lawyers can disagree, and that is no great problem.
The essential point which I wish to get across to the Minister and the Committee is that, following TUPE 81, any negotiations must be with a view to seeking agreement. The noble Lord has gone a little way towards me, but on the Atomic Weapons Establishment Bill the Minister concerned said that in applying TUPE 81 regulations nothing would happen,
"without the consent of the workforce".
That is the way to pursue this matter. If it is true that agreement is being sought, matters should not take place without the consent of the workforce. I hope that t le noble Lord will follow his colleague on the Front Bench and put that assurance into the Committee's proceedings.
Lord Henley: I should have thought that what I have said has gone far enough for the noble Lord. I said that consultation must be meaningful. It cannot be meaningful if it has no end point in its process and if it is not designed to achieve something. We believe that consultation must be meaningful; that is, at the end something must be achieved.
The noble Lord will know that the TUPE regulations require that the trade unions shall be consulted. They must be informed and any representations which they make must be considered. There is no firm requirement to reach agreement but obviously we prefer to reach agreement; that is the point of meaningful consultation.
Lord Williams of Elvel: I am sorry that the noble Lord was not able to take the extra step which I should have liked him to take. I emphasise that the main assets of this business are the staff. We are not selling factories but people's lives. It is essential that the staff remain happy and contented. They should agree to any attempted changes to their terms and conditions. I understand that the noble Lord feels constrained. Perhaps he will reflect on what I have said and I shall reflect on what he has said. At a later stage in the Bill we may have another run round this course. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51 L:
Page 5, line 42, at end insert:
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("( ) The Transfer of Undertakings (Protection of Employment) Regulations 1981 shall apply to the transfer of the Equal Opportunities Policy and all Agreements made under that Policy between the Export Credits Guarantee Department and the Export Credits Guarantee Department's Trades Union Side and in force on the day of any transfer made under Part II of this Act and no changes shall be made to this Policy or these Agreements by the transferee without the agreement of the employees through their trades unions".).
The noble Lord said: The trade union side of ECGD has been extremely successful in negotiating an effective equal opportunities policy in the department. I understand that that would transfer, along with other departmental agreements under TUPE 81 regulations, to the new company.
However, those regulations are only effective—and this is the point that I made as regards the last amendment—on the day of transfer. Subsequently the new employer is free to make changes without consulting the unions. On the last amendment the noble Lord went some way to reassuring me that there will be "meaningful consultation" with the unions. We wish to ensure that if there are to be future changes in equal opportunities policy—which has been carefully negotiated by the trade unions inside ECGD—they will be made not only after consultation but with the agreement and consent of the recognised trade unions.
I hope that the noble Lord will appreciate the importance of this and will take the extra step which he was unable to traverse on the last amendment. I beg to move.
Lord Henley: The noble Lord is mistaken. ECGD does not have a formal equal opportunities policy agreement with the trade unions. The purpose of this amendment thus appears to be to try to ensure that ECGD's policy and practice in this area is adopted by the new company despite the fact that there is no tangible agreement for TUPE to bite on. We hope that the new company will follow similarly good practice on equal opportunities.
Where formal agreements on any aspect of ECGD's policy towards its staff do not exist but instead best practice is followed, TUPE 81 does not cover the situation explicitly. It would be wrong—and very difficult to enforce—to extend the ambit of TUPE to cover such inexact matters. We can expect the new owners of the insurance services business to be enlightened employers who will also follow the best practice in this area.
The noble Lord pointed out that the employer will need to take the staff with him in order to have a viable business. Therefore it is in the employer's interest to follow the practice and policy which have been built up by ECGD. When the business is privatised it will be subject to all the anti-discrimination legislation relating to sex and race. I am confident that staff transferring need have no fears on that account. Therefore, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Williams of Elvel: Perhaps I may tell the noble Lord something about the equal opportunities arrangements inside ECGD. The Civil Service is an equal opportunities employer and we should insist that ISG—whoever purchases it—should remain an

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equal opportunities employer. An equal opportunities employer means only that the employer must comply with equal opportunities law, which is by no means comprehensive.
The Race Relations Act 1976 states that it is unlawful to discriminate on the grounds of,
"colour, race, nationality or ethnic or national origins".
The Fair Employment (Northern Ireland) Act 1976 states that it is unlawful to discriminate,
"on the ground of religious belief or political opinion".
The noble Lord referred to the Sex Discrimination Act.
The ECGD currently has an equal opportunities policy. I do not know whether it is at the moment enshrined in a formal agreement. It states that it is a disciplinary offence to discriminate unfairly on the grounds of race, sex, marital status, sexual preference, religious belief, disablement or political opinions. Also, offensive personal behaviour including racist remarks or sexual harassment is a disciplinary offence. That is the policy operating in the ECGD and it is a strong one.
In the ECGD there are also agreements and policy statements which need to be protected, such as those concerned with part-time working, maternity leave, paternity leave, job-sharing arrangements, special leave for domestic purposes, sexual harassment, racial discrimination and reinstatement priority for those who leave for domestic reasons. Negotiations took place with the trades unions on the precise status of the agreements. Agreement was reached between the two sides but was not formalised. Although there was no formal signature, I hope that the provisions of the agreement will he brought through the transfer process into the newly-privatised company. That is something which should be supported by the Government. I hope that the noble Lord will consider my remarks and perhaps give me a little more comfort.
Lord Henley: I can go no further. As I said, there is no formal policy agreement. ECGD has policy and practice in this area but best practice is not a matter that TUPE 81 covers explicitly. I hope that the assurances I gave when I first responded satisfy the members of staff that they need have no fears on that account.
Lord Williams of Elvel: I do not think we can go much further on the matter. We shall return to it at Report stage because I do not believe that the assurances given by the noble Lord, Lord Henley, are the ones that we seek. It is something on which we shall ponder until the next stage. I hope that the noble Lord and his advisers will ponder on the matter also. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51M:
Page 5, line 45, after ("person") insert ("with his written consent").
The noble Lord said: In moving Amendment No. 51, standing in my name and that of my noble friend Lord Clinton-Davis, with the leave of the Committee, I shall speak also to Amendment No. 51Q. We
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touched on this matter in an earlier amendment and I want to explore it further with the noble and learned Lord who is to reply on behalf of the Government.
The problem is whether any of the staff in ISG will be compelled to transfer to the newly-privatised company. From our earlier debates we understand that they can express a preference either to stay in the Civil Service or to go into the private sector with the new company. If they prefer to stay in the Civil Service, the question arises whether they will be allowed to stay in the Civil Service.
I must advise the noble and learned Lord that many members of staff of ISG are worried that if too few volunteer to join the privatised company—this advice comes from the trades union side—in order to ensure its viability management will compel others to transfer. Our understanding of the TUPE 81 regulations is that employees occupying ISG posts at the time of transfer to the purchaser must transfer to the privatised company if so requested. The amendment seeks to ensure that nobody will be forced against their will to move into a job that they do not want; they will be allowed to stay in the Civil Service if that is what they wish. I beg to move.
Lord Fraser of Carmyllie: As the noble Lord indicated, this is a matter on which we have already had some discussion. It may be useful if I expand on it in part now.
Amendment No. 51M would have the effect of limiting staff to be transferred to the new company to volunteers only. It is possible that the number of volunteers will not accord with the business requirements of the new company. The matter must be seen in context. ECGD privatisation is unlike some others in that only about half the organisation measured by number of staff, is planned to be privatised. That gives more scope than is normal for meeting the preferences of individual members of staff.
The then Secretary of State indicated on 18th December 1989 that all ECGD staff would be asked to express a preference on whether or not they wished to join the new company and that,
"ECGD will use its best endeavours to meet their wishes where these are consistent with the business needs of ECGD and the New Company".
That was reiterated during the Second Reading debate in another place.
It is worth putting on record that once it had been indicated that NCM had been selected as the preferred purchaser by the Secretary of State for Trade and Industry, the chairman said,
"I am delighted by the news and look forward to working towards the completion of the transaction … ISG is a strong business with an impressive record of experience and performance and an enviable business base serving Britain's export community. We have no doubt that, with NCM's support, ISG will be able to strengthen further the range and quality of services it provides to British exporters. We believe firmly that combining our complementary experience and resources can only be to the joint benefit of our organisations and of our customers in the increasingly international and competitive export insurance market place. We have long admired [and I echo this] the ability of the executive and staff of ISG. We look forward to working closely with them to establish a strong and productive base for our future partnership".

