Lords Sitting of 28 November 1991

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

Royal Assent
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:
London Underground (Safety Measures) Act.

EC Decision-Making: Control
3.1 p.m.
Lord Bethell Lord Bethell asked Her Majesty's Government:
Whether there should be democratic control over decisions reached by the 12 European Community Governments on police co-operation, immigration and asylum; and, if so, whether, in their view, such control should be exercised by national parliaments, or the European Parliament, or both.
The Minister of State, Home Office (Earl Ferrers): My Lords, the governments of the Twelve are individually accountable to their respective national parliaments for any joint decisions which they take. Her Majesty's Government believe that democratic control over actions in these important areas should be primarily by national parliaments.
Lord Bethell: My Lords, I am grateful to my noble friend. Does he agree with me, however, that it is not really enough to have important decisions on asylum, police co-operation and immigration merely cornmunicated to national parliaments or to the European Parliament in the form of an Answer to a Written Question'? Should they not be put before the parliaments before the decision is taken so that national parliaments or the European Parliament can make their views known and influence the decision?
Will my noble friend examine the procedure whereby at present information is merely provided to national parliaments? Will he see whether members of national parliaments or of the European Parliament may participate?
Earl Ferrers: My Lords, I am quite prepared to examine the procedures. However, the fundamental point is that there are important individual aspects bearing upon subjects such as asylum policy, immigration policy and the combating of drug addiction within each country. We believe that it is right to co-operate with our European partners, but not right to extend the Community competence into those areas.
Lord Richard: My Lords, is the Minister aware that there is some disquiet about the way in which
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decisions are taken at Community level? As the Minister knows, there are two groups, the Schengen Group, of which Britain is not a member, and the Trevi Group, of which it is? I am sure that the Minister is aware that policy emerges from meetings of those groups.
Can the Minister go so far as to agree with me that in relation to these sensitive areas of national policy, at the moment it is almost impossible to discover precisely what the various countries in Europe are co-ordinating and co-operating about? As the noble Lord, Lord Bethell, said, it is not good enough for decisions merely to be announced at a late stage when no one has a chance to consider them in advance.
Earl Ferrers: My Lords, the draft treaty identifies a range of interior and justice issues as being of common interest within the 12 member states. They include such matters as combating drug addiction, asylum policy and immigration policy, combating fraud and so on. The interior and justice ministers of the Twelve will remain accountable to their national parliaments for the work on decisions which are taken jointly in those areas. There will be co-operation between them but in the end it is the national parliaments who have the responsibility.
Lord Monson: My Lords, is the noble Earl aware of a news item in yesterday's Daily Telegraph which reported that Chancellor Kohl is urging the formation of a joint European police force to operate after 1994? Would this mean, for example, that after that date the CRS may be flown over from France to deal with demonstrations and similar events in the United Kingdom?
Earl Ferrers: My Lords, the noble Lord has allowed his imagination to run away with him. Europol is a proposal for a European police office which would encourage and facilitate the exchange of police and criminal information and experience. It would analyse such information for use by member states. Her Majesty's Government support it but we do not want Europol to have a supranational power of enforcement.
Lord Hailsham of Saint Marylebone: My Lords, does my noble friend agree that the operational control of police forces in this country is different from that of many of our European neighbours? The operational control of the various police forces scattered about the country by an international body would present considerable constitutional and practical difficulties.
Earl Ferrers: My Lords, I entirely agree with my noble and learned friend. The operational control of police forces in this country is different from that in other countries. Police forces in other countries differ from each other in their operational control. That is why we do not seek supranational control. We want full co-operation between the police forces of all the 12 members.
Lord Campbell of Alloway: My Lords, is my noble friend aware that the distinction which he firmly draws

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between national competence and Community competence in this regard is a source of great comfort to many of us on all sides?
Earl Ferrers: My Lords, I always like to think that I am a source of great comfort to noble Lords on all sides.
Lord Renton: My Lords, would Europol be a branch of Interpol or a rival to it?
Earl Ferrers: Neither, my Lords. It would be different from it.
Lord Morris: My Lords, does my noble friend agree that over the decades Parliament has, by means of a whole series of enabling measures in this field, given power to the Executive to look to these matters itself? It would not be practical to come back to Parliament to remove those powers which it has already granted to the Executive.
Earl Ferrers: My Lords, basically I agree with my noble friend.
Lord Mackie of Benshie: My Lords, perhaps I may return to the Question. Can the Minister say what plans the Government have, whether or not in co-operation with the rest of Europe, to separate the genuine asylum seeker from what one might call the economic immigrant? That is the great problem that faces us. All countries in Europe, or all the ones of which I know, have signed the 1951 Geneva convention on asylum, but it is becoming increasingly difficult to apply it. Genuine co-operation may enable steps to be taken which would identify genuine asylum seekers before they come to this country.
Earl Ferrers: My Lords, the whole matter of immigration in the Community is of great importance. It is necessary that we should work with our partners on border controls with a view to achieving a uniformly effective external frontier. The external frontiers convention is a step in this direction. There are other areas of immigration policy in which the harmonisation and exchange of information and experience will be valuable. We all face problems over immigration and asylum applications and we need to work together. The Dublin convention on the handling of multiple asylum applications is an example of the progress that is being made. The United Kingdom must retain control of its immigration and asylum policies. There is no question of conceding Community competence over that.
Lord Stoddart of Swindon: My Lords, the Minister gave an assurance to the noble Lord, Lord Monson, that there is no question of European police coming over here to deal with riots and other such matters. Will the Minister give a similar assurance that no undercover operations will be undertaken by Europol in this country?
Earl Ferrers: My Lords, I have tried to explain that Europol is a proposed European police office. It does not concern undercover agents working surreptitiously in other countries.
Lord Jenkins of Putney: My Lords, does the noble Earl not agree that where European policies differ from national policies, they differ from them and not to them?
Earl Ferrers: My Lords, I think I understand the point the noble Lord is making. Is he making the point that I was grammatically incorrect? If that is the case, I bow to his superior intellectual intelligence.

British Industry: Relocations
3.11 p.m.
Lord Molloy Lord Molloy asked Her Majesty's Government:
How many United Kingdom firms have relocated to other European countries during the past 12 months; and what contribution this has made to unemployment.
Viscount Astor: My Lords, detailed information is not kept in this way, but over the past five years inward investment into the United Kingdom from other EC countries has exceeded investment in the reverse direction by £4 billion.
Lord Molloy: My Lords, I thank the noble Viscount for that reply. Is he aware that the number of firms relocating to other European countries is increasing and that that could pose a grave danger to the economy of this country and prevent any recovery? Pilkington of Merseyside has said relocation occurs as firms do not wish to fall into a tax trap. Relocations have cost 700 Liverpudlians their jobs. It is said that many more jobs will be lost. Further, many students in our universities had the intention of serving British industry but those industries have relocated to Europe and those students who wished to help this country now find themselves on the dole. That is a distressing submission. Is the noble Viscount aware that the number of company liquidations is increasing? Relocation to Europe is increasing and the Government should seriously consider the implications of that.
Viscount Astor: My Lords, I can best reply to the point made by the noble Lord by quoting from a recent CBI report entitled Competing with the World's Best that states:
"investments overseas by UK companies should not be seen as weakening, but strengthening the UK's manufacturing base. If employment and investment prospects in the UK are to be sustained, the UK needs to remain a receptive and attractive base for inward and outward investment".

Housing: Owner Occupiers
3.13 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
Whether they are satisfied that present and prospective owner occupiers are given adequate financial protection by the current arrangements in the owner occupied housing sector.
The Minister of State, Department of the Environment (Baroness Blatch): My Lords, people

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who own a house have either inherited or bought it. All buyers qualify for mortgage interest relief up to £30,000 on their sole or main residence. Secure tenants of public authority housing who exercise the right to buy also have the advantage of buying at less than market value. Prospective buyers should take advice before committing themselves, and should consider shared ownership if they cannot afford to buy outright.
Lord Dean of Beswick: My Lords, I am grateful to the Minister for that reply. In 1979 2,500 houses were repossessed. In 1989 the figure was 16,000 and it is predicted that 115,000 to 120,000 houses will be repossessed this year. Those houses belonging to owner occupiers have been repossessed as their owners cannot meet their commitments. The figure of repossessions for this year represents a fortyfold increase. It appears that the Government have managed to organise a slaughter of the innocents with regard to the owner occupied sector.
The Minister has referred to the sale of council houses. Sympathetic financial treatment is being meted out to council house tenants. Some of those tenants are now receiving £40,000 and £50,000 discounts when purchasing their houses. In real terms that represents a subsidy of £80 to £100 a week on their mortgage repayments. Where is the equal society that the Prime Minister talks about when the purchase of properties is loaded so heavily in favour of one section of society? Will the Government give the same sympathetic treatment to those in the owner occupied sector as they mete out to those who buy council houses''
Baroness Blatch: My Lords, the noble Lord commented on financial protection for prospective buyers or home owners. I have to assume from what the noble Lord has said that he is critical of the right-to-buy scheme. He also appears to be critical of the extent to which people who enter the right-to-buy scheme receive discounts. The discounts are calculated according to the value given to a house as a vacant properly on the open market. That is not the case with council housing. A council house represents a secured tenancy and as such is worth little to a local authority. We are discussing whether those houses should be sold. If the discount is reduced, fewer people will be able to afford to purchase council houses. It is our view that home ownership should be extended to as many people as possible.
Lord Dean of Beswick: My Lords, that is precisely why I have asked that the sympathetic financial arrangements offered to local authority tenants should be extended to those in the private sector. I am not asking the Government to stop the sale of council houses. However, I must ask the Minister again whether she is aware that the subsidy given on the purchase of a council house amounts to £80 to £100 a week. I do not begrudge council tenants that subsidy, but I believe that similar treatment should be meted out to young people who are being evicted from their homes, probably for ever. Often those houses are the first houses those young people have been able to buy.
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All I am asking is that the Government should try to achieve the fairer society about which Mr. Major talks.
Baroness Blatch: My Lords, much is being done to help first-time buyers. There is a raft of shared ownership arrangements of which first-time buyers can make use. The economy is now more buoyant and inflation has been reduced, as have interest rates. Those factors also make it easier for young people to purchase houses. However, unless one considers reducing the discount offered to people who wish to buy council houses, a policy that offers financial help to anyone who is below a certain income to enable him to buy a house simply cannot be afforded. Perhaps the noble Lord is suggesting that such a policy will appear in the Labour Party manifesto. However, that would fly totally in the face of what the Shadow Chancellor is saying in another place.
Lord Stoddart of Swindon: My Lords, do not the Government have some duty as regards existing owner occupiers, particularly young people? Is it not the case that many of those young people were lured into buying houses that they could not afford by the availability of double mortgage income tax relief? Were not the lending institutions irresponsible, and encouraged to be so by the Government, in lending too much money to people who could not afford the repayments?
Baroness Blatch: My Lords, the noble Lord's final point is important. People should take as much advice as possible before entering into the purchase of a house. However, I maintain that to give a subsidy to anyone below a certain income who wishes to buy a house anywhere in the country would be a new and expensive burden on the taxpayer. If the noble Lord is advocating that policy, I must ask him from where the money is to come. In the meantime much is being done to help young people purchase property. As I have said, there is a raft of measures available which vary from enabling someone to be the shared owner of a property to enabling him to be the full owner of a property.