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NCM made very clear that if possible it would be its wish that those who go to the new company should be volunteers.
As has been indicated, the assets of the company are the staff and the experience contained there. However, while we fully recognise the desirability of avoiding an outcome that means not only volunteers would have to transfer, and while we regard that as a remote eventuality, the Government must retain the right to post people in order to meet the business needs of the new company and of ECGD.
The terms and conditions on offer to people transferring to the new company are expected to be at least as good as those they now enjoy. It is not unreasonable to expect them to transfer on a permanent basis and to show the sort of commitment to the business that I am sure they will expect from their new employer.
Acceptance of Amendment No. 51Q would mean, in effect, that everyone who transferred to the new company would do so on a secondment basis. Neither the Government nor the new company would have any clear idea about the eventual numbers of staff wishing to remain with the company or return to the Civil Service. Neither the Government nor, I am sure, the new company could regard that as a satisfactory position. The new company would have to face the possibility that many, or even the whole, of its workforce would suddenly decide to exercise that option. It could not run a business on that uncertain basis.
If they exercised such an option in large numbers, the Government would also face a very difficult situation and might even have to make some of the people redundant if they had not been found other Civil Service jobs within a reasonable time. I noted that the noble Lord's brow furrowed when I came to the kernel of the retention of the right to post people in order to meet the business needs of both sides. However, I hope that he and the trades unions will consider what I indicated at an earlier stage. The context of this particular privatisation must be regarded very carefully. Only about half the organisation will go. It is the clearly expressed desire on both sides that, if possible, it shall be volunteers only.
Lord Williams of Elvel: That is easy to understand because if they are not volunteers there will be nothing left of the business. However much the noble and learned Lord may like or dislike it, if people are compelled to go in a direction in which they do not want to go, they will tend to walk out of the door. The assets of the company walk out of the door at about half pest five each evening. The assets will disappear rather rapidly if there is not some arrangement with which they are satisfied. I do not believe that the Government can be at all complacent about the possibility of ISG staff being happy enough to volunteer in sufficient numbers to go to the privatised company.
The fact that NCM is the preferred bidder has been known for some weeks. I have to tell the noble and learned Lord that there has been no approach to the staff from that company. No formal talks have taken
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place, no offers have been made and no discussions have been embarked on. NCM claims that the Government are holding up matters. I do not know whether that claim is true or not. There is a genuine worry in the staff of ISG that quite a few of them will be forced into jobs that they do not want. That will be bad for them, bad for the business and bad for privatisation. I am sure that the noble and learned Lord will recognise that. Nevertheless, I believe that we have pursued this matter as far as we can at the moment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51N:
Page 6, line 1, leave out ("not").
The noble Lord said: In moving this amendment, it may be for the convenience of the Committee if I speak to Amendments Nos. 51P and 51U. Clause 9(2) (a) refers to the Superannuation Act 1972. Under Sections 1 and 2 of that Act a person transferring under Clause 9 which we are discussing, could be regarded as having been technically redundant by that transfer and thus be entitled, on transfer, to receive redundancy compensation. Subsection (2) of the clause removes the possibility of that technical redundancy compensation.
These are three probing amendments. If the noble and learned Lord is to respond, I hope that he will explain the concept of technical redundancy and how the Government can justify the withdrawal of the possibility of receiving such compensation from ISG staff, bearing in mind that redundancies could follow as a result of the purchase of ISG by a private buyer. Redundancy compensation terms currently applicable to ISG staff as civil servants could be altered by the purchaser without negotiations with the staff, the individual or the trades unions. I beg to move.
6.45 p.m.
Lord Fraser of Carmyllie: The noble Lord's information that the NCM has not met with the trades unions does not coincide with my information. I understand that NCM has already seen them and that the president of the company has addressed all the ISG staff and met a large number of them. Furthermore, I understand that about 50 of the ISG staff are flying to Amsterdam this week to meet with the NCM management and staff. I am sure that the noble Lord will welcome that opening of discussions directly with the trades unions if it has not already occurred.
Turning to Amendment No. 51N, if a civil servant is made redundant, compensation payments are funded from the principal Civil Service pension scheme. We cannot expect that any redundancy compensation payments in the private sector will be funded in this way. Instead, they would be a charge on the assets of the employer, or in the unlikely event he is unable to meet them, the redundancy fund would provide some compensation.
As regards pensions, we can expect that they will be funded through an exempt approved scheme established under a legally binding trust deed with

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funds separated from the new company's business and subject to the controls of the Inland Revenue and the Occupational Pensions Board. The standing of the new company is likely to be such that there is no basis for concern by employees about either job prospects in general, about the security of their pensions, or the payment of compensation if any individual were made redundant. Accordingly, Government and Treasury support are not appropriate.
As I have said previously, the Government will require the new owner to offer a basis of calculating pension entitlements and redundancy compensation payments equivalent to those applying in the Civil Service. The redundancy compensation will need to take fully into account the length of time people have already spent in the Civil Service. As the noble Lord appreciates, Clause 9(2) of the Bill will ensure that. This means it would be very expensive for the new company to make people redundant because it would have to compensate them in full for their length of time in the Civil Service as well as in the new company. Therefore it is to be anticipated that the new company will be unlikely to take on more people than it is quite confident it will need.
The proposed amendments could mean transferees were entitled to redundancy compensation payments now despite no loss of job, nor any loss of the protection they would have in case of redundancy during service with the new company. They would effectively confer windfall gains on the employees concerned at substantial cost to public funds and for no good reason. The proposed procedure that the Government have advanced will give adequate assurance to people transferring about their security of employment and about their pensions. With that explanation of the technical point, I hope that the noble Lord will feel that the amendment need not be insisted on.
Lord Williams of Elvel: I am grateful to the noble and learned Lord for bringing me up to date concerning the contacts that have been made between NCM and the staff of ISG. However, I am advised that NCM has met the staff only to hear what they want. There have been no offers, negotiations or anything of that kind. The company says that up to now it can only note the concerns of the trades union side and that of the staff and that all such notes are subject to the restriction placed on it by the Government. That is the state of play with NCM. I understand that the amendment as drafted would create certain difficulties. I indicated at the outset that it was not meant to be other than a probing amendment. I am grateful to the noble and learned Lord for his reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 51P, 51Q and 51R not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 51S:
Page 6, line 7, at end insert:
("(3) No person who has ceased to be employed in the Civil Service and become employed by a transferee by virtue of a
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scheme under section 8 of this Act shall at any time following the transfer have his employment terminated by the transferee for the purpose of making changes to the rates of pay, pension scheme or other terms and conditions of employment offered to employees of the transferee".).
The noble Lord said: I referred to this amendment a little earlier. It is a question of whether at any time following a transfer and ceasing to be a civil servant, an employee can have his terms and conditions changed. I refer again to the Skills Training Agency which was sold rather piecemeal to private buyers. The result of that was quite appalling acrimony and aggravation between the staff and the new employers on the terms and conditions of employment. That acrimony still persists. We very much hope that that will not take place in the case of the privatised ISG. I should be grateful for the comments of the noble and learned Lord. I beg to move.
Lord Fraser of Carmyllie: I hope I can reassure the noble Lord by saying that in our view the amendment is unnecessary. Existing employment law will protect the position of employees at any time. TUPE 81 applies only at a time of transfer; but it establishes a basis of terms and conditions which will be included in binding contracts of employment. The new company can only amend these contracts by agreement or by appropriate notice, otherwise compensation could be sought. Also, if change were imposed and this amounted to constructive dismissal the noble Lord will appreciate that compensation could be payable. I hope the noble Lord is satisfied with that brief explanation.
Lord Williams of Elvel: I am grateful to the noble and learned Lord. We are coming to the end of a rather long series of amendments. I apologise for having wearied the noble and learned Lord with them. These are very important amendments which the staff have quite rightly asked us to put forward in order to probe the situation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 51 T to 51 V not moved.]
Clause 9 agreed to.
Clause 10 [Vehicle companies]:
[Amendment No. 51W not moved.]
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51X:
Page 6, line 31, leave out ("or partly").
The noble Lord said: This was an issue which was raised at Committee stage in another place. The Minister then explained that the words "or partly" were included to provide the opportunity for the successful bidder—ISG—to pay by instalments. What the Minister said was:
"If company A offered £100 million down and nothing more later and company B offered £100 million down and £20 million later, all other things being equal—and I stress that many other things must be taken into account, for example, commitments and financial resources—I should he inclined to take company B's offer. In these circumstances, it could he that partly-paid shares would be the best method of ensuring that the second instalment was paid".—[Official Report, Commons, Standing Committee H. 7/3/91: cols. 386–387.]
I note that with some interest, particularly in the light of the situation which has arisen vis-a-vis NCM. Can the Minister say whether there is any question of a