Criminal Justice Commission: Report
3.18 p.m.
Lord Mishcon Lord Mishcon asked Her Majesty's Government:
Whether, in view of public anxiety regarding legal procedures for dealing with miscarriages of justice, and in the light of the Winston Silcott case, they will request the Royal Commission on Criminal Justice to expedite its report and recommendations.
Earl Ferrers: My Lords, the noble Lord, Lord Mishcon, is looking in the wrong direction. The Royal Commission on Criminal Justice was asked to make every effort to complete its work within two years. Given the very wide range of subjects which it has been asked to consider, we do not think that the Royal

1403
Commission could reasonably be expected to bring forward its report, but we hope that it will be able to adhere to what is already a very exacting timetable.
Lord Mishcon: My Lords, I am delighted to receive a reply from the noble Earl even though I had anticipated receiving a reply from another Minister. Does not the Minister agree that our judicial system—of which we have been so proud and wish to continue to be proud—has been definitely affected by such recent cases as the Guildford Four, the Birmingham Six, the Maguire Seven and the Silcott case? Is it not a fact that the terms of reference of the Royal Commission which the noble Earl mentioned cover a variety of proposed reforms or examinations of the criminal law? Does he not think that the forecast of a two-year period before the Royal Commission reports justifies the Government asking that there should be an urgent interim report into that part of the mandate given to the Royal Commission which deals with miscarriages of justice?
Earl Ferrers: My Lords, the noble Lord, Lord Mishcon, prepared his questions thinking that he would be addressing them to my noble and learned friend the Lord Chancellor. That gives me even more cause for anxiety because the noble Lord is always particularly generous to me in a way which he may not be to one of his colleagues of his own legal distinction.
The noble Lord, Lord Mishcon, rightly referred to the anxiety which people feel about those cases. That is why my right honourable friend set up a Royal Commission. Many of the matters under examination by the Royal Commission are interrelated. It is difficult to pick out one and concentrate on that. The conduct of the review is a matter for the Royal Commission. It is unlikely that it would wish to approach its task in a disjointed way. Whether or not it makes an interim report is a matter for the Royal Commission. I guess that it will prefer to deal with the matter in the round and make a full report at the end of its deliberations.
Lord Hailsham of Saint Marylebone: My Lords, does not my noble friend agree that it was precisely the need for a comprehensive review of methods of investigation, mounting prosecutions, evidence and procedure which led to the appointment of the Royal Commission? Would it not be far better if we awaited its report, knowing how serious the matter is and how important the investigation, rather than trying to make the commission come to any rushed decisions?
Earl Ferrers: My Lords, my noble and learned friend is entirely right. The whole point of setting up a Royal Commission is to have an in-depth study. To ask the commission to rush it would be wrong. My noble and learned friend is also right in saying that there are a great many interrelated problems. For that reason it was decided that a Royal Commission was the most appropriate course. It would be right to await the report of the Royal Commission rather than trying to rush the matter.
Lord Molloy: My Lords, should it not be borne in mind that one of our policemen was slain? Somebody murdered him. Will that matter be pursued when the Royal Commission reports or is it still under investigation? Whoever killed that policeman is free.
Earl Ferrers: My Lords, the noble Lord, Lord Molloy, is quite correct to say that behind that particular incident, to which part of the Question of the noble Lord, Lord Mischon, referred, is a whole series of events which culminated in the murder of a policeman. The action that is being taken is a matter for the Commissioner of Police for the Metropolis. The original investigation was intense and wide-ranging but no significant information has been forthcoming in response to police appeals. The police are ready to consider any new information from witnesses or from any other source which may have something to offer.
Lord Mishcon: My Lords, does the Minister agree that there is a difference between the word "rush" and the word "expedite"? Does he not consider that having to wait for a period of two years —which will be followed by the time required for complex legislation—is too much to ask of a public who are seriously worried by this run of miscarriages of justice which our courts are unfortunately unable to deal with under their present powers?
Earl Ferrers: My Lords, I do not wish to get involved in a matter of semantics with the noble Lord, Lord Mishcon, as to the difference between "rush" and "expedite". The single result of either would be that the Royal Commission would produce a report, whether rushed or expedited, earlier than it would wish. I do not think that that would be right.
As regards the public anxiety, of course there is anxiety when any wrongdoing or malpractice appears. Over the past year or so there has been a series of high profile cases which would appear to involve wrongdoing on the part of the police. We must not allow such unrepresentative cases to obscure the fact that most police officers do an excellent job in very hard, difficult and sometimes frightening and dangerous circumstances.
Lord Bruce of Donington: My Lords, is the noble Earl aware that past experience has shown that frequently governments have taken as long to consider a Royal Commission report as it took to compile the report itself? Will the noble Earl give the House an undertaking that whenever the report of the Royal Commission is made public the Government will give it immediate and urgent attention?
Earl Ferrers: My Lords, of course no government would set up a Royal Commission of this nature on such a subject without considering its conclusions very carefully and with great urgency.
Earl Russell: My Lords, may I thank the noble Earl for the stress he has placed on the importance of getting this right and ask him to take note that that view is not confined to any one quarter of the House?
Earl Ferrers: My Lords, I hope that no quarter of the House would insinuate that we do not want to get it right.
Lord Allen of Abbeydale: My Lords, does the Minister agree that it is important to bear in mind that there have been important changes in criminal procedure since some of the early cases to which the noble Lord, Lord Mishcon, referred?
Earl Ferrers: My Lords, that is perfectly true. Some of the changes in procedure have been due to the introduction of the Police and Criminal Evidence Act and of the Crown Prosecution Service, both of which were the result of a previous Royal Commission investigation.
Lord Harris of Greenwich: My Lords, picking up the last point made by the noble Earl, Lord Ferrers, I very much agree with what he said. Is he not aware that the Police and Criminal Evidence Act is now recognised by most people as being a considerable improvement in the law because it followed detailed and careful consideration by a Royal Commission, unlike some other pieces of legislation which have not been handled in the same way? Is he also aware that many of us have deep sympathy with the point made by the noble Lord, Lord Mishcon? Nevertheless, given the fact that these issues are, as he said, interrelated, it is very difficult to see how there could possibly be an interim report.
Earl Ferrers: My Lords, I am grateful to the noble Lord, Lord Harris of Greenwich, for that remark. Whenever I have looked at the problem from the viewpoint of a small part of a department it has been clear that, whether it is the police, the courts, the way evidence is taken or given, or the powers of the courts to cross-examine, these matters are intricate and tied together. It is very difficult to home in on one and deal with that in isolation. One has to take them all together. As the noble Lord, Lord Harris of Greenwich, quite rightly said, it is important to get it right in the end.
Lord Jenkins of Putney: My Lords, can the noble Earl give the House an assurance that pending the report, which it has been said will take at least two years, some immediate administrative steps will be taken to prevent the wickedness which has occurred being repeated?
Earl Ferrers: My Lords, the courts can only come to a conclusion and a judgment on the evidence which is placed before them. In those particular cases the courts came to a certain judgment. It was only later that new evidence became available, and it was as a result of that new evidence that my right honourable friend referred the matter back to the courts. That is pretty convincing evidence of the fairness and justice of the judicial system.
Lord Annan: My Lords, is the noble Earl aware that the chairman of the Royal Commission, the noble Viscount, Lord Runciman, while being the soul of courtesy, has a withering way with wafflers? Does not
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the noble Earl agree that he must be allowed time to cross-examine the massed regiments of lawyers who will have to give evidence before him?
Earl Ferrers: My Lords, he will need a lot of time. I have seen some of the evidence that has been sent to him and I was very glad that I was not part of the Royal Commission.
Baroness Mallalieu: My Lords, in view of his rather depressing forecast of the length of time before we see any results from the Royal Commission, will the noble Earl take note of the great public anxiety occasioned by the delay between the time a conviction occurs and when the Court of Appeal can make time to hear that appeal, particularly in relation to cases where there is an appeal agaist conviction and the man is serving a sentence?
Will the noble Earl also bear in mind that in August of this year out of 250 cases which came into that category about 72 had been waiting for over six months and about 15 for between 12 and 18 months? In the light of the fact that a number of those cases ultimately proved to be miscarriages of justice, will the noble Earl indicate to the House what steps Her Majesty's Government propose to take as a matter of urgency to ensure that those delays are cut?
Earl Ferrers: My Lords, it is always a cause of anxiety if justice gets delayed for any length of time. The Question of the noble Lord, Lord Mishcon, referred to the case of Silcott. I took the trouble to find out the facts in that case.
Any Home Secretary has to be cautious of seeking to interfere with decisions which are reached by the courts. However, my right honourable friend received representation on 15th July 1991 that Silcott's confession was unreliable. Until that moment there had been no question of the authority of the interview concerned. It was 15th July that my right honourable friend had the information. He asked the Metropolitan Police for a report on it on 24th July. The Metropolitan Police quite rightly asked the Essex police —an outside force—to go into the matter. The report from the Essex police arrived on 26th September and my right honourable friend referred the cases of Silcott and Braithwaite on 26th September. Therefore, from that point of view there was no delay.

House of Lords Offices: Select Committee Report
3.31 p.m.
The Chairman of Committees (Lord Aberdare):My Lords, I beg to move the Motion standing in my name on the Order Paper. The meeting of the Select Committee on House of Lords Offices was solely taken up with appointing the four sub-committees. The names of those who will serve on those sub-committees are listed in the report.
Moved, That the first report from the Select Committee be agreed to.—(The Chairman of Commit tees.)
Following is the report referred to:

SUB-COMMITTEE MEMBERSHIP
In its 3rd report, session 1990–91 (H.L. Paper 69), the Committee recommended that from the beginning of the present parliamentary session it should have four subcommittees with new responsibilities, as follows—

(i) Finance and Staff;

(ii) Administration and Works;

(iii) Library and Computers;

(iv) Refreshment.

The Committee also recommended that the new sub-committees should have not more than 11 members each and that in deciding the membership of sub-committees greater weight should be given to expert knowledge and relevant experience than to strict party balance.
The House agreed to the Committee's recommendations on 10 July 1991.
The Committee has accordingly appointed the following Lords to form the sub-committees—

FINANCE AND STAFF SUB-COMMITTEE

L. Aberdare (Chairman)

L. Jenkins of Hillhead

L. Ampthill

B. Nicol

L. Bancroft

B. Seccombe

L. Cledwyn of Penrhos

L. Thomson of Monifieth

L. Dainton

L. Waddington (L. Privy Seal)

L. Jenkin of Roding

with the Clerk of the Parliments.

ADMINISTRATION AND WORKS SUB-COMMITTEE

L. Aberdare (Chairman)

L. Graham of Edmonton

L. Allen of Abbeydale

L. Hesketh

L. Ampthill

B. Hylton-Foster

L. Dainton

B. Seccombe

L. Dean of Beswick

L. Tordoff

L. Gibson

with the Clerk of the Parliments and the Gentleman Usher of the Black Rod.

LIBRARY AND COMPUTERS SUB COMMITTEE

L. Bonham-Carter

L. Peston

B. Brigstocke

L. Mclntosh of Haringey

L. Browne-Wilkinson

L. McColl of Dulwich

L. Dainton (Chairman)

L. Morris of Castle Morris

L. Flowers

L. Walton of Detchant

E. Howe

with the Clerk of the Parliments.

REFRESHMENT SUB-COMMITTEE

L. Ampthill (Chairman)

B. Hylton-Foster

L. Colnbrook

L. Graham of Edmonton

B. David

L. Mason of Barnsley

L. Denham

Ly. Saltoun of Abernethy

B. Hamwee

L. Tordoff

L. Hesketh

with the Clerk of the Parliaments
On Question, Motion agreed to.

King's Cross Railways Bill
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper. The orders made by the Commons which are referred to revive the Bill, which is a private Bill at present in another place. It will continue its progress there.
Moved, That this House do agree with the orders made by the Commons set out in their Message of 26th November.—(The Chairman of Committees.)
On Question, Motion agreed to, and it was ordered that a Message be sent to the Commons to acquaint them therewith.

Severn Bridges Bill
The Chairman of Committees: My Lords, I beg to move the third Motion standing in my name on the Order Paper. This is a hybrid Bill and therefore goes to a Select Committee. The names recommended by the Committee of Selection are shown on the Order Paper.
Moved, That as proposed by the Committee of Selection the following Lords be named of the Select Committee to consider the Bill—

L. Ampthill (Chairman),

L. Brougham and Vaux,

L. Galpern,

L. Redesdale,

V. St. Davids;

and that the Committee do meet on Monday 2nd December at 10.30 a.m. in Committee Room 4.—(The Chairman of Committees.)
On Question, Motion agreed to.