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payment on the basis of instalments so far as concerns NCM? What happened in relation to the other bids —the bids of AG of Italy and Trade Indemnity? Was any suggestion made of instalments in those cases? Is the Minister able to tell us anything about the value of the bids at this stage?
I shall listen with great interest to what the Minister has to say. I beg to move.
Lord Fraser of Carmyllie: Clause 10(3) fulfils the technical purpose of providing a means by which the paid-up status of the shares of the vehicle companies can be established. This is particularly important in relation to the shares of the transferee company which are not issued in consideration of the injection into the company of assets or cash but in consequence of the transfer of ISG business to it. The normal Companies Act procedures for issuing shares do not apply as this clause provides for a special statutory issue. It is necessary to be able to classify shares so issued as paid-up fully or partly so that the Companies Act can then apply to them.
Little purpose is served in removing power to classify as partly paid. The subsection so amended would give a discretionary power to the Secretary of State to classify the shares as fully paid-up. The implication would be that if he did not they would be treated as partly paid; in substance the same as giving power to choose between these alternatives.
It is unlikely that the Secretary of State would wish to treat the shares as partly paid but it would be unwise. to foreclose any options at this stage of the privatisation process. It is difficult to speculate on circumstances in which the Secretary of State would wish to treat shares as partly paid. There is the possible use of partly paid shares in the sale of shares by instalments. However, as the noble Lord asked a direct question on this matter, I should emphasise that instalment sales are not presently contemplated. The important point is that the enabling power must be wider than any specific use of it that is envisaged to ensure the precise use within the scope of the power, and hat flexibility remains to deal with any eventualities. This is clearly a technical point concerning company law and the particular circumstances of privatisation. I hope I have answered the queries of the noble Lord.
Lord Clinton-Davis: I am grateful to the Minister for that reply. I assume from what he said that the answer to the specific question that I posed is in the negative. Is that right? I specifically asked about NCM. The Minister said that no question of instalments is contemplated. It therefore follows that in relation to NCM there is no question of instalments.
Lord Fraser of Carmyllie: I thought that I had indicated as clearly as I possibly could. I included the words "at present" or "presently" that is the state of affairs. I cannot advance on that.
Lord Clinton-Davis: I am obliged to the Minister. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 51Y:
Page 6, line 39, at end insert:
("(c) transfer any shares held on behalf of the Crown in any vehicle company unless he has made provision for that vehicle company or its subsidiaries to continue to operate through a regional network which assures an office in each standard planning region of the United Kingdom". ).
The noble Lord said: This is a probing amendment. At the present time there are nine regional offices all of which handle only ISG cases. Therefore they are destined to transfer to the private buyer. The question is whether the purchaser is likely to retain these regional offices. I understand that NCM has indicated that it will wish to review the cost-effectiveness of the regional network. This is a matter of considerable anxiety to the staff. However, it is more than the staff that one has to consider in this situation.
The fact that there are regional offices has stimulated the view that NCM has been invaluable as regards a local presence in enabling people within the areas of the regional offices to enter into meaningful discussions. If NCM was closed down that would no longer be the case. It is the view that there is a considerable need to contact a local office when it comes to processing applications for cover.
These are not just my views. They are views which are attributed to Bain Clarkson who are important brokers in this field. The even more forceful view was expressed by Mr. Granger, the former deputy chairman and current consultant with CIA. Mr. Granger believes that it is a question "of people dealing with people"; that the experience of staff within the regional office network was an important consideration and represented a fine source of education for most exporters.
Therefore the general view on the part of brokers and others is that it is extremely important to maintain a local representation. It enables people to feel at home, so to speak, in securing information that they want, in obtaining meetings with reasonable convenience, which may be extremely important in this area, particularly with regard to smaller exporters. Jardines go so far as to say that ISG will have to be careful not to try and service customers from different areas within too big a geographical location. We are not just thinking here of NCM. We are thinking in terms of the convenience of exporters and of the input they make to the national effort. Those are, frankly, quite as important as the interests of NCM, if not more important. I beg to move.
7 p.m.
Lord Henley: We went over some of this ground, or rather similar ground, in dealing with Amendment No. 5 last week. The ECGD network of nine regional offices is that which is best suited to meeting the reasonable needs of ECGD's customers and, therefore, to getting business. These offices handle only the insurance services business. As the noble Lord will know, the project group business is dealt with directly by the head office in London.
I am confident that the new owners will wish to keep the network that responds to these needs and also developments in business communications. However, it would be unreasonable to impose a

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statutory requirement to do so on a private company which is in competition with other private companies which are not subject to such requirements. The regional offices and their staffs will be among the assets transferred upon privatisation of ISG. Their locations are, of course, of long standing and were chosen to provide a balance between the needs of Insurance Services customers, the local service and contact and the costs of running a widespread regional network which is funded from the premiums paid by exporters.
Lastly, in relation to the amendment itself, I should point out that the regional office locations are not and never have been entirely consistent with United Kingdom standard planning regions; nor would it necessarily be appropriate that they should be, given the factors determining their location. Also it is not necessarily appropriate that the successor company should necessarily have standard planning regions imposed on it, as regions in which it should deal. With that explanation, I hope the noble Lord will feel able to withdraw his amendment.
Lord Clinton-Davis: I am not entirely reassured by the explanation. Has NCM intimated to the department the steps it proposes to take to give consideration to this particular matter?
Another point which gives rise to concern on the part of exporters, and most notably the smaller exporters—I should have thought that Ministers would want to know about it because after all NCM is the preferred bidder—is a matter which, although I entirely agree that it is not something that is written into the law, is nonetheless a subject of concern to the staff, to exporters and is of importance for the viability of our export business. I should like to ask the noble Lord what information he has gathered from NCM as to its intentions. Surely he will have extracted from them some undertaking to enter into a process of consultation in this connection. After all, it is not inconceivable that it will be cheaper to run a central office. On the other hand, that may not be in the best interests of the smaller exporter and there may be a conflict there.
Lord Henley: I do not accept what the noble Lord has said. As regards what NCM has actually said to my right honourable friend and to my department, it has expressed appreciation of the fact that there is a concern in the negotiations for taking over the regional offices. There is no reason to believe that it intends to change the regional pattern that it is proposed it might purchase.
The noble Lord said, I think, that it was not just NCM's interests we should look to, but I think he should remember that the company's interests are also those of its customers. If it cannot bring in the customers there is little point in buying the new company. NCM needs customers to make the company viable, and I am sure it will find it necessary to keep a regional network.
Lord Clinton-Davis: Here again there is a conflict of view between us. It is our view that it is not at all
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inconceivable that some customers may be dispensable and that NCM will not in fact be looking for customers so there could be some prejudice to our export trade if certain of the smaller exporters in particular are found to be unnecessary to NCM's overriding interests. However I have listened to what the Minister has said and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 51Z and 51ZA not moved.]
Clause 10 agreed to.
Clause 11 [Reinsurance of ECGD risks]:
Lord Henley Lord Henley moved Amendment No. 52:
Page 7, line 14, at end insert:
("(1A) The Secretary of State shall from time to time determine, in relation to such classes of risk determined by him as might be insured by him under section 1 of this Act, whether it is expedient in the national interest for him to exercise his powers under that section to make arrangements for reinsuring persons providing insurance for risks of that class.").
The noble Lord said: My noble and learned friend Lord Fraser spoke to this amendment with Amendment No. 51. I beg to move.
On Question, amendment agreed to.
[Amendment No. 52A not moved.]
Clause 11, as amended, agreed to.
Clause 12 [Delegation of assistance function]:
[Amendment No. 52B not moved.]
Clause l2 agreed to.
Clause 13 [The Export Credits Guarantee Department and the Export Guarantees Advisory Council]:
Lord Henley Lord Henley moved Amendment No. 53:
Page 7, line 40, at end insert:
("(4) In exercising his duty under section 11(1A) of this Act, the Secretary of State shall consult the Export Guarantees Advisory Council.").
The noble Lord said: I beg to move this amendment. My noble and learned friend spoke to the amendment when speaking to Amendment No. 51.
On Question, amendment agreed to.
[Amendments Nos. 53A and 53B not moved.]
Clause 13, as amended, agreed to.
Clause 14 [Expenses]:
[Amendment No. 53C not moved.]
Clause 14 agreed to.
Clause 15 [Short title, interpretation, commencement, etc.]:
[Amendment No. 53D not moved.]
Clause 15 agreed to.
On Question, Whether the schedule shall be agreed to?
Lord Williams of Elvel: I have indicated opposition to this schedule not because I have any reason to oppose it but simply because I do not understand what on earth it means. I should be most grateful if the noble Lord would explain in comprehensible language what it means.
Lord Henley: I am sure the noble Lord, Lord Williams, will find the schedule very easy to understand after I have given a brief explanation of its purpose. I can understand that it is possibly the legal

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language that the noble Lord finds somewhat confusing, although he is well versed in the skills and arts of the draftsman. I am sure he will ultimately find it perfectly straightforward.
The schedule contains useful supplementary provisions which tidy up some loose ends which will be left after the transfer envisaged by the scheme has taken effect. The purpose is to ensure that all references to the Secretary of State in documents and proceedings which relate to the properties and liabilities transferred are to read in future as references to the transferee, who will then own the property and be subject to the liabilities.
For example—it is very often by means of example that we can make things clear—if the ECGD is a party to a contract whereby a person provides cleaning services for Insurance Services Group premises which are to be transferred to the transferee company, the schedule ensures that, when the contract is transferred by the scheme to the transferee, the transferee is to be deemed to be the party to that contract—
Lord Williams of Elvel: I did ask for simple language to explain the system. Would the noble Lord be kind enough to observe my request?
Lord Henley: I apologise to the noble Lord. However, perhaps I may return to the beginning of my example.
I was trying to explain a situation where, for example, ECGD was party to a contract. I suggested that it might be party to a contract providing cleaning services for its own premises; that is, the premises of ISG. Those premises are then transferred to what I would describe as the transferee company, but I shall call it i he new company. The schedule ensures that the contract will be transferred by the scheme to the new company; in other words, the new company will be a party to the contract with the old cleaning firm which was providing those services to the ECGD. I believe that that is all perfectly straightforward.
Baroness Seear: Is the Minister saying that under these arrangements the new firm will go on using the old cleaners?
Lord Henley: As always, the noble Baroness puts the matter far more succinctly than I can. Indeed, she has it exactly right.
However, I shall continue with my explanation for the benefit of the noble Lord, Lord Williams of Elvel, whose skill in reading fairly simple and straightforward legislation is not the same as that of the noble Baroness. The schedule also enables a certificate to be provided by the Secretary of State conclusively establishing that any asset or liability was vested in the transferee company on a particular date. That is a useful provision for establishing title to assets.
I hope that that brief explanation will be sufficient to satisfy the noble Lord that the schedule is perfectly straightforward and that there is nothing sinister in its purpose. I trust that he will, therefore, feel able to withdraw his opposition to the schedule forming part of the Bill.
Lord Trefgarne: I wonder whether my noble friend is aware that, quite contrary to the look of puzzlement on the faces of those on the Opposition Benches, his explanation was almost as clear as the words in the schedule itself. Therefore, it has been of great assistance to the Committee.
Lord Henley: I knew that my noble friend would need no explanation. I am sure that he quietly read the schedule, as we all do from time to time, before going to bed. He immediately knew exactly what it meant.
Schedule agreed to.
House resumed: Bill reported with amendments.