Charities Bill [H.L.]
3.32 p.m.
The Chairman of Committees: My Lords, I beg to move the fourth Motion standing in my name on the Order Paper. It was agreed by your Lordships yesterday that this Bill should go to a Public Bill Committee. The names proposed for those to sit on the Committee, agreed by the Committee of Selection, are on the Order Paper.
Moved, That as proposed by the Committee of Selection the following Lords together with the Chairman of Committees be named of the Public Bill Committee to consider the Bill—

L. Allen of Abbeydale,

V. Astor,

L. Beaumont of Whitley,

L. Brightman,

L. Congleton,

B. Denton of Wakefield,

B. Faithfull,

E. Ferrers,

L. Harris of Greenwich,

B. Hilton of Eggardon,

L. Houghton of Sowerby,

L. Morris of Castle Morris,

L. Peyton of Yeovil,

L. Richard,

L. Renton,

That the procedure of the Committee shall be so far as possible that of a Committee of the Whole House;
That the report of the Committee's debates be published from day to day and the Minutes of the Committee's proceedings be published as appendices to the Minutes of Proceedings of the House;
That the Committee do meet on Tuesday next at a quarter past three o'clock in the Moses Room.—(The Chairman of Committees.)
Lord Cledwyn of Penrhos: My Lords, as the noble Lord the Chairman of Committees and the noble Lord the Leader of the House know, we support the proposal that the Charities Bill should go to a Public Bill Committee because we wish to see the Bill on the statute book after due examination. However, I note from the wording of the Motion,
"That the Committee do meet on Tuesday next at a quarter past three o'clock in the Moses Room".
The House will recall that the last time a Bill was referred to a Public Bill Committee was in 1985 when the Pilotage Bill was so committed. There was a good deal of argument and disagreement as to whether or not the reference to a Public Bill Committee had been a success. There was division among the Members of the Committee on the matter.
One problem was that the Committee met in the Moses Room, which is adjacent to this House, and that sittings were held in the afternoon when the House was also sitting. Many difficulties arose which I believe could have been avoided if the Committee had met upstairs. An even better solution would have been to meet upstairs in the morning. In order to ensure that the reference on this occasion is given an opportunity to be a success, perhaps I may ask whether it is possible to find room upstairs for the Committee to meet in the morning.
The Chairman of Committees: My Lords, with regard to holding the Committee in the Moses Room, I am afraid that the pressure on our committee rooms is now absolutely extreme. With private Bills, hybrid Bills and numerous other ordinary committee meetings, it is quite impossible to find a place for the Committee to meet other than in the Moses Room.
The Moses Room has certain advantages as well as disadvantages. It is somewhat like this House in the way that it is set out. It has a Bar of the House. I believe that it is not too bad. Since the Pilotage Bill we have tried to improve the facilities in respect of sound, and so on.
With regard to the times of sitting, the first meeting will be in the afternoon because it seemed to us that people would be present without having to alter their diaries. But it is entirely up to the Committee at its first meeting, to decide when it will meet in future. I think it quite likely that Members will decide to meet in the morning which I am sure will please the noble Lord the Leader of the House.
Lord Cledwyn of Penrhos: My Lords, I am most grateful to the noble Lord the Chairman of Committees for his reply. However, the fact remains that the location of the Committee in the Moses Room is thoroughly unsatisfactory. It is an important Bill and an important reference to a Public Bill Committee. I know that many noble Lords would like to see such references become a success. Therefore to say that there are other matters which must be discussed upstairs is not an adequate reply. After all, as the House well knows, the practice in the other place is to refer Committees upstairs. If they were adjacent: to the House of Commons there would be a riot there as well.
The Chairman of Committees: My Lords, with great respect to the noble Lord, I do not agree. There is only one really large room upstairs which is divisible into two. That is able therefore to accommodate two committees. We then use the Moses Room which I do not think is all that unfortunate a place in which to hold meetings. I have many meetings there.
Lord Simon of Glaisdale: My Lords, was not one of the Committee meetings on the Pilotage Bill taken upstairs? Were not both the upstairs room and the Moses Room found to be inconvenient?
Lord Harris of Greenwich: My Lords, having been involved as a Minister in putting through a Bill—admittedly, shorter than the Charities Bill—in the Moses Room, I am bound to say that on that occasion we found no difficulty about holding sittings there. share the view of the noble Lord the Leader of the Opposition that we wish to make this a success. Certainly, if there is a problem about location after Tuesday afternoon, no doubt that can he discussed through the usual channels.
On Question, Motion agreed to.

Local Government Bill [H.L.]
3.38 p.m.
Baroness Blatch: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That it be an Instruction to the Committee of the Whole House to whom the Local Government Bill has been committed that they consider the Bill in the following order—

Clauses 1 to 11,

Schedule 1,

Clause 12,

Schedule 2,

Clauses 13 to 27,

Schedule 3,

Clauses 28 and 29,

Schedule 4,

Clause 30.—(Baroness Blatch.)

Lord McIntosh of Haringey Lord McIntosh of Haringey rose to move, as an amendment to the Motion,
Line 4, leave out ("Clauses 1 to 11, Schedule I") and insert ("Clauses 1 to 7")
The noble Lord said: My Lords, the Motion before the House is a procedural Motion and I shall attempt to confine my remarks to procedural remarks. I shall certainly not indulge in comment on the content of Clauses 8, 9, 10, 11 and 12 and Schedule 1 which my amendments remove from the immediate consideration of the Committee.
The matter is one of great importance to the reputation and responsibilities of this House as a revising Chamber. Noble Lords may recall from previous debates that when the Bill was published at the beginning of this month, on the same day a consultation paper was issued by the Department of the Environment on compulsory competitive tendering entitled Competing for Quality. That is the subject matter of those four clauses and the schedule. The date for receipt of replies to the consultation process

1411
is 31st January 1992. It will be obvious to your Lordships that consideration of the Bill in this House will be complete before 31st January 1992. For that reason alone it would be unsatisfactory to have a consultation process simultaneously with consideration of the Bill in this House. Furthermore, it would be unsatisfactory if the House did not have available to it the responses to the consultation document, if that document is taken seriously.
But the situation is worse than that. It is clear that in this Bill we come closer to the doctrine of legislation by this Government—that the Secretary of State shall do as he likes—than we have ever come before. The poor old Department of the Environment is a little out of step. Other departments appear to have realised that the Government will lose office within the next nine months and have gone out of their way to make Bills as precise as possible in order to tie the hands of the Labour Government which will take their place. However, the Department of the Environment has not yet woken up to that reality. The clauses which this House is being asked to consider in Committee and in later stages are full of references to the powers of the Secretary of State but without indication of what the Secretary of State will do with those powers.
It is entirely unsatisfactory for this House to be asked to consider those clauses under those circumstances. We as Members of a revising Chamber cannot possibly do our job properly. My amendment does not go against the decision that the Bill shall be considered in Committee. However, it will delay that consideration until the Government have reported to the House the results of the consultation. That would be in accordance with the traditions of this House. I beg to move.
Baroness Hamwee: My Lords, I support the amendment. Consultation is now taking place but consultation is always difficult. The essence is that those who are consulted must have confidence that what they say will be taken seriously. The reputation of this House and of the working of the Government is before us today.
On Second Reading I asked the Minister what the Government's response would be if there were a negative answer to the consultation. I hope that she can explain what will happen if the consultees say no to the consultation. Indeed, it would be better if she conceded that we should wait to hear the response. There is a risk that the consultation exercise will be regarded as cynical.
A White Paper was published simultaneously with the consultation paper. I am sure that all noble Lords will wish to look at the issue in the context of the Citizen's Charter. With regard to local authorities, it asks for higher standards, better value for money and so forth. It also states that people should be given more choice. However, is there a real choice if those who have the opportunity to respond to consultation feel restrained by legislation which is already in place? On my reading of the Bill the legislation will apply to all council services involving the application of any technical or financial expertise. Everyone working in a local authority up to and including a chief executive must fall within that provision. It is most serious and
1412
wide-ranging. Unless the amendment is agreed to the citizens whom we ask to comment during consultation might rightly say, "You tell us that you hear us, but are you really listening?".
3.45 p.m.
Lord Boyd-Carpenter: My Lords, I hope that your Lordships will not accept the amendment. The House has a most important Bill in front of it and deliberately to cut out discussion in Committee of important parts will lead inevitably to great confusion. If it is the view of some noble Lords opposite that certain clauses will require further elucidation in the light of consultation no doubt they will make that point when we deal with those clauses. However, to amputate from the Committee stage any discussion of those clauses will produce considerable disorder in the management of the affairs of this House. I hope that your Lordships will reject the amendments.
Lord McIntosh of Haringey: My Lords, I do not claim credit for the detail of the wording of the amendment. It does not amputate the discussion in Committee. The House has already taken the decision to refer the Bill to a Committee of the Whole House. The amendment is worded carefully to ensure that the staging of the Committee is such that the results of the consultation will be available before the relevant clause is considered. Nothing is amputated.
Lord Boyd-Carpenter: My Lords, the noble Lord says that nothing is amputated but that is exactly what the amendment does. It breaks up the normal order of discussion. It is no good the noble Lord saying that the effect is to delay discussion until whatever he wants has taken place. The amendment amputates the Bill and I am sorry if he cannot understand that simple English word.
Lord Tordoff: My Lords, the discussion will not be delayed until whatever the noble Lord, Lord McIntosh, wants has taken place. The Government have decided what must take place, and that is the consultation process. If the Government are serious about consultation they should not put on the statute book primary legislation which overturns that consultation before it has taken place.
Lord Skelmersdale: My Lords, relevant to that is a further point. It is some time since I read the consultation paper Competing for Quality. In the meantime, I have read Clause 8 of the Bill and I am sorry that it is necessary to refer briefly to it. Clause 8 empowers the Secretary of State to draw up affirmative orders in order to take particular action. It is that action which is dependent on the consultation paper and not the primary legislation.
Baroness Blatch: My Lords, it is precisely because the Government are serious about consultation that I shall invite the House to reject the amendment tabled by the noble Lord, Lord McIntosh. I listened to his comments in support of his amendment that the consideration of the Local Government Bill by a Committee of your Lordships' House should exclude,

1413
for the time being, consideration of Clauses 8 to 11 and Schedule 1. The noble Lord gave notice of his intentions during the debate on Second Reading.
Your Lordships will appreciate that this is an unusual situation and not one that has precedents in this House or in another place. Your Lordships' House has a reputation for careful consideration of legislation brought before it by the Government of the day, and deals with its responsibilities thoroughly and in detail. Noble Lords opposite have at their disposal a wide range of methods of focusing attention on individual provisions. I have no doubt that they will use those to the full as this Bill proceeds through Committee.
It is precisely in Committee that it would be appropriate for them to raise the sort of detailed question which the noble Lord's amendment addresses. They will do so against the background of the principles for the extension of compulsory tendering set out in the Citizen's Charter White Paper, and of the consultation paper Competing for Quality—Competition in the Provision of Local Services referred to by my noble friend Lord Skelmersdale. It sets out our intentions in detail and we have invited comments on it. It is important to note that in addition any secondary legislation which will flow from this part of the Bill will be subject to the usual scrutiny of both Houses. In particular, regulations consequential on Clause 8—which I believe most offends the noble Lord—would be subject to affirmative resolution.
The opportunity that the noble Lord, Lord McIntosh, and other noble Lords will have to put forward amendments to the Bill applies to Clauses 8 to 11 and Schedule 1 just as it does to the other provisions of the Bill. It is open to all noble Lords to table amendments removing from the Bill the clauses to which the noble Lord, Lord McIntosh, takes exception and to table amendments which will have the effect of delaying their implementation or which will have the effect of restricting the scope of the provisions. Your Lordships will then be able to consider in detail those amendments and the clauses to which they refer. I see no justification for denying your Lordships the opportunity to put forward and consider such amendments.
I suggest that the proposal is rather inconsistent. Another consultation document has been issued on another part of the Bill; that is, guidance to the Local Government Commission. The noble Lord has chosen to be selective and that rather suggests that this is less a matter of principle and more a delaying tactic on the Bill.
The noble Baroness, Lady Hamwee, asks what will happen if the results of the consultation indicate that our proposals are not liked or should be modified. That is the reason for the consultation document: it will influence the content of the regulations which come before your Lordships' House. Your Lordships will then be given a full opportunity to discuss the regulations and to approve or not to approve them.
I ask the House not to break with convention but to give way to the normal rigorous method of
1414
scrutinising legislation. I ask the noble Lord to withdraw his amendment. I invite the House to accept the Motion standing in my name on the Order Paper.
Lord Tordoff: My Lords, before the noble Lord, Lord McIntosh, replies, I make the point that the Government are hiding once again behind the pretence that affirmative resolutions and prayers against negative instruments can be dealt with by your Lordships. We all know that they can and are debated. However, there is a convention that we do not divide on those. I say from these Benches that if the Government persist in hiding behind that kind of secondary legislation, there will come a time when we shall insist on dividing the House on those statutory instruments.
Baroness Blatch: My Lords, there is also a convention that we do not remove from Bills large numbers of clauses and set them aside for discussion on another day. If the House does not like what is in regulations, then it must have its say. That is why regulations come before the House especially in the form of affirmative resolutions.
It would be quite wrong and quite precipitate of this Government, in advance of consulting the people, to take a view of what people may think and put that into the regulations at this stage. I implore the House to reject the amendment and to agree to the Motion standing in my name on the Order Paper.
Lord McIntosh of Haringey: My Lords, I am surprised that the Minister should plead in support of the double fault which the Government have now committed by issuing this week a consultation paper on guidance to the Local Government Commission. That is fairly indefensible, but at least Part II expresses the Government's views about what the Local Government Commission should do. The draft guidance notes for consultation merely fill out the detail of that.
Clauses 8 to 11 and Schedule 1 are entirely different from that. Anybody reading objectively those clauses and that schedule cannot for a moment work out what is the Government's intention because the Government have not made up their minds. For that reason, it is unsatisfactory that we should seek to amend measures which have not been adequately discussed and not clearly set out.
Baroness Blatch: My Lords, has the noble Lord totally ignored the plethora of detail set out in the two documents—the Citizen's Charter White Paper and the document on local competitive services?
Lord McIntosh of Haringey: My Lords, the Minister is digging herself deeper into a hole. The Government are asking us to sign a blank cheque on the face of the Bill. There are documents which are not statutory documents, both in the form of the Citizen's Charter and the consultation document. The content of those documents is not reflected on the face of the Bill. The Government ask us to agree to those clauses in the Bill. I put it to your Lordships that it would be entirely improper for us to do that and I seek the opinion of the House on this matter.
3.55 p.m.
On Question, Whether the amendment shall be agreed to?
Their Lordships divided: Contents, 108; Not-Contents, 138.

Division No. 1

CONTENTS

Addington, L.

John-Mackie, L.

Ailesbury, M.

Judd, L.

Airedale, L.

Kagan, L.

Ardwick, L.

Kennet, L.

Aylestone, L.

Kilbracken, L.

Beaumont of Whitley, L.

Kirkwood, L.

Birk, B.

Kissin, L.

Bonham-Carter, L.

Leatherland, L.

Bottomley, L.

Listowel, E.

Broadbridge, L.

Llewelyn-Davies of Hastoe, B.

Bruce of Donington, L.

Lockwood, B.

Callaghan of Cardiff, L.

Longford, E.

Campbell of Eskan, L.

Lovell-Davis, L.

Carmichael of Kelvingrove, L.

Macaulay of Bragar, L.

Carter, L.

McCarthy, L.

Chester, Bp.

Mclntosh of Haringey, L.

Cledwyn of Penrhos, L.

Mackie of Benshie, L.

Cudlipp, L.

McNair, L.

David, B.

Mallalieu, B.

Dean of Beswick, L.

Mason of Barnsley, L.

Desai, L.

Mayhew, L.

Diamond, L.

Milner of Leeds, L.

Donaldson of Kingsbridge, L.

Mishcon, L.

Donoughue, L.

Molloy, L.

Dormand of Easington, L.

Morris of Castle Morris, L.

Ennals, L.

Mulley, L.

Ewart-Biggs, B.

Perry of Walton, L.

Ezra, L.

Pitt of Hampstead, L.

Falkender, B.

Porritt, L.

Falkland, V.

Prys-Davies, L.

Fitt, L.

Richard, L.

Gallacher, L.

Ritchie of Dundee, L.

Galpern, L.

Rochester, L.

Gladwyn, L.

Russell, E.

Graham of Edmonton, L.[Teller.]

Sainsbury, L.

Scanlon, L.

Greene of Harrow Weald, L.

Seear, B.

Gregson, L.

Serota, B.

Grimond, L.

Shackleton, L.

Hampton, L.

Shaughnessy, L.

Hamwee, B.

Stallard, L.

Hanworth, V.

Stedman, B.

Harris of Greenwich, L.

Stoddart of Swindon, L.

Hilton of Eggardon, B.

Strabolgi, L.

Hirshfield, L.

Tordoff, L. [Teller.]

Hollick, L.

Turner of Camden, B.

Hollis of Heigham, B.

Underhill, L.

Holme of Cheltenham, L.

Wallace of Coslany, L.

Houghton of Sowerby, L.

White, B.

Hughes, L.

Williams of Elvel, L.

Hunt, L.

Willis, L.

Jay, L.

Wilson of Rievaulx, L.

Jeger, B.

Winchilsea and Nottingham, E.

Jenkins of Hillhead, L.

Young of Dartington, L.

Jenkins of Putney, L.

NOT-CONTENTS

Aldington, L.

Boardman, L.

Alexander of Tunis, E.

Borthwick, L.

Allenby of Megiddo, V.

Boyd-Carpenter, L.

Annan, L.

Brabazon of Tara, L.

Arran, E.

Brougham and Vaux, L.

Astor, V.

Butterworth, L.

Astor of Hever, L.

Caldecote, V.

Auckland, L.

Campbell of Alloway, L.

Balfour, E.

Carnegy of Lour, B.

Belhaven and Stenton, L.

Carnock, L.

Beloff, L.

Cavendish of Furness, L

Belstead, L.

Clanwilliam, E.

Bessborough, E.

Clitheroe, L.

Blatch, B.

Cockfield, L.

1416

Colnbrook, L.

Middleton, L.

Constantine of Stanmore, L.

Milverton, L.

Cottesloe, L.

Morris, L.

Cross, V.

Mottistone, L.

Darcy (de Knayth), B.

Mowbray and Stourton, L.

Davidson, V. [Teller.]

Moyne, L.

De Freyne, L.

Munster, E.

Denton of Wakefield, B.

Murton of Lindisfarne, L.

Downshire, M.

Napier and Ettrick, L.

Effingham, E.

Nelson, E.

Elles, B.

Norfolk, D.

Elliot of Harwood, B.

O'Cathain, B.

Elliott of Morpeth, L.

Onslow, E.

Erroll of Hale, L.

Oppenheim-Barnes, B.

Faithfull. B.

Orkney, E.

Ferrers, E.

Orr-Ewing, L.

Flather, B.

Oxfuird, V.

Fortescue, E.

Park of Monmouth, B.

Fraser of Kilmorack, L.

Pender, L.

Gainsborough, E.

Prior, L.

Gisborough, L.

Pym, L.

Gray of Contin, L.

Quinton, L.

Gridley, L.

Rankeillour, L.

Grimthorpe, L.

Rees, L.

Hailsham of Saint Marylebone, L.

Renton, L.

Renwick, L.

Harvington, L.

Rodney, L.

Haslam, L.

St. John of Bletso, L.

Henley, L.

Saint Oswald, L.

Hesketh, L. [Teller.]

Sandford, L.

Hives, L.

Sandys, L.

Holderness, L.

Savile, L.

Hooper, B.

Selsdon, L.

Howe, E.

Shannon, E.

Hylton-Foster, B.

Sharples, B.

Jenkin of Roding, L.

Sherfield, L.

Killearn, L.

Shrewsbury, E.

Kinnaird, L.

Simon of Glaisdale, L.

Kitchener, E.

Skelmersdale, L.

Knollys, V.

Stanley of Alderley, L.

Laing of Dunphail, L.

Stockton, E.

Lauderdale, E.

Strathcona and Mount Royal, L.

Lawrence, L.

Liverpool, E.

Strathmore and Kinghorne, E

Lloyd of Hampstead, L.

Swinfen, L.

Lloyd-George of Dwyfor, E.

Taylor of Hadfield, L.

Long, V.

Tenby, V.

Lytton, E.

Terrington, L.

McAlpine of West Green, L.

Teviot, L.

Mackay of Ardbrecknish, L.

Thomas of Gwydir, L.

Mackay of Clashfem, L.

Trumpington, B.

Macleod of Borve, B.

Ullswater, V.

Marlesford, L.

Vaux of Harrowden, L.

Masham of llton, B.

Vivian, L.

Merrivale, L.

Waddington, L.

Mersey, V.

Wharton, B.

Resolved in the negative, and amendment disagreed to accordingly.
On Question, Motion agreed to.

Offshore Safety Bill [H.L.]
4.3 p.m.
The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Viscount Ullswater.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Chairman of Committees in the Chair.]
Clause 1 [Application of Part I of 1974 Act for offshore purposes]:
On Question, Whether Clause 1 shall stand part of the Bill?
Lord McCarthy: As we made clear on Second Reading, we generally support the Bill's purposes; nevertheless, we have a number of criticisms to make and it is convenient to make some of the more serious ones now in relation to Clause 1. The purpose of the Bill, as the Minister said on Second Reading, is the prevention of accidents offshore based upon an acceptance of Lord Cullen's proposals.
The Minister then said, at col. 658 of Hansard of 11th November, 1991:
"The Government immediately accepted all 106 recommendations",
of the Cullen Report.
In opposing the clause, we say that the face of the Bill does not reflect that commitment; that the Bill is a narrow Bill which deals merely with those aspects of Lord Cullen's report which dealt with safety; that there are a number of Lord Cullen's recommendations which do not find themselves in the Bill; and that we should like to see the Government make certain commitments, if not that they can be put in the Bill, that they will follow in the near future.
When the Bill was going into Committee we sought to make a number of amendments. We wanted to move amendments dealing with safety and, in particular, with safety committees. We wanted to follow through Lord Cullen's recommendations, in particular, recommendations 27, 30 and 31. We tabled amendments attempting to do something about that. Recommendation 27 states:
"The regulatory body, operators and contractors should support and encourage the involvement of the offshore work force in safety. In particular, first line supervisors should involve their workforce teams in everyday safety".
We do not find provisions in the Bill which we consider deal with that recommendation.
Just as importantly, recommendation 30 states:
"Safety representatives should be protected against victimisation by a provision similar to Sec 58(i) (b) of the Employment Protection (Consolidation) Act 1978".
We do not see that provision in the Bill. It is true that the Minister said that at a convenient time in the future the Government intend to legislate to that effect; but we do not see why the Government could not frame a Bill which would have enabled that provision to be included.
Finally, in relation to Lord Cullen's recommendations, recommendation 31 states:
"The Offshore Installations (Safety Representatives and Safety Committees) Regulations 1989 should be modified to the effect that the training of safety representatives should be determined and paid for by the operator".
Again, the Minister told us that the matter was subject to review; but we have no time span for that review. There is no sense of urgency. Safety representatives are not protected against victimisation. The safety committees have not been modified to the effect that the training of safety representatives shall be determined and paid for by the operators. There is nothing in the Bill to deal with the support, encouragement and involvement of the offshore workforce in safety matters. Therefore, we ask the Government what are their intentions in the immediate future.
1418
We know that we cannot amend the Bill. We know that, even if we change the Bill's Long Title. We have been told that the Bill in its present context is essentially a Bill about safety, and that to do the things we want to do, it would become a Bill not just about safety, but about safety and employment.
We ask the Minister to tell us now what the Government intend to do about those other matters, which are connected to safety but which have an employment context.
Perhaps I may raise one issue to which I ask the noble Viscount to address himself. We were told that one of our amendments was not possible because of the Long Title of the Bill. It was to deal with the situation where a worker feels that he or she is working in unsafe conditions. The issue is whether in that circumstance a worker can refuse to work as an individual and if that constitutes a breach of contract which justifies dismissal. If that is lawful, we also wish to know whether workers as a group could also refuse to work in what is regarded as unsafe conditions. Let us suppose that when workers decide not to work as a group that action is regarded in some sense as a strike or withdrawal of labour designed to put pressure on an employer. Is that safe from the legal point of view or does it constitute the kind of action which could be said to be the subject of a fair dismissal?
In another place on 20th March, the Minister of State claimed in Committee, at col. 391:
"It is unlawful to work in unsafe conditions and does not constitute industrial action".
That is the Government's position. The Minister of State went on to say that,
"a simple refusal to work in unsafe conditions does not constitute industrial action".
We consider that that does not fit with recent case law. I refer to Power Packing Case Makers v. Faust 1983 and Wilkins v. Cochrane 1984. We say that those cases put into very considerable doubt the position from the point of view of the courts as to whether it is lawful simply to refuse to work in unsafe conditions and whether that might not constitute industrial action.
Therefore, we are asking the Government that should they do nothing about the Bill and the clause now, they will undertake—if they are fortunate enough to survive long enough—to implement their present proposals for further legislation as embodied in the Green Paper on further industrial relations reform. Perhaps they will also say whether they are telling us here today that they are going to put these matters into a future employment Bill. I ask the noble Viscount to tell the Committee whether the Government will do something about the three recommendations in the Cullen Report which are not included, and in particular that they will do something about clarifying the position as to whether or not it is lawful or unlawful to work in unsafe conditions. It is on that basis that we oppose Clause 1 of the Bill.
Lord Rochester: At Second Reading I said that on these Benches our general attitude to the Bill was one of support in so far as the Bill followed the recommendations of the Cullen Report on the Piper Alpha disaster. Therefore, it may seem strange at