Rights of Access to Neighbouring Land Bill
7.12 p.m.
Lord Murton of Lindisfarne: My Lords, I beg to move that this Bill be now read a second time.
The Bill has its origins in Law Commission Report No. 151 presented to Parliament in December 1985. It relates to the rights of persons to gain access to neighbouring land for the purpose of carrying out work to their own land. The present law does not provide any general means whereby a person who is unable to carry out necessary works to his own land without access to that of his neighbour can lawfully enter that land without the neighbour's permission.
I should state at this juncture that there is no definition of "land" as used in the Bill. It therefore has the meaning ascribed to it by Schedule I to the Interpretation Act 1978 and so includes buildings and other structures which in law form part of the land and the airspace above the ground.
Some 27 years ago as a Member of the other place I was approached by a constituent with a classic example of what this Bill seeks to rectify. An elderly couple who I shall call A lived in a small house contiguous to another, both built before the First World War and to the same design, with minimal space in the boundary between them. For one reason or another and over a considerable period of time A had fallen out with the neighbouring household who I shall refer to as B.
A's guttering had collapsed because of neglect occasioned by B's refusal to allow A to erect a ladder on the narrow strip of B's land in order to effect repairs. In consequence, A's bedroom on the boundary side was uninhabitable. It was so damp that part of the ceiling had collapsed and part of the plaster on the inside of the affected wall had fallen away. The room was full of mould and the house was moving steadily into a state of dereliction.
A had no legal remedy against B, however unreasonable B's refusal might have been, and, as it so happened, there was a tragic outcome. Problems such as this occur from time to time and can affect rural as well as urban land.
Mr. John Ward, the honourable Member for Poole, has recently been faced with a similar situation. His constituency case is also of an urban nature but rather more complex than the one already described. A

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householder who I shall refer to as X had an apple tree growing 18 inches from his boundary wall. On the far side was his neighbour's garage. I shall call this neighbour Z. Neighbour Z wrote to X informing the latter that his tree was both overhanging and undermining his garage and demanded that it be removed within 14 days or Z would cause someone to enter upon the premises to remove it and that X would be expected to foot the bill. This was followed up by another letter, this time from a solicitor, alleging progressive damage to the contents of the garage and stating that his client Z would be in order to cut back the branches overhanging his property and that X would be responsible for paying for this work.
On his own initiative, neighbour X cut back all the overhanging branches. He also asked for permission in his turn to enter upon Z's property to carry out some remedial work to the flank wall of his house abutting upon Z's land, where defective rendering was allowing rainwater to penetrate.
After a long history involving solicitors, surveyors and tree surgeons and the voluntary removal of the offending tree by X, even though expert opinion had found this to be innoxious as far as its roots were concerned, permission was offered by Z for entry to repair the flank wall by X but only on condition that X paid Z's legal fees amounting to £250. X was advised by his solicitor not to accept this proposition because it would set a precedent should there be future need to seek permission from Z for entry to attend to X's premises.
So the matter rested for three years until X was about to retire, when he decided to sell his house and leave the district because of the stress occasioned to his wife. His son-in-law wished to buy it, but before it was sold X tried again to come to terms with Z by offering the original £250, only to be told that the licence fee for entry, if I may call it such, was now £555. X declined to pay and his son-in-law Y bought the house without the dispute being resolved.
Two years have passed and letters written to Z by the new owner Y remain unanswered. The leak in the flank wall grows worse and Y's wife is ill with stress caused by the progressive damage to her home. The situation is once more deadlocked.
In view of that sorry tale my honourable friend has introduced this Bill, which he took through the other place in all its stages on 5th July without amendment. As I have already stated, the law does not provide any general right enabling a person to gain access to neighbouring land in order to carry out work to his own land. In consequence a person who enters neighbouring land without any authority does so as a trespasser and renders himself liable to civil proceedings at the suit of the occupier. It is no defence to show that the need for access was compelling or that loss arising to the plaintiff from access by the defendant was negligible.
There is a small number of exceptions to the above, such as easements of varying kinds, covenants, contracts or licences and estoppel rights. Peculiar to
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London, the London Building Acts (Amendment) Act 1939 may in certain circumstances provide an owner with the right of access to his neighbour's land.
However, generally speaking, reliance for access rests upon good neighbourly relationships in which two (or possibly more) neighbours come to an amicable arrangement whereby A is given permission to enter B's land with a promise to make good any damage caused or, alternatively, B may offer to do the work himself subject to reimbursement by A.
Unfortunately, not all owners of land in its broadest sense are thus amenable; and it could be claimed by some that their boundaries should remain inviolable whatever the discomfort to their neighbours. But, of course, many public authorities already have statutory rights of access to carry out their functions in the interests of the public at large: for example, the Public Health Act 1936 or the Rights of Entry (Gas and Electricity Boards) Act 1954.
It would seem reasonable therefore that there should be a change in the law to cover entry for the purpose of the preservation of land or property; but any such change should be limited both in its nature and its scope and should interfere as little as possible with the property rights of individuals. For that reason the Bill is framed so as to grant a temporary right of access to another's land but only at the discretion of county courts and the High Court, which shall have jurisdiction in all access proceedings.
The temporary right of access should be specifically for "preservation work"—that is to say, work intended to protect and maintain existing land which of course includes things on, in or above the land, as indicated in Clause 1(4) of the Bill. Such work must be reasonably necessary and, in regard to buildings and other structures, may include inspection, repair, maintenance, improvement, decoration, alteration, adjustment, renewal or demolition. Improvements and alterations contemplated for their own sake are not to count as preservation work and are outside the scope of the Bill: but improvements and alterations which are incidental to preservation work are not so excluded so long as they could not be construed as development.
Access orders would not be obtainable against the Crown: nor would access be given to any neighbouring land that is the highway, because existing law provides adequate means of access under the provisions of the Highways Act 1980. The courts will have the normal discretion as to costs which would be exercisable in accordance with existing principles, including those applicably where any party is legally assisted.
It is always to be hoped that neighbours finding themselves in difficulties can come to amicable agreement before resorting to the law. To my mind it would be rare, but nonetheless unfortunate, if neighbour B were suddenly to find himself respondent to an access order sought by the applicant, neighbour A, without a prior attempt at an informal compromise. For this reason I venture to suggest to my noble and learned friend the Lord Chancellor that he might consider the recommendation in paragraph 3.63 of the Law Commission report that anyone