1419
Committee stage for me to start by supporting the noble Lord, Lord McCarthy, in opposing the Question that Clause 1 should stand part of the Bill. The explanation is straightforward: in my view the Bill does not go far enough in implementing Lord Cullen's recommendations and this is my only opportunity in Committee to say so.
At Second Reading, like other noble Lords, I drew particular attention to the recommendations concerning safety committees and representatives to which the noble Lord, Lord McCarthy, has already referred. Lord Cullen stressed the value of a safety committee system as a means of providing for new ideas and solutions to be brought forward and for passing verbatim and uncensored safety comments up the management line. He also said that the system helps to enforce the principle that each employee is responsible for his own safety and for that of his fellow workers.
I agree with Lord Cullen's conclusion that employee representatives on these committees need not be drawn from trade unions, but in my view it is essential to ensure that all employees are involved in the promotion of safety at work. At Second Reading I said that I should like to see some reference to that matter in the Bill and that I might wish to return to it in Committee. It appears that this is the only chance I have to do that. As the noble Viscount, Lord Ullswater, told us earlier, provision for the appointment of safety representatives in Committee is made by regulations under the Mineral Workings (Offshore Installations) Act and the whole question of their effectiveness is now subject to review. Meanwhile, there is no opportunity to pursue that matter further and that I regret.
Similar considerations apply to Lord Cullen's recommendation that safety representatives should be protected against victimisation, which is another point already mentioned by the noble Lord, Lord McCarthy. We are told that the Government intend to amend employment protection legislation to ensure that any representative who has been dismissed or otherwise victimised can gain redress through an industrial tribunal. But such legislation falls outside the scope of the present Bill because it deals only with safety matters and not with employment issues. The matter of victimisation is to be dealt with only when a suitable legislative vehicle presents itself, and that, too, I regret.
At Second Reading I also drew attention to the statement in the Explanatory and Financial Memorandum that there would be no increase in public expenditure or manpower in consequence of the Bill. I questioned how far, if that were so, the resources available to the Health and Safety Commission, particularly as regards the number of inspectors, would be sufficient to enable the Health and Safety Executive fully to implement Lord Cullen's recommendations.
I take this opportunity to thank the noble Viscount for his helpful letter to me explaining what I should have realised before; that in practical terms the transfer of responsibility for offshore safety and of staff from the Department of Energy to the HSE has
1420
already taken place and that the resources available to the commission have been increased to cover the other tasks recommended by Lord Cullen. That has certainly relieved me of one anxiety. But I continue to regret that, despite the enormous risks that are run by those who have to take part in offshore operations, the opportunity has not been taken to deal in the Bill with any of Lord Cullen's recommendations concerning the employment aspects of safety offshore. I therefore agree with the noble Lord, Lord McCarthy, that Clause 1 of the Bill is quite inadequate in that respect.
4.15 p.m.
Viscount Ullswater: I am disappointed that we need to debate whether Clause 1 should stand part of this Bill. At Second Reading I thought that it had been welcomed by both the noble Lord, Lord McCarthy, and then by the noble Lord, Lord Rochester. An amendment such as this to remove Clause 1 would have the effect of wrecking the entire Bill. I understand the concerns of both noble Lords about victimisation and other anxieties and I shall deal with those matters shortly.
Clause 1 is the key provision of the Bill. It paves the way for one of the vital recommendations of Lord Cullen—the reform and enhancement of existing offshore health and safety legislation. It is an essential step towards the creation of the "goal setting" regulatory regime set out by Lord Cullen. It is not the intention of this Bill to implement all of Lord Cullen's recommendations. This Bill deals with the technical legal measures necessary for the development of the new legal framework which will apply to offshore health and safety. Without this clause the process of reform cannot begin. The Government are committed to implementing all of Lord Cullen's recommendations. This will take time but this clause and this Bill is essential to the overall process. On this ground alone I commend the clause to your Lordships.
I now need to deal with the issue of victimisation. I reiterate that there is no question of Lord Cullen's recommendation on victimisation being ignored. The Government have accepted it. We have accepted all the recommendations of Lord Cullen's outstanding report. The current Bill is not the right place to implement this particular recommendation. That is because the Bill is an enabling measure confined to health and safety. It is not concerned with employment issues. We intend to amend employment protection legislation to implement both Lord Cullen's recommendation and the requirements of a European directive called the framework directive.
Perhaps I can explain our intentions for implementing the recommendation and the relevant provisions of the framework directive. The directive has to be implemented by the end of 1992. It requires that certain employees with specific health and safety functions or other workers who take action in the face of imminent danger should not be victimised for taking such action. We intend to ensure that such employees will be able to complain to an industrial tribunal if they are dismissed or suffer other victimisation by their employer for carrying out their

1421
health and safety duties. Extending those provisions offshore, as it is our intention to do, will fulfil Lord Cullen's recommendation.
So the Government's commitment cannot be questioned. We will implement those measures just as soon as a suitable legislative vehicle is available. Even under current legislation, anyone who is qualified to make a complaint of unfair dismissal to an industrial tribunal would already have a very strong case if he or she were dismissed for making justified complaints about health and safety risks.
Of course it would be quite unacceptable if employees were victimised for pursuing justified fears. As I have said before, victimisation of workers who raise safety concerns is completely unacceptable to the Government and to the HSE. It undermines the objective of increased safety awareness. If there is any evidence of intimidation taking place, HSE will look into it: the name and address of an offshore inspector is displayed on every offshore installation and anonymity is guaranteed if requested.
The noble Lord also asked about safety committees and the workforce involvement. The safety cases in preparation at the moment will require safety management systems which will involve the workforce. The regulations for those are in hand. There is a timetable by which they must be presented to the Health and Safety Executive and I believe that that is the proper way to deal with it. At Second Reading, the noble Lord, Lord Rochester, mentioned safety committees, and I believe I sought to concern myself with that. I do not believe that changes can be made to the 1989 safety representatives and safety committee regulations under the Health and Safety at Work etc. Act until the Bill is enacted, making the regulations statutory provisions. It would not be appropriate to make detailed provision in the Bill while the review which I announced is being carried out. Changes could be made under the Mineral Workings (Offshore Installations) Act in advance of the Act being made part of the "existing statutory provisions." However, it will not be appropriate to amend the regulations while that review is under way. It will be more appropriate to make any changes to the regulations as part of a wider reform of legislation.
In conclusion therefore it is essential to maintaining and improving offshore safety standards that the clause stands in the Bill. I hope that the reassurances I have given to your Lordships on victimisation and other matters are sufficient and that the clause will stand.
Lord McCarthy: We are naturally disappointed with the Minister's response. He said that he was surprised that we needed to debate the Bill. I cannot understand why. Most of the points were raised in passing in speeches made from this side of the House at Second Reading. We made criticisms of the Bill. We said that it was not implementing all aspects of the Cullen Report, although the Government said and said repeatedly that they accept all those recommendations. We must ask ourselves why the Government chose to implement some of the recommendations and not others. Why do they come forward with some of the recommendations—to a considerable degree as a
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matter of urgency—and yet allow others to be left until there is an appropriate Bill on industrial relations? The Minister now says others can be left until the Government decide what to do in regard to the framework directive, which they must consider before the end of 1992.
Why are some of the recommendations left out of the Bill? There is no necessity for that. The Minister said that it is an enabling Bill. But it does not have to be an enabling Bill. God did not decide that it should be an enabling Bill; the Government decided. God did not decide that it should deal with safety and not employment; the Government decided. It was possible for the Government to give us a Bill which carried out every recommendation that Lord Cullen put forward. Of course, further legislation may be needed. When the Government get round to dealing with the framework directive there will need to be further legislation. But that is no reason for the Bill to be narrowed in the way that it is. We see no reason for that.
Of course we shall not divide because we are in favour of what is on the face of the Bill. We wish at this stage to protest. We may come back in some other way on Report.
On Question, Clause 1 agreed to.
Clauses 2 and 3 agreed to.
Clause 4 [Increased penalties under Part I]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 1:
Page 4, line 42, leave out ("(g) or (o)").
The noble Baroness said: Amendment No. 1 is a probing amendment. I am not certain what the Government intended in drafting this specific section of the Bill. When we look at the line which we seek to amend, we see that it deals with penalties and offences. It says,
"A person guilty of an offence under subsection (1) (g) or (o) above shall be liable",
and then it spells out the penalties. Subsections (1) (g) or (o) take us to Section 33 of the Health and Safety at Work etc. Act, to which they refer.
When we look at Section 33 we see that it not only consists of the provisions in (g) or (o). Paragraph (g) says that it is an offence for a person,
"to contravene any requirement or prohibition imposed by an improvement notice or a prohibition notice (including any such notice as modified on appeal)".
Paragraph (o) says,
"to fail to comply with an order made by a court under section 42".
When we look at the section as a whole we see a number of other important provisions relating to offences. For example, under paragraph (h) it is an offence,
"intentionally to obstruct an inspector in the exercise or performance of his powers or duties".
Paragraph (k) says,
"to make a statement which he knows to be false or recklessly to make a statement which is false where the statement is made (i) in purported compliance with a requirement to furnish any information imposed by or under any of the relevant statutory provisions; or (ii) for the purpose of obtaining the issue of a document under any of the relevant statutory provisions to himself or another person".
Paragraph (I) refers to an offence intenionally to make a false entry in any register; subsection (m) refers to an offence where there is an intention to deceive, to forge or use a document issued or authorised to be issued and so on. Paragraph (n) refers to falsely pretending to be an inspector.
The purpose of the amendment is to ask the Government why it was felt necessary simply to refer to paragraphs (g) and (o) of Section 33 when there are all those other provisions of the section which relate to serious offences and which may apply equally under the Bill. It is for the purpose of asking those question that we tabled the amendment. I beg to move.
4.30 p.m.
Viscount Ullswater: I think that Members of the Committee should be clear that the effect of this amendment will make every offence in Section 33(1) of the Health and Safety at Work etc. Act 1974 liable on summary conviction to a penalty of £20,000 or a term of imprisonment of not more than six months, or both. On conviction on indictment, those offences would be liable to imprisonment for up to two years or an unlimited fine or both.
Perhaps I may state at the outset that the introduction of Clause 4 of the Bill gives a clear signal that the Government are keen to see penalties exacted which match the seriousness of health and safety offences. But the proposed amendment would extend the penalties to almost every health and safety offence without discrimination. The Government oppose it for the following reasons.
First, on a technical point as drafted, the amendment would be inconsistent with Clause 4(2) of the Bill which provides for different penalties for breaches of Sections 2 to 6 of the Health and Safety at Work etc. Act. I understand that the intention of the amendment is to extend the higher penalties across the board. Secondly, the Government believe that their proposals to fix the penalty to suit the crime is just about right. There are three strands to this policy.
The first strand is that as a result of the Criminal Justice Act 1991 magistrates' statutory maximum power to fine for all offences on summary conviction will be raised to £5,000. The legislation will also allow magistrates to refer companies to Crown Courts, with unlimited powers to fine, for any offence which they consider requires a penalty beyond their powers. I believe that these changes will be welcomed. However, the Government are not convinced that they go far enough. When considering the need for high penalties, we believe that the Government must be concerned to ensure that the punishment fits the crime.
As the second strand of the penalties policy, we have ensured in the Bill that the harshest penalties are reserved for those companies which knowingly break health and safety legislation by flouting notices or remedy orders. Doing so endangers both employees and the general public. Therefore, the punishment must reflect that fact.
The third strand is that the Government are proposing, in addition, to give magistrates the power to impose fines of up to £20,000 for breaches of the core health and safety duties on employers, occupiers,
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manufacturers and suppliers under Sections 2 to 6 of the Health and Safety at Work etc. Act. About 25 per cent. of all health and safety cases are taken under those sections. The higher penalties will, therefore, bite. As I said before, if magistrates consider a fine of £20,000 to be insufficient then, for offences triable either way, they will be able to refer both individuals and companies to a higher court where fines are unlimited. I must emphasise the fact that it is for the courts to determine punishment within the framework set by the Government. In setting that framework, the Government must indicate which are he more serious offences. We believe that we have got this about right.
The third reason we oppose the amendment is that there are a number of offences which it would cover but which the Government do not consider suitable for these higher penalties. For example, the proposed amendment would extend the higher penalties to breaches of health and safety duties by employees under Section 7 and to any person, including a member of the public, who interferes with something provided to maintain health and safety standards under Section 8. The Government do not wish to subject the employees or the public to such stringent penalties. That would not further the aim of ensuring that business takes its health and safety responsibilities seriously.
Finally, we oppose the amendment because it would apply the higher penalties to offences which are triable only summarily in a magistrates' court. The reason for that is that they are not considered particularly serious and do not of themselves necessarily prejudice health and safety. Such offences include, for example, obstructing an inspector. Again, it is important to fit the punishment to the crime. Very few people are prosecuted for these offences. The cases are dealt with satisfactorily in the magistrates' courts.
I believe that the division of the cases in Section 33(1) is already catered for by further subsections of that section. It is just that we need to put in the increased penalties where necessary—that is, where we consider they are required—rather than putting in the blanket provision of the higher penalty for every offence. I can assure Members of the Committee that the Government have every intention of dealing firmly with those who commit health and safety offences. For the reasons I have outlined, we do not think that the amendment is safe. In the light of that explanation, I hope that the noble Baroness will feel able to withdraw the amendment.
Lord McCarthy: The noble Viscount has made an effective case against the amendment which we wish to advance on the grounds that it would produce a blanket provision. However, it does not seem to me that his case is one which applies to the Bill as it stands. Of the 15 or so different paragraphs under this section of the Health and Safety at Work etc. Act, the Government are covering only two. It is possible that the remaining 13 are not all equally heinous and do not all need the increased penalties. However, there is still some mystery as to why the Government have picked the two in question. If I understood the noble Viscount correctly, he said that the essence of the argument, for the most part, is that the provision in