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contemplating application to the court could, without having to seek professional assistance, use a suitable pro forma letter to send to his neighbour on the basis of an effective "letter before action" in the hope that the two sides might then come to terms and thus avoid subsequent litigation through having to call into effect the provisions contained in the Bill.
I shall go quickly through the clauses. Clause 1 deals with access orders. Subsection (1) is the operative provision. It enables a person who, for the purpose of carrying out work on one piece of land, requires to enter neighbouring land but is unable to obtain the necessary agreement to such entry, to apply to the court for an order authorising his entry. There is an extended definition here because the applicant's difficulty in carrying out the work may, exceptionally, stem not from the neighbour's refusal of access, but from the refusal on the part of the owner of an easement to allow him to obstruct the easement.
By virtue of Clause 6, the "court" may be either a county court or the High Court. However, Section 1 of the Courts and Legal Services Act 1990 enables the Lord Chancellor to make a jurisdiction order in respect of the allocation of cases between the High Court and the county courts. It is likely that once such an order has been made the vast majority of proceedings under the Act will be handled by the county courts. The phrase "adjoining or adjacent" land covers the possibility that the applicant may need to enter land divided by a narrow strip from the land on which the work is to be done.
Subsection (1) does not define, or impose any limitation on, either the category of person who may apply for an access order or the category of person against whom such an order may be sought. Thus, any person, whether or not he has any legal or other interest in the land to which the work is to be done, may apply for an order and may make respondent to his application any person whose agreement to his entry on the adjoining land he thinks he needs, but cannot obtain. "Land" has the meaning ascribed to it by Schedule 1 to the Interpretation Act 1978.
Subsection (2) prescribes the circumstances in which, subject to subsection (3), the power of the court to make an access order is to be exercised, namely on its being satisfied that without access the carrying out of preservation work would be impossible or substantially more difficult or expensive. "Preservation" for this purpose excludes work designed to improve or alter the land, though improvements and alterations which are incidental to preservation work are not excluded, as I explained earlier in my speech.
Subsection (3) qualifies subsection (2), by requiring the court not to make an access order, notwithstanding that the work is necessary and the entry is required, if the respondent satisfies the court that, notwithstanding the obligations on the applicant arising under Clause 3 or the imposition by the court of conditions under Clause 2, entry by the applicant in pursuance of an order would cause such hardship that it would be unreasonable to make the order. In so providing, subsection (3) puts the burden on the
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respondent to satisfy the court that no order should be made, once the applicant has made out the case for access to do necessary preservation work.
Subsection (4) deals with the categories of work which fall within the meaning of "preservation", as I have already explained. Subsection (5) enables rules of court to prescribe the procedure to be followed by an applicant who is unable to ascertain the name of a person whom he should make respondent. Rules normally require a respondent to be named.
Clause 2 deals with the power of the court to impose terms and conditions. Subsection (1) provides for three matters which must be specified in every access order. These matters, relating to the extent of the work, the timing of the access and the particulars of the land to which access is to be given, are essential elements in any access order.
Subsection (2) gives the court power to impose terms and conditions for the purpose of minimising any adverse consequences arising out of the entry authorised by the order. Subsection (2) thus imposes a limiting factor on the purposes for which conditions may be imposed and does not give the court a "blanket" power.
Subsection (3) paves the way to subsection (4), which specifies a number of matters which may be included in terms and conditions imposed by the court. Subsection (3) makes it clear that the specifying of these matters does not detract from the generality of the power conferred by subsection (2), but equally does not detract from the prohibition imposed by subsection (5) on making inconvenience or "mere access" the subject of compensation.
Subsection (4) specifies in paragraphs (a) to (e) a number of matters which the court may include in exercising its power to impose terms and conditions.
Subsection (5) ensures that the court's power to impose terms and conditions cannot be used to compensate a respondent merely because an access order has been made or merely because entry in pursuance of the order is inconvenient to him. The words,
"entry as authorised by the order",
make it clear that damages for breach of a condition imposed by the court to avoid or minimise inconvenience are not excluded: they would fall within Clause 4.
Subsection (6) enables the court to make provision for a respondent to be reimbursed expenses, such as professional fees, reasonably incurred by him, notwithstanding that those expenses could not—for example, because they had been incurred before any proceedings were instituted—be part of the "costs" of the proceedings. The court may also require the applicant to give security for any money that may become payable to the respondent under this clause or Clause 3.
Clause 3 deals with the effect of an order. Subsection (1) sets out the legal effects of an access order. Paragraph (a) provides that an access order authorises the applicant to enter the neighbouring land to carry out the preservation work specified in the order. Paragraph (b) provides that an access order authorises the doing of a number of ancillary acts,

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including the bringing of materials and equipment on the neighbouring land and the entry of the applicant's contractors, and so on. The authority conferred under this provision is subject to the power of the court under subsection (2).
Paragraph (c) provides that an access order imposes on the applicant an obligation to make good the land before his authority to enter expires and to indemnify the respondent against any damage to the land or goods on it resulting from the entry. This, too, is subject to exclusion or variation by the court under subsection (2). The reason for giving an access order under these automatic effects is that they will be appropriate in all but the most exceptional cases.
Paragraph (d) provides that an access order imposes on the respondent an obligation to permit the applicant to do anything provided for by the order. Enforcement of this obligation will be facilitated by the inclusion of this provision, since if the respondent fails to comply with the order the applicant will be able to apply directly to the court for committal proceedings rather than have to apply first for an injunction.
The concluding words of subsection (1) provide for an access order to have the same effect as if the respondent had consented to the applicant acting in accordance with the terms of the order. The respondent will not therefore be able to sue the applicant in trespass (or, in the case of an easement owner, in nuisance) for acting in accordance with those terms. Nor will an applicant entering land pursuant to an access order be liable to prosecution under any provision making it an offence either to trespass on that land or to enter or be on that land without the respondent's consent.
Subsection (2) enables the court to dispense with or vary the effects of an access order specified in paragraphs (b) or (c) of subsection (1).
Clause 4 dealing with enforcement does not provide expressly for the assessment of damages. That is left to the court. In some cases where there has been physical damage to a party's property, it is to be expected that the court will adopt the principles applicable to the assessment of damages for tort. In others, for example, where the applicant has defaulted on his obligation to make good, the court is likely to adopt the analogy for breach of contract. It would not be practicable or necessary for the legislation to cater specifically for every possibility.
Clause 5 deals with the variation, discharge, suspension and cessation of access and other orders made by the court. Subsection (1) enables any party to apply to the court for an access order to be varied, suspended or discharged and extends to any previous order for variation, suspension or discharge of an access order, as well as to any terms or conditions imposed by an order. It also enables a term or condition to be temporarily suspended or to be revived. This ensures that the new regime will be flexible enough to deal with changing circumstances.
Subsection (2) provides for an access order to cease to have effect on the date specified in the order for the cessation of the authority to enter—a terminal date is
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a necessary feature of an access order. If the work is completed before that date, the respondent will be able, if he so wishes, to apply for the order to be varied accordingly. Equally, if the applicant needs more time, he will be able to apply for an extension. Cessation is without prejudice to the respondent's right to enforce, after that date, any term or condition of the order or any obligation imposed on the applicant, to make good the land and to indemnify the respondent against damage.
Subsection (3) makes it clear that the cessation of an access order does not affect its previous operation.
Clause 6 gives the county courts and the High Court jurisdiction in all access proceedings under the Act. This is in line with Section 1 of the Courts and Legal Services Act 1990 and jurisdiction orders made under it.
Clause 7 contains supplementary provisions relating to the effect of an access order and invalidates any contracting out. Subsection (1) provides for an access order to bind no one other than a party to the access proceedings.
Subsection (2) renders ineffective any agreement, whenever made, which would, but for this provision, have the effect of preventing or restricting a person applying for an access order. The reason for invalidating contracting out is that the scheme would otherwise be undermined.
Clause 8 concerns the Short Title, interpretation, commencement and extent. Subsection (1) gives the Short Title of the Bill. Subsection (2) defines "entry" as including the doing of anything necessary for carrying out works. This extended definition thereby ensures that the Bill, particularly Clause 1, caters for the exceptional case in which the objection to access comes not from the occupier, but from the owner of an easement over the land to which access is sought who refuses to allow the applicant to obstruct the easement.
Subsection (3) provides for the Bill to come into force on a day to be appointed by the Lord Chancellor. Rules of court under Clause 1(5) and a jurisdiction order under Section 1 of the Courts and Legal Services Act 1990 will need to be prepared before the commencement date.
Finally, subsection (4) provides expressly that the Bill is to apply only to England and Wales. I beg to move.
Moved, That the Bill be now read a second time.—(Lord Murton of Lindisfarne).
7.35 p.m.
Lord Carmichael of Kelvingrove: My Lords, we can all give a welcome to the Bill and congratulate the noble Lord, Lord Murton, on sponsoring such a helpful measure in the House. His speech was illustrated by examples of what may seem to be minor but are often most distressing social breakdowns.
The Bill relates only to England and Wales. I understand that the legal position in Scotland is somewhat different. I am not sure of that, but I have no knowledge of Scottish situations that quite parallel those illustrated by the noble Lord. I have a feeling that Scottish title to land is perhaps more explicit in

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allowing some flexibility for those owning or occupying neighbouring land. I am sure that the noble and learned Lord the Lord Advocate will be able to enlighten the House on the point or indicate whether there are equivalent loopholes in Scottish law on which, at a future date, he may think legislation for Scotland would he helpful.
Sadly, the Bill is all too necessary to regulate disputes between neighbours if agreement cannot be reached between them. There is also protection by the courts against unnecessary intrusion. Both these safeguards are unfortunately necessary since bad relations sometimes exist between neighbours. The root cause of the disagreement may have been lost in the mists of time and totally forgotten by both parties. Time can cause quite irrational positions to be taken over what may appear to be quite unimportant matters.
Having given a general and basic agreement to the Bill, I have a few doubts about one or two details. The Bill does not appear to cover damage involving costs. For example, who will be liable for damage caused while exercising a court order? I am thinking of someone chasing a drain or a sewer through a tennis court or a croquet lawn. Will reinstatement be necessary? Who will be responsible for the standard of reinstatement that will be required?
Does Clause 2(5) require some form of words to allow for financial or physical inconvenience? As an illustration, we find more and more in our cities that every piece of private ground is taken up with car parking, in order to get cars off the main roads due to the frequency of needless and heedless vandalism. Someone may require access via a small drive with three or four tenants living in a small block of flats. There may be no way for cars to enter, and people may feel strongly that if damage is caused to their cars because they are unable to use their normal parking place, there should be compensation. The same could apply to a caravan park at the height of the season. If a drain had to he taken across the park, there could be a problem and the owner of the caravan park could claim that people were unable to have access to it.
I am not trying to nit-pick. I am genuinely anxious about problems that I believe may arise. However even with those doubts which may exist only in my own mind and may be quite unnecessary, we would not wish to delay this Bill. However, we would be happy to receive any assurance that the Minister can give us tonight or in writing to assuage any doubts. I hope that we shall see progress with this little Bill which could turn out to be very important for many people involved in the situations that the noble Lord, Lord Murton, has described. We on this side of the House wish the Bill well.
7.40 p.m.
Lord Wilberforce: My Lords, there are at any rate two welcome features in the presentation of the Bill this evening. First, it brings before this House a report of the Law Commission that was made in 1985. That step is not universally taken with regard to Law Commission reports. The Government may have
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taken five-and-a-half years to bring this report out of its pigeon-hole but that is perhaps rather better than par for the course. We should therefore be grateful.The second good feature was the fair and full presentation given by the noble Lord, Lord Murton. He has enabled us to understand completely what the Bill seeks to do. I hope I may add a point 2(a) as it were. It is interesting and totally not unwelcome that the Bill seems to have been taken over in this House by our friends north of the Border. I am very happy to see the noble and learned Lord, Lord Fraser of Carmyllie, on the Front Bench and to listen to the noble Lord who has just spoken. I am also glad to see the noble Lord, Lord Mackie of Benshie—he will perhaps relate his experiences in this matter—and the noble Baroness, Lady Saltoun of Abernethy, who is seated behind me. The Bill appears to be a Scottish affair. That is remarkable, as it does not apply to Scotland. Nevertheless no doubt our friends north of the Border will be able—as the noble Lord, Lord Carmichael, suggested—to give us the benefit of their experience, as in most matters pertaining to land the Scottish law is centuries ahead of ours. It is much more practical and much more sensible than the English law in this area. We hope that we may draw something from the wisdom of our Scottish friends.
So much for the good points. However, there are certain matters which give me at any rate cause for concern. The noble Lord, Lord Murton, said quite accurately that this Bill was taken through all its stages in the House of Commons without amendment. One ought to be a little more precise and state that the Bill was taken through all its stages on a Friday afternoon, 5th July, together with a great number of other Private Bills. It was taken through without a word of explanation or a moment of discussion. It was simply passed on the nod. Yet it is a Bill of considerable interest to the public, as the Law Commission's report states in paragraph 1.7. The report states that the Bill is of general public interest. The Bill is one that greatly affects citizens' rights in a sensitive area; namely, a man's right to his home or castle.
The Bill may involve the homeowner being subjected to inconvenience without compensation. He may be involved in litigation in a county court. He may suffer physical damage to his property or he may be harassed by people who want to make life difficult for him. Are not all those considerations worth a moment of legislative time? I should have thought they were. The fact that the Bill was treated so rapidly by our honourable friends in another place makes it all the more important that we in this House should give it some attention. If we cannot revise this Bill, our claim to be a revising Chamber is rather hollow.
It is certainly not a good omen that the Bill comes before this House in the dinner break, late in the Session and at a time short of the 14 days prescribed in the Companion to the Standing Orders which should elapse between consideration given to a Bill in the House of Commons and the consideration given to it in this House. The Bill has been very well described by the noble Lord who presented it. I shall not attempt to repeat his points, but I wish to underline one or two

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features which seem to me to be worthy of consideration. In general terms the Bill allows entry onto a person's land, including entry into his house or garden, to carry out one or more of a series of works. The Bill also provides for compensation to be paid for any damage.
The examples given by the noble Lord, Lord Murton, suggest that there is in this area a need to be met. There is a problem in this area, but the question is how that need should be met and how the problem should be solved. Does the Bill go too far? Should the provisions stated in the Bill be accepted in the interests of the public? At first sight it appears that the rights given under the Bill are rather exceptional and closely limited. Clause 1(2) (a) states that a court shall make an access order only if it is satisfied that,
"the works for which the entry is sought are reasonably necessary for the preservation of the land".
The Law Commission's report states that entry to a neighbour's land is to be limited to preservation work. That all looks very nice, but the Bill itself appears to go far beyond works that one would normally consider as being connected with preservation. The Law Commission report quite fairly accepts that factor. On page 55 of the report the term "preservation" is used in a very wide sense. Preservation work is not considered merely as work that stops something from falling down or maintains it in existence. The term covers a wide range of factors.
Clause 1(4) (a) of the Bill states that an access order may be made for the purposes of carrying out,
"works of repair … improvement, decoration … or demolition".
The demolition of buildings is an extraordinary version of preservation. Subsection (4) refers to other works for which an access order may be made. Clause 1(4) (g) refers to those well-known sources of neighbour disputes and irritation—hedges, trees and shrubs. The noble Lord, Lord Murton, mentioned an apple tree. I do not think such a tree is dealt with in the Bill, although no doubt the consequential argument that was mentioned is dealt with.
Under the terms of Clause 1 a man may enter my land to clip my hedge. He may chop branches off a tree or shrub, check on the roots or even replace a tree or shrub. All those provisions give the word "preservation" a wide interpretation. That is not the end of the matter. A man who is working on my land, having gained entry to it, may leave his materials and plant on my land. He may leave the debris resulting from his work on my land; that is to say, the lopped branches, rusty gutters or demolished structures. We all know that works are seldom or never completed on time. One has visions of tools, painting materials and ladders being left on one's land for weeks while a workman is on holiday or off on another job. Those consequences are automatic on any order being made. They follow from the terms of Clause 3 unless a court decides not to apply those provisions. An order that is made may automatically result in those effects.
Even that is not the end of the matter. A neighbour who wishes to have the works carried out may bring as many people onto his neighbour's land as he wishes. If I happen to be the neighbour involved, I would not
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have the opportunity of vetting those people. They may be unidentified cowboys who have no respect for my property. I have no means of checking on those people. Again that is one of the automatic consequences of Clause 3. Were not all those factors worth a moment's examination by our legislators?
It will be said that all of these provisions are discretionary and are under the control of the courts, which may impose conditions, protections and other factors. There are certain protections in the Bill but there are also some drawbacks. First, the owner is obliged to go to the court, which may not be in his home town, or he may be obliged to employ a lawyer and probably an expert such as a builder. He may possibly have to obtain legal aid. My next point will no doubt be taken up by other noble Lords. The owner will not even be sure of recouping his costs.
County courts are particularly busy tribunals and they will be much busier in the next few years when the work of the High Court will be largely devolved onto the county courts. No doubt a Chancery judge, with the help of a surveyor or a good builder, and with the parties present, could draw up an excellent and workable scheme that included time limits, notices, restrictions, guarantees, deadlines and other provisions. But all of that takes time, especially if a court is to give consideration to the personal needs of a man, his wife, his children, his roses and his lawn. Can a busy county court be expected to devise a comprehensive scheme of protection on all those lines?
The Bill is a lawyer's construction, and from that point of view a very good one. It is essentially an attempt to put into a straitjacket of legal procedures what are essentially rules of good neighbourly behaviour. Although we always hear of the cases in which neighbourly behaviour breaks down, we should realise that for each of those there are probably a hundred cases in which such matters are arranged amicably between neighbours, with a small payment and a little negotiation and without the need to go to court.
Finally, your Lordships will wish to bear in mind that this is not an uncontroversial Bill. It is not a simple, technical Bill which one would expect to put before the House and to be passed without undue consideration on the basis that the Law Commission has gone into the matter and there is no need to do the work again. As the report shows, there has been a great deal of consultation. There is a long list of those who have been consulted. However, the views expressed in the Law Commission report are by no means unanimous. For example, paragraph 1.8 indicates that there have been considerable divergences of view. There are alternatives. There are minority views, the merits of which ought to be looked at before the law is passed.
There is a marked difference of opinion on the very important matter of compensation for access which is referred to in paragraph 4.56. There are a variety of views as to whether access should be given when "strictly necessary" or when "reasonably required" which are mentioned in paragraph 4.102. Consideration is required as to the merits of Clause