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the Bill would get at people who deliberately violate notices. I should have thought that paragraph (c) of the 1974 Act which deals with contravening the terms of a licence was very close to that situation. Similarly, I believe that other items in that list also come very close to that; for example, contravening a notice in relation to paragraph (i).
Surely it is a very serious matter when an employer fails to discharge his responsibilities under Section 2 of the 1974 Act—that is, the positive general provision; in other words the one covered by paragraph (a). Some of those offences are directly related to a quite determined and intentional obstruction of inspectors. It seems to me that they should be covered. For example, paragraph (d) refers to the intentional obstruction of a "any person". Such a person could be an inspector. Moreover, paragraph (f) refers to preventing someone going to an inspector. There is also paragraph (h) which refers to the intentional obstruction of "an inspector"; paragraph (k) which refers to false statements; paragraph (1) which deals with false entries; paragraph (m) which deals with forgery; and paragraph (n) which refers to the actual impersonation of an inspector. Surely the latter is a very serious offence which should be covered by any reasonable improvement in penalties.
The Minister may say that the courts do not need all these powers. But, of course, if they do not need them all they will not use them. It is a question of which way we want to slant the legislation and whether we want to ensure that the courts at least have the powers that they need. If they decide they want to impose a low fine in such cases where someone has impersonated an inspector, that is a matter for them. But surely the courts should have rather more freedom and discretion as regards some of those very serious examples than they are given by the Bill at present.
Viscount Ullswater: The noble Lord put forward a good case. However, he continues to make the case that there should be a blanket maximum fine available for every offence. If he looks at Section 33(2) of the 1974 Act, he will see that some of the offences in the list to which he referred—that is, (d), (f), (h) and (n)—were selected for summary conviction only and that the maximum penalty under that subsection is £400. Those are the offences that I sought to indicate to the noble Lord will now be subject to a penalty of £5,000. Similarly, other cases which become triable either way—for example, (a), (b), (c), (g) and (i), and so on—would become subject to the increased fines that the Offshore Safety Bill now seeks to impose.
Therefore, returning to my original argument, we believe that the penalties should fit the crime. We are not seeking to change the difference in the penalties in this way; we are seeking to increase the penalties in the way that we suggested we need to do in accordance with the seriousness of the case in question.
Baroness Turner of Camden: I thank the noble Viscount for his explanation. I said when I moved the amendment that it was a probing amendment because we wanted to find out what was in the Government's mind in limiting this section of the Bill simply to paragraphs (o) and (g) in Section 33 of the Health and
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Safety at Work etc. Act. The Minister has explained what is in the Government's mind and I must emphasise that it was not our intention that this should be treated as a blanket set of provisions. I am interested in what he has said. We will look closely at what the noble Viscount has said and we might be able to come back with an amendment at Report stage, in view of the explanation that we have had. It seems to me, as my noble friend has already mentioned, that there are some provisions in Section 33 that qualify for the kinds of penalties envisaged in the Bill. Certainly some of these offences seem to us to be serious. My noble friend has dealt with them and I shall not go over them again, but we shall consider what has been said and see what further action we can take. We do not feel happy simply limiting this part of the Bill to the provisions of Section 33 paragraphs (o) and (g). We think that something else might possibly be done and we shall have another attempt on Report. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 4 shall stand part of the Bill?
Baroness Turner of Camden: I gave notice of my intention to oppose the Question that Clause 4 stand part of the Bill because, as has already been stated, we on this side of the Committee are not very happy about the narrow scope of the Bill. In our view, the Government have missed an opportunity to implement in full the recommendations made by Lord Cullen.
In drafting so narrow a Bill some important aspects of safety have been left out altogether, and that has already been referred to by my noble friend Lord McCarthy and the noble Lord, Lord Rochester: namely, the part played by the employers themselves. Lord Cullen repeatedly referred to the necessity of establishing what he called a safety culture, the kind of atmosphere and environment where cutting corners is simply not on the cards, and absolute priority is given to health and safety issues.
The necessity for this was established beyond doubt in the inquiry into the terrible Piper Alpha disaster. It is even more necessary in the kind of industry where there are inherent dangers and where the failure to produce the necessary cultural awareness involving everyone can have terrible and tragic results. Lord Cullen made it clear that the responsibility for the creation of a safety culture begins at the very top. Responsibility should clearly rest there. With this in view, we originally drafted amendments designed to pin down the responsibility and to ensure that the directors of a company, in the event of deaths or injuries occurring as a result of negligence, could be held personally accountable and even, in sufficiently serious circumstances, face charges of manslaughter.
I have to say that in view of the narrow scope of the Bill this amendment was not regarded as procedurally correct, and we were not able to proceed further with it. Therefore the only way in which we can again protest that the Bill has been too narrowly drawn is to oppose the Question that Clause 4 shall stand part of the Bill.

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We believe that the clause should specifically state that where an offence has been committed by a body corporate there should be a presumption that it was attributable to the neglect by any director whose functions included responsibility for safety. We believe that it is necessary to pin down responsibility and to do so at the highest possible level. We wanted an opportunity to do that. I said earlier that because the Bill was so narrowly drawn we were unable to do so and we could not proceed with an amendment along the lines that I have indicated. That does not mean to say that we are at all happy about the situation. For that reason it seemed to us that the best way to express this unhappiness was to oppose the Question that Clause 4 should stand part of the Bill.
4.45 p.m.
Viscount Ullswater: I believe that the discussion that we have just had on the proposed amendment went to the root of the purpose of this particular clause. I must say that I remain convinced that the approach adopted by the Government in this clause is the right one. Our position is that the level of penalties should reflect the seriousness of the offence. As I have said before, it is the responsibility of the courts to set the level of penalties within the framework defined by the Government. This clause helps to define that framework by making it clear which offences are considered to be the most serious. For example, a breach of the main general duties laid down in the Act in Sections 2 to 6 often indicates serious or long-term shortcomings in the way that health and safety is managed and operated in a company, rather than a one-off failure on the part of management.
As a result, these offences will attract a maximum fine of £20,000 in a magistrates' court—a level which is in line with the penalties for the most serious offences laid down in the Environmental Protection Act 1990 and the Food Safety Act 1990. A breach of a prohibition or an improvement notice is the result of an employer deliberately flouting instructions given by an inspector, and that is particularly serious in the case of a prohibition notice which will have been issued immediately to stop something which has the potential to cause serious injury. In those cases the option of imprisonment is considered appropriate. Of course if magistrates consider that the penalties available to them are insufficient they are free to refer cases to the Crown Courts, where unlimited fines are available and imprisonment is also available for the most serious offences.
The Government take a very serious view of those who commit health and safety offences. This clause takes an important step in demonstrating that view and I hope that your Lordships will accept my assurances on this and will therefore feel able to accept this important clause as part of the Bill.
Baroness Turner of Camden: Again, I thank the Minister for what he has said. I have particularly noted his reference to the freedom of magistrates to refer cases to the Crown Court if they felt that very serious cases were involved. Nevertheless, I still feel
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rather strongly that the Bill does not adequately reflect the recommendations of Lord Cullen. We still feel very strongly about that on this side of the Committee. As I said earlier, the object of opposing Clause 4 was to give us the opportunity of expressing on the Floor of the Committee our general dissatisfaction with the way in which the Government have proceeded in this matter. It is not my intention to press this to a vote because, as the Committee will know, we support what is on the face of the Bill. Our main contention is that it does not go nearly far enough and therefore does not do the job that we originally hoped it would. which was to give effect in full to the recommendations of Lord Cullen. However, having said that, my noble friends and I do not wish to take this further.
Clause 4 agreed to.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 2:
After Clause 4, insert the following new clause:
("Disqualification of Directors
There shall be added to section 2(1) of the Company Directors Disqualification Act 1986, the words—
"or where he is convicted of such an offence under Part I of the Health and Safety at Work Act 1974 or the Offshore Oil Act 1991".").
The noble Baroness said: When the Bill was debated on Second Reading I commented that, while the directors of a company could be disqualified from holding office if found guilty of a fiduciary misdemeanour, that sanction would not be applied if the company of which they were directors was guilty of negligence or breach of regulations and if such negligence or breach led to the death or injury of employees or members of the public. The Minister replied that that could indeed be done already under existing law, and he has indicated how that could be done again this afternoon. He has said that if a person is guilty of a criminal offence he or she can be disqualified. However, I cannot recollect that this has ever been done in a case where there has been a serious accident attributable to negligence. The Minister may have some knowledge of it but I certainly have not. I still take the view that it would be quite a powerful disincentive given that other sanctions are not available to us under the Bill.
We have been told that the Bill, concerned as it is with offshore safety, is a technical Bill and therefore anything touching upon employee protection cannot be included. I believe that is extremely odd bearing in mind that safety is of itself largely about employee protection in that employees are the people mostly and continuously at risk.
However, when it comes to penalties it is possible to do something even within the confines of this narrow Bill. Increasing the fines to £20,000 is not that much of a penalty for a multi-million-pound company. It is true that prison sentences are allowed for under the Bill, but they may not involve those at the top of the company who have responsibility for its general policies and the particular company philosophy which will carry on down through the company. As Lord Cullen made very clear, a safety culture starts at the top. I believe that it should be clearly stated in the Bill that there is a possibility of disqualification of

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directors as part of a penalty. That would introduce a measure of personal accountability at the very top of the company. In some respects that is even more important than increasing the financial penalty. I hope that the Minister will be prepared to consider this as a possibility.
Viscount Ullswater: The Government cannot support the amendment. In a moment I shall indicate not only why they cannot support it, but why they think it is unnecessary. First, I should like to correct the impression that I believe the noble Baroness gave the Committee a moment ago that the £20,000 fine was in some way a maximum fine for the most serious categories of offence. When talking of Clause 4 I have sought to indicate that if cases are referred to the Crown Court that court will have the ability to impose unlimited fines for particularly serious offences. It would be wrong for the noble Baroness to go away with the belief that the £20,000 fine was the maximum.
To return to the particular amendment, the main reason why the Government oppose the amendment is that they believe it is unnecessary or perhaps even counter-productive. It is unnecessary because in our view Section 2 of the Company Directors Disqualification Act 1986 is capable of applying to health and safety matters. That Act provides for the court to make a disqualification order against a person convicted of an indictable offence connected with the promotion, formation, management or liquidation of a company. We believe that the potential scope of Section 2(1) of that Act is very broad and that "management" includes the management of health and safety. However, I should point out that in practice those powers are unlikely to have much effect on improving health and safety standards, largely because the opportunity for using the disqualification option has been and will always be very limited.
It is one of the strengths of the Health and Safety at Work etc. Act that it defines offences in broad terms and imposes inescapable duties on employers. That said and despite the best endeavours of the Health and Safety Executive, it will always be relatively difficult to prove health and safety charges against individual directors, and because of those difficulties there will always be fewer successful convictions of individuals compared with those against companies. Added to that, in some of those cases where a successful conviction has been obtained against an individual director the court may decide that disqualification would serve no useful purpose.
Finally, I mentioned our view that the amendment could be counter-productive. By that I meant that the proposed text could have the effect of narrowing the scope of Section 2(1) of the Company Directors Disqualification Act 1986 which currently we can construe very broadly. There is a danger that in seeking to define the circumstances in which Section 2(1) applies, the courts will interpret the section as applying only to those specified circumstances and none other. I am sure that that is not what the noble Baroness intends. Therefore, I hope that, bearing in mind what I have said, she will agree to withdraw the amendment.
Baroness Turner of Camden: I thank the Minister for his explanation of the Government's point of view on the amendment and also note what he says about £20,000 not being the maximum. We were anxious to write in somewhere on the face of the Bill an element of personal accountability, and we felt that unless we saw something like that in the Bill it would not be sufficiently apparent from the text. The Government say that they believe the amendment to be unnecessary and that the text we propose could result in limiting the scope of the current powers under the Company Disqualification Act. Of course we would not like to do that. What we want to do is take the amendment away and think about it again. We are very anxious to get an element of personal accountability written into the clause dealing with penalties. That might prove rather difficult, but as the Bill now stands we believe that it does not have the necessary accountability which ought to be there.
Having said that, I propose to withdraw the amendment at this stage and we will look at it again on Report.
Amendment, by leave, withdrawn.
Clause 5 [Directions for preserving security of petroleum and petroleum products]:
Lord McCarthy Lord McCarthy moved Amendment No. 3:
Page 5, line 18, at end insert ("consistent with the health and safety of persons employed or working at those places of work.").
The noble Lord said: The object of this amendment is twofold. First, in some ways it is a probing amendment because we want the Government to tell us the intention, meaning and need behind Clause 5 which at present is not absolutely clear to us. Secondly, the amendment is designed to reassure and underpin because the words of the amendment suggest that the provisions of Clause 5 should be,
"consistent with the health and safety of persons employed or working at those places of work".
In other words, if the provisions of Clause 5 are to stand they should not operate in such a way that they undermine the basic objectives of the Bill which are to secure the health and safety of persons employed or working in those places of work.
On the face of the Bill, the Government provide us in the Explanatory and Financial Memorandum with an explanation of the reasons for Clause 5. It transpires that the clause is about security. It enables the Secretary of State after consultation to give directions to operators of offshore installations, terminals and so on for the purpose of preserving their security, which I take to mean the security of the operators. It will require those operators to comply with such directions notwithstanding other duties imposed upon them; in other words, the inference is that if what is demanded from the point of view of security sets at risk what is required for the health and safety of persons employed or working at those places of work it will be expected that operators will not have regard to problems of health and safety but will make as their primary concern problems of security.
The explanatory memorandum tells us that the Secretary of State will lay any such directions before both Houses of Parliament unless in his opinion

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disclosure will be against the interests of national security. We are not talking about the security of the operators or the employers; we are now talking about national security. The memorandum goes on to talk about the "commercial interest of any individual". So, all of a sudden, the concern is for individuals. Sometimes it is the nation, sometimes the operator and sometimes the individual, but in all circumstances, in the interests of the security of all those different groups, it appears to me that one can set aside the health and safety of persons employed or working at those places of work.
In the Second Reading debate the Minister told us a little more about what the Government want Clause 5 for and what might happen. He said at col. 663 of Hansard for 14th November:
"Directions could be general or specific … General directions might reflect a warning that the industry faced a particular threat";
We wonder what kind of threat that is,
"or they might address some widespread shortcoming"—
A shortcoming is not a threat or need not be a threat—
"which had been brought to light".
Brought to light by whom?
"Specific directions might be given to an individual operator if the Secretary of State came to the conclusion that there were particular shortcomings in security measures at the site which needed to be rectified … Arrangements already exist to give advice to operators on the measures necessary to protect the site adequately".
So we are not quite certain what it is needed for.
"I hope that your Lordships will understand if I do not go into too much detail on what those arrangements or measures may be".
We confess that we are now totally and utterly confused. What is this security that has to be protected? We are told that it is done in other circumstances; that it is done in telecommunications, electricity, water. That leads us to ask a number of questions. For example, in the first place, what are these insecurities that are regularly uncovered in telecommunications, electricity and water that require those provisions in the Bills? What are the other duties that have to be overridden in those cases? Has it involved health and safety? What are the concrete circumstances where the content of such a direction and even its existence cannot be laid before Parliament because to do so would prejudice "national security"—which is a very high minded thing—or "commercial interests"—which is not necessarily quite such a high minded thing.
What can this regulation be that preserves security? In any case, why should it set aside the basic purpose of the Bill? Our amendment seeks to ensure that it does not do so. I beg to move.
5 p.m.
Lord Rochester: I have put my name to this amendment and I support it. I have little to add to what the noble Lord, Lord McCarthy, said; but I have approached the matter in a rather different way from him. This is how I see it. It may be said that it is self-evident that the Secretary of State should give directions for preserving the security of petroleum and petroleum products. That is how this section of the
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Bill is headed. But he may do that only in so far as the directions are consistent with the health and safety of the employees who are affected.
In paragraph 18.47 of the Cullen Report under the heading "Organising for safety", Lord Cullen says:
"To ensure that the safety philosophy becomes a tangible safety programme there must be defined organisational responsibilities for safety; and each part of the organisation has to be set and held accountable for safety objectives … safety has to be a prime objective of on-going operations".
In my view, the Government should not be immune from the primacy of that objective. Their organisational responsibility for health and safety should accordingly be made evident on the face of the Bill by means of words such as those proposed in the amendment.
It may be that the precise way in which this responsibility should be included in Clause 5 could be improved on. I hold no brief for the amendment's wording and perhaps neither does the noble Lord, Lord McCarthy. However, its underlying principle is clear and I support it.
Viscount Ullswater: By and large, security measures at oil and gas installations on and offshore are fully adequate. The Government share the credit for this with the industry because under existing arrangements operators receive advice on security measures from government specialists. However, the Government can at present only advise; they cannot insist that operators follow the advice which is given. Individual operators respond as they see fit. This has not given rise to a serious or widespread concern about security. As I said, standards are generally adequate; but under the circumstances it would be surprising if standards did not vary between sites so that some were very good while at others there was room for improvement.
The noble Lord, Lord McCarthy, asked me what kind of security features we were considering. I do not wish to go into too much detail, but with, for example, the erection of security fences there could be a perceived threat. The removal of car parks beside certain key buildings could be considered to be a security precaution, not only for the security of supply but also for the security of those people working on the site.
It would be right to say that subsections (1) and (2) of Clause 5 require the Secretary of State to consult with the Health and Safety Executive before issuing any direction—because that is what the clause does—in the interests of security. Before giving its view, the Executive will consider whether the security recommendations might in any way affect health and safety measures at the site. The Secretary of State would not in practice issue directions unless he was satisfied that they would not prejudice health and safety.
This safeguard is itself a second line of defence because when the security advisers inspect the sites, they too are required to have regard to any health and safety implications arising from their proposals. There is ample opportunity for such matters to be raised in discussions with the operating company before the advisers formally report their recommendations.
I believe that the noble Lord sees something in this which is not there and that recommendations would be made or would be considered which would put at

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risk the health and safety of those working on the site. It is not only for the security of the supply itself but for the health and safety of those working on the site that this consultation exercise should take place. Therefore, I ask the noble Lord to withdraw the amendment.
Lord McCarthy: I suppose that reply is what one calls the unnecessary reply. It is not that it is a bad amendment, but that it is happening already. The trouble with such a reply is that it does not leave us with any reason why it should not be put on the face of the Bill in order to reassure people. The Minister tells us that on the whole there are not many problems. He says that security is normally, usually, fully adequate. But he says—and I thank him for this and I am beginning to see what the clause is about—"The problem is that we can't do more than advise; sometimes we want to compel". I say, "Yes, all right, fair enough. Let us suggest that the Government are quite justified in having a clause of this kind in the Bill. What is now unclear is clear. But what has it to do with safety?" I have asked for examples. I may have missed them because it is five o'clock in the afternoon; but I heard two. It is more mystifying than ever.
The Minister gave me a list: the erection of fences. I cannot see how the erection of a fence for the sake of security has much to do with safety. He mentioned the removal of car parks, and I suppose one might trip over a notice. But the examples he gave me reinforced my view that there is no earthly reason why the Government should not accept our amendment. Then the Minister said, "Of course, you don't need the amendment because I happen to know that there are all kinds of people, including inspectors who have been given instructions that whatever they do as regards security, they must not in any way infringe the fundamental health and safety purposes of the Bill". That may well be true, in which case why can it not appear on the face of the Bill? We think our proposal is eminently reasonable and we shall divide the Committee on it.
Viscount Ullswater: Before the noble Lord takes that action, I wish to make a few more comments in the hope of persuading him not to do so. I should explain that it may be decided to move car parks away from key buildings to remove a known specific threat from a terrorist organisation. Such action would remove the risk of a bomb being planted near to a key site. Such action is very much in the health and safety interests of those working on the site.
In practice the amendment could cause problems. Given the matter at issue, it is highly desirable that once a direction has been issued it should be clear and authoritative. The amendment would give rise to the possibility of arguments over interpretation. Those may be seized by a recalcitrant operator to delay implementation of a direction.
The amendment could have the effect of exposing directions to challenge in the courts on the grounds that they were inconsistent with health and safety. Such a situation could be undesirable and could give a reluctant operator a further opportunity to cause
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difficulties. I hope the noble Lord has listened carefully to those additional remarks and that he will see fit to withdraw the amendment.
Lord McCarthy: The Minister digs a bigger and bigger pit for himself. He now says there may be a conflict in this matter although he does not put forward a concrete case. The example he suggested of car parks and terrorists does not constitute a concrete case. The Minister has said there may be cases where it would be desirable to make directions for security reasons but that such directions could lead to a challenge in the courts on the grounds of health and safety. That is a totally different argument to the argument the Minister used before. If he is saying there is a conflict here, I am more determined than ever that our provision should appear on the face of the Bill.
Viscount Ullswater: I do not wish to intervene too many times. I merely wish to point out that there can be two areas where directives need to be imposed. One of those areas may concern purely security matters to prevent terrorism and sabotage. The other area where directives need to be imposed may concern purely health and safety matters. If directives need to be imposed to prevent terrorism, the Health and Safety Executive will be fully consulted on the implications of imposing them.
Lord McCarthy: We now appear to be reverting to the first argument the Minister used. Whichever argument is used, my answer is the same. We shall divide the Committee.
5.13 p.m.
On Question, Whether the said amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 70; Not-Contents, 86.

Division No. 2

CONTENTS

Addington, L.

Hirshfield, L.

Airedale, L.

Holme of Cheltenham, L.

Ardwick, L.

Houghton of Sowerby, L.

Aylestone, L.

Howie of Troon, L.

Beaumont of Whitley, L.

Hughes, L.

Birk, B.

Jay, L.

Blackstone, B.

Jeger, B.

Bonham-Carter, L.

Jenkins of Putney, L.

Callaghan of Cardiff, L.

Judd, L.

Carmichael of Kelvingrove, L.

Kagan, L.

Carter, L.

Kennet, L.

Cledwyn of Penrhos, L.

Kirkwood, L.

Clinton-Davis, L.

Lockwood, B.

David, B.

Longford, E.

Dean of Beswick, L.

Lovell-Davis, L.

Desai, L. [Teller.]

McCarthy, L.

Donaldson of Kingsbridge, L.

Mclntosh of Haringey, L.

Donoughue, L.

Mackie of Benshie, L.

Dormand of Easington, L.

Mallalieu, B.

Ewart-Biggs, B.

Molloy, L.

Ezra, L.

Morris of Castle Morris, L.

Falkender, B.

Peston, L.

Gallacher, L.

Pitt of Hampstead, L.

Graham of Edmonton, L. [Teller.]

Prys-Davies, L.

Rea, L.

Hampton, L.

Richard, L.

Hanworth, V.

Ritchie of Dundee, L.

Harris of Greenwich, L.

Rochester, L.

Hilton of Eggardon, B.

Russell, E.

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Seear, B.

White, B.

Stoddart of Swindon, L.

Williams of Elvel, L.

Strabolgi, L.

Willis, L.

Tordoff, L.

Wilson of Rievaulx, L.

Turner of Camden, B.

Winchilsea and Nottingham, E

Underhill, L.

Young of Dartington, L.

Wallace of Coslany, L.

NOT-CONTENTS

Abinger, L.

Howe, E.

Aldington, L.

Hylton-Foster, B.

Alexander of Tunis, E.

Jellicoe, E.

Allenby of Megiddo, V.

Killearn, L.

Arran, E.

Kinnoull, E.

Ashbourne, L.

Kitchener, E.

Astor, V.

Knollys, V.

Auckland, L.

Lauderdale, E.

Balfour, E.

Liverpool, E.

Beloff, L.

Lloyd of Hampstead, L.

Belstead, L.

Mackay of Ardbrecknish, L.

Birdwood, L.

Mackay of Clashfern, L.

Blatch, B.

Macleod of Borve, B.

Boyd-Carpenter, L.

Marlesford, L.

Brabazon of Tara, L.

Merrivale, L.

Brougham and Vaux, L.

Mersey, V.

Butterfield, L.

Middleton, L.

Butterworth, L.

Morris, L.

Caldecote, V.

Mottistone, L.

Campbell of Alloway, L.

Mountevans, L.

Campbell of Croy, L.

Munster, E.

Carnegy of Lour, B.

Murton of Lindisfarne, L.

Cavendish of Furness, L.

Nelson, E.

Cockfield, L.

O'Cathain, B.

Coleraine, L.

Onslow, E.

Colwyn, L.

Orkney, E.

Constantine of Stanmore, L.

Oxfuird, V.

Crathorne, L.

Park of Monmouth, B.

Davidson, V. [Teller.]

Pearson of Rannoch, L.