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1(2) (a) and (b) which is expressed in rather broad terms. Consideration should also be given to the important issue of compensation for inconvenience, and: here is the important issue of costs. There is also the very interesting suggestion made by the noble Lord in opening the debate as to whether a pro forma letter ought to be sent. I agree with him that it would be a very useful piece of machinery. That is mentioned in paragraph 3.63 of the report.
All those matters deserve consideration in this House. They may or may not lead to amendments. I hope that we shall not hear the argument that if we try to amend the Bill it will be lost. If that argument were to prevail it would mean that we accepted unicameral legislation, made by a Chamber which has not thought fit to give one moment's consideration to the Bill. There are many experts in this House, not only lawyers but other sensible people who know what the rights of a citizen in relation to his house ought to be, and I hope that your Lordships will give this Bill careful consideration. We should not be rushed into telescoping its stages. We should be given an opportunity to consider it in Committee and to give proper consideration both to suggestions made today and to others which may come before the House.
7.53 p.m.
Lord Coleraine: My Lords, I congratulate my noble friend Lord Murton of Lindisfarne on taking this opportunity to introduce the Bill. I wholeheartedly support some parts of the Bill but have reservations about others. It is, as the noble and learned Lord has just pointed out, a controversial Bill in several respects. In general, I support its aims and the way in which it sets about achieving them.
My own two experiences of the problem—one professional and one personal—have related to the common problem of a house wall on a boundary and the need to repair the house wall. I do not recall difficulty arising in either case. However, I accept that, where disputes arise between neighbours—and all lawyers know that the most common source of dispute is the boundary—difficulty can arise. It is also the case that it may be difficult to sell a house which has such a defect in its title. The Bill deals admirably with that kind of problem.
The Country Landowners' Association discussed the Bill with me today. The association feels that the Bill does not begin to take proper account of the position of farmers and landowners. It asks why, for example, a large-scale extractor of timber, who may have many miles of forest road on his land, should be entitled to require his farmer neighbour to allow him to take felled timber out over the farmer's fields, perhaps over a road which the farmer has installed at his own considerable expense, without any liability to pay the premium which he has always had to pay in the past and which represents some part of the benefit which the timber extractor has gained as a result of the co-operation of his neighbour. I see considerable merit in the CLA's point that all of the consideration behind the Bill has been directed at the problem of disputes affecting property owners in the urban and semi-urban context.
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I should like to turn now to some detailed aspects of the Bill and ask some questions which my noble friend or my noble and learned friend may be able to answer when they sum up. Why does Clause 1(2) provide that the court "shall" make an access order if satisfied on the two points set out in that subsection unless the respondent satisfies the court on the grounds of hardship set out in Clause 1(3)? As I read paragraph 3.42 of the Law Commission report, the Law Commission decided that a general right of access should arise only at the discretion of the court. Why, then, does the clause not give the court that discretion by using the words "may if it thinks fit" instead of "shall"? It seems to me that the points on which the court is required to be satisfied do not involve discretion. I may be wrong, but I do not understand the liberal references to reasonableness as creating a discretion.
I am advised by the CLA that plc corporations and statutory undertakers with compulsory powers to enter land to construct works, to lay pipes etc., normally exercise their rights by negotiation. When they take the rights to lay the pipes and build those works, at the same time they will negotiate rights of access for the very necessary powers which they will need over the years, perhaps every year, to maintain the pipes and to repair and oil the works. I am advised by the CLA that in some cases the compensation payable for rights to enter land for such purposes may amount to as much as half or 75 per cent. of the total compensation payable.
Under the Bill, if enacted, such undertakers will not need to negotiate access rights when they negotiate the rights to carry out the works in the first place. The CLA is concerned that, instead of exercising compulsory powers and paying compensation for access, undertakers will exercise rights under the Bill. Because of their statutory powers under Clause 1(2) (b) they will not need to satisfy the court they will merely have to satisfy the "reasonably necessary" test of Clause 1(2) (a).
Clause 1(3) provides that:
"The court shall refuse to make an access order if it is satisfied by the respondent that … such hardship will be caused by the entry as to make it unreasonable to make the order".
That does not go far enough towards the protection of the respondent. I should have thought that the court would refuse to make the order if the respondent satisfied it that it was unreasonable to make the order by reason of hardship or for any other cause.
My next inquiry is: why is inconvenience not to be compensated for under the Bill? If, to save himself large sums of money in repairing his property from his own land, someone wants to cause noise and dust and intrude on the privacy of his neighbour, making his neighbour's life a misery, surely he should pay some compensation.
I now turn to Clause 7(2), which precludes in a general way any contracting out of the provisions of the Bill. I certainly envisage cases in which it will be dangerous to let, for example, a landlord granting leases contract out of the provisions of the Bill as regards the rights of entry between one part of a building and another. However, I can also see a case

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in which a landowner—I am talking, for example, about the owner of a house with two or three acres of land—may have obtained planning permission for that land and sold two acres of it on the basis that houses would be built in such a way that no access would ever be needed to his land for the repairing of the houses on the land that had been sold. Then the person who has built the houses may have gone to the planning authority and achieved a more financially desirable layout which has thwarted the intentions of the person who sold the land. Alternatively, it may well be that the person who sold the land included in the sale land which could have been used for access purposes, but the developer has sold that piece of land for a large price. He may come back to the court a few years later saying that he cannot obtain access to his land to repair the houses on it, and requesting an order. In those circumstances, it would seem reasonable for the owner of the land, when selling it, to contract out of the provisions of the Bill.
The final point of difficulty that I find with the Bill concerns the question of costs. I should be grateful if my noble and learned friend would explain what Clause 2(6) means when it states that:
"The court may make provision for the reimbursement by the applicant of any expenses reasonably incurred by the respondent and not recoverable as costs".
It appears, at least on first reading, that the subsection assumes that, when an access order has been made, the respondent will be entitled to his costs. I see nothing in the Bill, apart from that tangential reference, to suggest that the normal rule does not apply. As a result, the successful applicant will obtain not only his access, but his costs. When introducing the Bill, my noble friend said that the normal rule as to costs would apply.
The implication of paragraph 3.48 of the report is that, because it will be obvious whether an application will succeed, an unsuccessful respondent should pay the costs. I readily concede that an unreasonable unsuccessful respondent should pay the costs. It seems right that a respondent should pay the costs, for example, where he is clearly shown to have acted unreasonably because he did not permit his neighbour, by agreement, to come on to his land, bring a ladder into the garden and repair a roof slate, but instead forced the neighbour to go to court. That is one situation in which the Bill might help because it will stop owners being unreasonable when they receive requests from their neighbours to allow them onto the land. They will know that they cannot go to court because they will have an order for costs made against them and the order for access will be made. However, I doubt whether in real life the situations to which the Bill will apply will be as simple as that.
It is equally likely that when an application to the court is made there will be questions as to whether hardship will be caused by granting the application, or whether the carrying out of the works will be substantially more difficult or expensive without entry to the land. Those are cases—I refer especially to those cases in which the applicant may save a great deal of money if he obtains his right of entry—in which lawyers and judges might come to different
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conclusions and give different advice. Those are not matters on which the result of an application can be predicted in advance with any certainty and in which one can reasonably say that someone should not have resisted the application. Because the Bill confers a special and exceptional right of entry on to another person's property, it should be only in exceptional cases where that person—the respondent—has been shown to be unreasonable in resisting the application that the respondent should not be awarded the costs of the application. If that is not the case, there will be many instances in which small people threatened with a court application by larger interests—perhaps commercial interests—will simply give in for fear of the expense and consequences of a court action.
There are a number of points in the Bill which should be considered. I join with the noble and learned Lord, Lord Wilberforce, who thought that it should be given proper consideration by the House. I hope that that will be so.
8.8 p.m.
Lord Mackie of Benshie: My Lords, my name was meant to go down on the speakers' list but, as a result of an oversight, it did not do so.
I have listened with dismay to the speeches of the two learned lawyers who have spoken. Their speeches show that neighbours should be sensible and should not go to law. There is an old story in Scotland which no doubt everyone has heard, but that will not stop me telling it. It concerns two sheep farmers in the braes of Balquhidder who quarrelled. Eventually, they were foolish enough to go to law and both went off to Edinburgh to seek a lawyer. One chap was explaining his case when the lawyer suddenly held up his hand and said, "I'm sorry, but I'm acting for your opponent. I'll give you a letter to a good lawyer". So he scribbled a note, sealed it and handed it to the farmer who, not being a fool, when he got outside thought that he had better open the letter, which said, "Dear Geordie, two rams are fighting on the braes of Balquhidder. You fleece one and ill fleece the other". That appears to be a lesson to all of us.
The two pathetic cases quoted by the noble Lord, Lord Murton, show that there are times when, unbelievably, there is no redress for some poor householders against neighbours who stop repair work which is necessary to stop the house falling to bits. I hope that the noble and learned Lord the Lord Advocate will assure us that foolishness does not pertain in Scotland and that there are methods whereby in Scotland an unreasonable neighbour, or rather the neighbour of an unreasonable man, can be protected.Having said that, it is obvious from the words of the two experienced lawyers who have spoken that one must examine the consequences. However, as regards the principle, I have no doubt that it is absolutely scandalous that people can be left in that position without any recourse to law. It will be good if the Bill puts that right.
The noble Lord, Lord Murton, seemed to indicate that a repair was quite a reasonable cause for which to obtain an order but that an improvement, unless it

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simply resulted from the repair, was not. I wonder whet her he could enlighten us on that point. It would appear to me to be reasonable that if a man wanted to improve his house and that did not affect his neighbour, he could apply under this legislation to have it done. However I believe that the Bill is necessary. The illustrations which have been given prove it.
8.10 p.m.
Lord Fraser of Carmyllie: My Lords, I should like to begin by saying that my noble and learned friend the Lord Chancellor has asked me to convey to the House his apologies for not being able to be present tonight. I must tell the noble and learned Lord, Lord Wilberforce, that this is not a matter of a Scot taking access to neighbouring land. My noble and learned friend is at a state banquet for the heads of government who are attending the 1991 Economic Summit and I have been asked to speak for the Government in his place.
I have no doubt that my noble and learned friend will follow this debate with great interest. In particular, I suspect that he will be keenly interested in the support that the noble Lord, Lord Murton, gave to the proposal for pro forma letters, which is to be found in paragraph 3.63 of the Law Commission's report. I congratulate him on having introduced his Bill so eloquently, and with such pertinent and poignant examples. I echo the congratulations that he extended to Mr. John Ward, the honourable Member for Poole, who introduced the Bill in another place. As the House will be aware, he did not have the opportunity to speak, and for that reason I entirely accent the comments of the noble and learned Lord, Lord Wilberforce, about the desirability of having some debate in this Chamber so that at least the issues that gave rise to this proposed legislation should be fully understood.
As noble Lords will appreciate, the Bill does not extend to Scotland. But I hasten to add that I do not come to the Dispatch Box trying in any sense to indicate that Scotland has solved the problem or that in this particular area of law it can claim any superiority. As in England, there is no such general right of access to neighbouring land in Scotland. It is only possible if there is some statutory or contractual right or a right arising out of land law. It is certainly not completely general.
On the other hand, the land law of Scotland is very different from the law of England. While there may be those who think that some such legislation ought to be provided in Scotland, I should most firmly counsel against any effort to extend this Bill to Scotland. It will be readily appreciated that it would not happily sit with the rest of Scottish law. Curiously enough, although there have been marked problems on this side of the Border, the situation does not seem to have given rise to quite the same difficulties North of the Border.
It is right to congratulate the Law Commission. The noble Lord, Lord Murton, has already drawn attention to the fact that the Bill had its origins in its report which was published in 1985. The matter was
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first referred to the Law Commission in 1978. With the thoroughness that has for long been the hallmark of the Law Commission's work, it issued in 1980 a working paper inviting comments on its provisional proposals. The paper attracted a considerable response from the public as well as lawyers, surveyors, professional bodies, government departments, statutory undertakers and others. One reason for the size of the public response stems from the fact that the publication of the working paper was coupled with the distribution of free copies of a pamphlet which summarised the main issues discussed in it. That was one of the earliest examples of a useful additional method of giving greater publicity to law reform proposals adopted by the Law Commission. I am told that the project was mentioned on the Jimmy Young radio programme and that in turn prompted a great many further responses from the public to the Law Commission.
That Law Commission report identified the crucial point: the present law of England and Wales does not provide any general means whereby a person who is unable to carry out necessary work to his land without access to his neighbour's land can lawfully enter that land without the neighbour's permission. As my noble friend pointed out, the right of access may exist or arise in particular cases but there is no general right. That has led to a number of cases in which extreme hardship has been caused. Buildings have fallen into disrepair, which has an adverse effect not only on the properties themselves but also on the lives of those who live in them. My noble friend gave details of a number of such cases. Over the years similar cases have been drawn to the attention of the Lord Chancellor's Department. That is what led to the matter being referred to the Law Commission in the first place.
The Government fully support the Bill. A little while ago they announced that they had accepted the commission's recommendations in the report. Unfortunately the Government were not able to find the necessary parliamentary time to include the Bill in their own perennially busy legislative programme. It is particularly pleasing therefore that my noble friend and the honourable Member in another place have been able to find an opportunity to bring forward this measure.
The contents of the Bill have been carefully and fully explained, but perhaps I may single out a few matters within it. The Bill enables a person who, for the purpose of carrying out work on one piece of the land, requires to enter neighbouring land, but is unable to obtain the necessary agreement to such entry, to apply to the court for an order authorising his entry. The circumstances in which the power of the court to make an access order is to be exercised are prescribed in the Bill in Clause 1(2); namely, on the court being satisfied that access is necessary for the carrying out of the preservation work. The court is required not to make an access order notwithstanding that the work is necessary and that entry is required if the respondent to the application satisfies the court

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that, whatever conditions are imposed, entry by the applicant would cause such hardship that it would be unreasonable to make the order.
I listened carefully to what my noble friend Lord Coleraine had to say about Clause 1(2). However, it seems to me that the Law Commission has attempted to balance carefully the respective rights of neighbours. It has put forward a scheme which allows for access to be taken in all circumstances in which one would generally think it appropriate but which allows for that entry to be refused where there is hardship.
Although Clause 6 provides that both the High Court and the county courts are to have jurisdiction, in practice applications will be handled by the county courts, as the noble and learned Lord, Lord Wilberforce, anticipated. I was glad to hear from those who contributed to the debate that the Bill is generally welcomed. I appreciate that there has been anxiety in some quarters about the effects of the Bill on the rights of individual landowners who fear that the Bill will deprive them of the peaceful enjoyment of their property. With respect in particular to the Country Landowners' Association (which I too have met), I consider that a number of fears are in danger of being exaggerated. I understand the arguments that have been advanced with regard to statutory undertakers and others; but, as I am sure the association is aware, my view is that after examining Clause 1(1) (b), it would properly reach the conclusion that a statutory undertaker could not by-pass the present arrangements that have to be made because the provision is:
"Where a person … for the purpose of carrying out works to land … does not have the agreement of a person … whose agreement to the entry he needs".
In the case of the farmer and the statutory undertaker who has a statutory right to enter the land, it cannot be said that he is a person whose agreement to the entry the applicant needs. He is already entitled to take that entry without securing agreement.
First, the type of work for which access is to be available under the scheme is limited to preservation work. As the noble and learned Lord, Lord Wilberforce, pointed out, the statutory definition of "preservation" in the Bill is possibly wider than most people would consider fell naturally within the word "preservation". Nevertheless the type of work permitted is clearly spelt out. Most importantly, access for the purposes of constructing new buildings is clearly outwith the scheme.
Secondly, the right of access under the scheme is not a permanent right. It will subsist only for the purpose of carrying out the particular project of work for which the right of access is sought—a one-off right to which a terminal date will be fixed by the court.
Thirdly, as has been explained, the court will have power to impose conditions on an access order with a view to minimising the neighbour's inconvenience and loss of privacy, reducing security risks and the risks of financial loss, physical damage or personal injury, ensuring that the work is done properly and quickly and awarding compensation if appropriate. The noble Lord, Lord Carmichael, seemed to consider that there
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was no provision for compensation. Perhaps I may advise him that if he considers Clause 2 he will find such provision.
Provision is certainly not made for an award of compensation in respect of inconvenience, to which my noble friend Lord Coleraine referred. He will find that there is a useful discussion on the matter within the Law Commission Report. It begins conveniently at paragraph 4.52. Interestingly enough, the provisional proposal was that damages or compensation for inconvenience should form part of the scheme. However, for the reasons spelt out at paragraph 4.52 and more fully at paragraph 4.54 it reaches the conclusion that compensation for inconvenience should not be allowed.
I am confident that if the courts apply the principles set out in the Bill, cases of undue hardship caused to neighbours upon whose land entry is sought will be kept to a minimum.
Finally, my noble friend Lord Coleraine asked a question about costs. As I am sure he appreciates, there is very little in statute about costs in the High Court and county courts. Section 51 of the Supreme Court Act 1981 is the relevant provision which gives the courts a general discretion. Different rules therefore can be applied in this situation, although there is no reason to suppose that the courts would apply them in the absence of any provision in the Bill.
On behalf of the Government I wish my noble friend every success in getting this small but worthwhile measure on to the statute book. I shall avoid the error of suggesting to the noble and learned Lord or others that this House should not consider amendments if it is of the view that they are desirable. However, it will be clearly appreciated that the Bill had to be introduced quickly in another place. It is a valuable small piece of legislation. I hope that our consideration of it will not impede or damage its prospects of reaching the statute book.
Lord Murton of Lindisfarne: My Lords, I thank noble Lords who have been kind and considerate enough to remain to discuss this short measure, in particular, sadly, in front of a fairly empty Chamber and rather late in the Session.
Perhaps I may explain my difficulty to the noble and learned Lord, Lord Wilberforce. The Bill came to this House within the normal 14 days' notice. My honourable friend in the other place was able, somewhat to his surprise, to get the measure through another place virtually on the nod. He had not expected that. We are now up against a difficult dateline. As I understand the position procedurally, if we were to amend the Bill at Committee stage and were to send it back again to another place, that House is not in a position to receive it because the last day for Private Members' business has passed. We shall have to consider carefully whether to proceed with the Bill as it stands or to amend it at the next stage, in which case I fear that it will fall and will have to be re-introduced at some other time. However, that is for your Lordships to decide. I simply say how grateful I am to those noble Lords who have spoken.
The noble Lord, Lord Mackie, raised the issue of improvements. If one carries out a repair one is

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authorised to do a minor improvement. For instance, if one's wooden window frame is falling to pieces, it would be quite in order to put in a better frame, perhaps double-glazing. It is only intentional improvement which is not allowed. Work which is incidental to preservation is all right so long as it cannot he construed as development. If alterations and improvements are contemplated for their own sake, that does not count as preservation work.
It is a long Law Commission report. Although I have read it two or three times, I do not pretend that cart remember all that is said in it. As the noble and learned Lord, Lord Wilberforce, said, it is clear that
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there are questions. It is not necessarily only a technical Bill. However, I have to leave the matter in your Lordships' hands. I commend the Bill to your Lordships.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Brighton Marine Palace and Pier Bill [H.L.]
Returned from the Commons agreed to.
House adjourned at twenty-seven minutes past eight o'clock.