De Freyne, L.

Pennock, L.

Denham, L.

Pym, L.

Denton of Wakefield, B.

Rankeillour, L.

Downshire, M.

Renwick, L.

Elliot of Harwood, B.

Salisbury, M.

Elliott of Morpeth, L.

Sanderson of Bowden, L.

Gardner of Parkes, B.

Savile, L.

Hailsham of Saint Marylebone, L.

Strathcarron, L.

Strathmore and Kinghorne, E

Harvington, L.

Trumpington, B.

Haslam, L.

Ullswater, V.

Henley, L.

Vaux of Harrowden, L.

Hesketh, L. [Teller.]

Vivian, L.

Hives, L.

Waddington, L.

Hooper, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.20 p.m.
Clause 5 agreed to.
Remaining clauses agreed to.
Schedules agreed to.
House resumed: Bill reported without amendment.

Innovation in Manufacturing Industry: Select Committee Report
5.21 p.m.
Viscount Caldecote Viscount Caldecote rose to move, That this House takes note of the Report of the Select Committee on Science and Technology on Innovation in Manufacturing Industry. (1st Report, Session 1990–91, H.L. Paper 18).
The noble Viscount said: My Lords, the investigation and report by the Select Committee on
1436
Science and Technology was prompted by the 1985 report of the Select Committee on Overseas Trade. Paragraph 74 of that report reads:
"The Committee believe that manufacturing is vital to the prosperity of the country and that services, important as they are, are no substitute for manufacturing because they are too heavily dependent upon it, and only 20% are tradeable overseas. The Committee believe that expansion of the manufacturing base is the principal means of achieving growth".
In the six years since then there have been significant improvements in the productivity and profitability of manufacturing industry and an increase in output of some 12 per cent. In spite of those improvements the excess of imports over exports of manufactured products is now running at an annual rate of about£5½ billion, virtually the same as in 1985. However, there has been a marked reduction in the balance of payments deficit since the peak of £19½ billion in 1989, due mainly to lower home demand brought about by the recession.
While that is a most welcome improvement, it must be seen against the background of the far higher growth rates of our competitors which started from a much higher base. When the economy expands again the greater demand will suck in imports and once more we shall be in the old balance of payments difficulties with pressure on sterling unless manufacturing industry invests and expands its output much faster. The problem is clearly set out in paragraph 1.1 of the report.
In preparing the report the committee assumed the vital importance of a faster growing and prosperous manufacturing industry. That view, I am glad to say, has now been powerfully supported by the CBI's recent publication Competing with the World's Best. That report states:
"Either we return to the 'boom or bust' cycle which has plagued British manufacturers certainly since the Second World War, or we invest in our manufacturing base. There is no middle way, and no alternative to a national commitment to make manufacturing the success story of the 1990s".
Those are strong and encouraging words.
The Engineering Employers' Federation has also recently issued a report, entitled Action for Economic Growth, which gives further support to the CBI view. Therefore there is no need for me to argue that point further.
As the committee recognised, there are many factors which make industry more competitive. Innovation is one of the most important, for only through investment in innovation—both in product and in processes—can industry maintain its competitive edge. That is the only way of breaking the vicious circle described in paragraph 1.1 of the report, for the fact is that as soon as sales of a new product commence it is obsolescent.
The committee defined innovation in manufacturing industry as,
"the commercial application of knowledge or techniques in new ways or for new ends".
We did not therefore debate the need to stimulate invention or new ideas, important as they are, but rather their commercial application. We emphasise that innovation encompasses many disciplines as well

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as the efficient application of technology. It was on that aspect of innovation that the committee concentrated.
We also recognised that there is much more to technological innovation than research and development and that much successful innovation is of an incremental nature, of improving a product or a process, and also that it is not confined to high technology industry. Nevertheless, as the noble Lord, Lord Weinstock, said in his evidence:
"Innovation is indispensable in maintaining a successful business … if you do not change as the times, the markets and the products require, you are dead".
The report summarises the conclusive evidence that as a whole our manufacturing industry has not produced a sufficient volume of competitive products over a long period. As the Engineering Employers' Federation report says:
"The manufacturing sector is efficient but too small".
We have many top class companies which successfully sell a wide range of products in world markets. They have achieved that through, inter alia, wise investment in innovation. Our problem is that we need many more to follow their good example to create a bigger manufacturing base.
The committee therefore concentrated on identifying reasons why too many companies do not invest adequately in innovation. We sought to find ways of removing obstacles and promoting incentives. We took evidence from a wide cross-section of experienced people. We also visited Germany and Italy to gain first-hand knowledge of their practices, particularly regarding the support given to manufacturing industry and its relationship with financial institutions. The committee itself was also widely representative and not, as one commentator suggested, made up mainly of ancient, reactionary peers with an emotional, outmoded attachment to manufacturing.
I turn now to the principal recommendations which emerged from the evidence we received. I emphasise that those conclusions were not picked out of the air; they emerged from the evidence we received. The conclusions are set out in paragraph 9 of the report. In view of the time I shall mention only some of the most important of the recommendations.
The evidence confirmed the widely held view that antipathy to manufacturing industry runs deep in our society. We concluded that the most urgent need is for a change in our culture, a change in attitude towards manufacturing. Government can make a major contribution to stimulating that change and should give a clear and unambiguous lead towards that end. The report urges that Ministers must be heard to proclaim the vital significance of manufacturing industry to our national prosperity on every possible occasion. The DTI should be fully consulted on all aspects of government policy-making in so far as it might affect industry.
But industry's part in the campaign to change attitudes is at least as important. Young people deciding on a career must have evidence, and must perceive, that industry offers a challenging, interesting career, I financially rewarding and with opportunities for advancement as good as in any other field.
Industry's contacts with schools have markedly improved over the past decade, but much more needs to be done. Already many charities are working effectively in this field. But their impact is severely limited by lack of financial resources. We recommend in the report that Government should give financial support to this important educative work. I am sorry to say that that is one of the many recommendations that were turned down. I shall come to that point later.
Although the Government should provide a measure of selective support in this and in other ways, and must create the best climate for innovation, remove obstacles and create incentives, the main action is in industry. Therefore in paragraph 9.24 and onwards the report urges all companies to seek out and implement the best practice, emphasising that it is essential to cultivate a positive and enthusiastic attitude to innovation led by the chairman and chief executive, supported by the board. It is also important to embrace innovative developments from any source, whether within or outside the company, to meet the customers' needs.
The report emphasises too the importance of learning from competitors, and in particular urges British companies to look critically at the respective proportion of profits devoted to dividends and investment. It recommends that companies should pursue dividend policies more in line with those of Japan and Germany. To date in 1991 Germany and Japan have paid out about 30 per cent. of earnings in dividends compared with 70 per cent. in the UK. No wonder there is a shortage of financial resources to invest in innovation, particularly as we identified the high cost of capital as one massive disadvantage faced by British industry compared with our competitor countries. That, combined with the expectation by UK investors of high and relatively quick financial returns, discourages investment in innovation.
We therefore made recommendations to alleviate the problem by improving cash flow to provide more self-generated funds for investment. First, we recommend that 150 per cent. of expenditure on R&D should be exempt from corporation tax as described in paragraph 9.41. In the past such schemes have been opposed, perhaps laughed at, on the ground that experience elsewhere shows that they are ineffective. I was therefore interested to see during a recent visit to Australia that experience there indicates clearly that a tax allowance on those lines has been successful in stimulating investment. We also recommended in the report that companies should be allowed to choose for themselves the rate of depreciation against tax, but only for plant and machinery. Again, that recommendation was not accepted.
Although the report expresses great concern at the shortage of skilled manpower, without which investment in innovation cannot be successful, in view of the ACOST study on the problem we spent little time on it. However, we recommended in paragraphs 9.49 and 9.50 more favourable tax treatment of expenditure on training.
By contrast, the issue of "short termism" and its effect on investment in innovation was the subject of a spirited debate. We concluded that short termism is

1439
a real problem in that context and that the current over-emphasis on this year's achievements rather than the long-term prospects of a business is damaging to industry and therefore to the national economy.
The subject is fully covered in paragraphs 9.54 to 9.66 in which we urge companies to ensure that their own procedures, in particular incentive payment schemes, should not encourage a short-term outlook, and that financial institutions should improve their understanding of the workings of industry.
However, the most significant comment relates to takeovers. Paragraph 9.60 states:
"The proliferation of takeovers in the United Kingdom in the 1980s was a significant factor in creating short-term attitudes".
We noted that in Japan and Germany, where manufacturing industry is strong and efficient, and where a positive balance of overseas trade exists in manufactured products, opposed takeovers are virtually unknown. The evidence that we received in Germany and Italy clearly indicated that the argument often used in favour of takeovers—that the threat is an essential stimulus to good management —is without foundation.
We therefore welcomed the valuable work being done by the Innovation Advisory Board on the subject. But after considerable debate we concluded that effective action is urgently needed to discourage opposed takeover bids. Paragraph 9.63 recommends:
"Voting rights should be enjoyed only by those shareholders who have held their shares for at least a year".
I fully appreciate that that is a controversial and drastic proposal. It is an indication of the strength of feeling on the committee of the damage being done by excessive deal-driven activity. I shall be very interested to hear in the course of our debate any better proposals for dealing with that serious problem.
In paragraphs 9.67 to 9.86 the report makes a number of recommendations relating to government policy and action by the DTI. But those recommendations must be read in the light of paragraph 9.75 which states:
"Generally industry is best placed to assess its markets and make decisions about investment in innovation. But, as the DTI has said, industry alone may not always generate sufficient innovation for the national good".
I believe that the spirit of the report is well summarised in a concluding paragraph, paragraph 9.89, which states:
"Our recommendations will necessarily result in more Government interest and involvement in industry. While the mistakes of the past have caused these ideas to become unfashionable, the pendulum has swung too far the other way. All the evidence shows that the present lack of Government commitment, support and assistance is deeply damaging to industry and to our national interest. We are confident that the changes we recommend would contribute significantly to restoring a better balance between the two extremes of Government policy".
Since that was written there have been three significant developments—one bad and two good. The bad news is the Government's response to the Select Committee's report in Cm.1575. As in all such documents, there is an encouraging start. Paragraph 3 states:
1440
"The Government warmly welcomes the House of Lords Select Committee's report … the Committee's most valuable work is making an important contribution to changing attitudes".
So far so good, my Lords. However, the response then goes on to turn down every significant recommendation made in the Select Committee's report or ignores them. In some cases the reasoning is far from clear and too often misses the main point of the recommendation. For instance, in paragraph 23 of the response, the rejection of the proposal that companies should be allowed to choose the rate of depreciation of plant and machinery makes no mention of the effect on cash flow for investment, which is the stated objective.
The response seemed to me to be lacking in appreciation of the vital need for action now to promote greater investment in innovation and so to increase output. It shows no awareness of the magnitude of the task before us, in particular in rebuilding important industries which are no longer in the top league. Nor does it seem to appreciate the risks implicit in the necessary innovation.
I give one example. Can we really be satisfied when we produce less than 4 per cent. of the world's output of machine tools whereas West Germany produces 19 per cent. and Japan 23 per cent., observing that virtually everything that we use is either made directly by machine tools or by equipment made by them? The Government seem to believe that market forces must prevail and no support should therefore be given to such important industries. That is in marked contrast to Germany and Japan. It is also at variance with the logic which rightly provides financial inducement to inward investment. Why should similar support not be given to stimulate expansion and investment by British companies? And why is it that when market forces fail to attract adequate investment in housing, support is given through housing associations to provide it? Industry appears to be treated far less generously. The need is clear, for once again during the past week we have seen the German mark very strong with sterling under pressure. A principal reason for that is Germany's strong manufacturing base and its long-standing positive balance of overseas trade compared with our relatively weak position.
Perhaps I may conclude on a brighter note. The Secretary of State for Trade and Industry has made a series of stimulating speeches on the importance of innovation, which he clearly appreciates. But, alas, though his spirit is willing the flesh is weakened by his dogmatic views about reliance on market forces which hold back effective government support for manufacturing industry. Such support, as the report makes clear, is quite distinct from intervention or picking winners.
The second piece of good news is the CBI's recent report, Competing with the World's Best, to which I have already referred. At long last it brings manufacturing industry to the top of the CBI's agenda. It is an excellent document and there is much support in it for the views expressed in the Select Committee's report. The CBI states:
"By the year 2000 the UK must be a world-class provider of high-quality and cost-competitive products".
It further states that one of the conditions necessary to make that vision of the future become reality is,
"continuous innovation—to meet the requirements of world markets—in terms of technology, design and product developrnent".
We have moved a long way since the days of the early 1980s when it was confidently asserted that we were a service economy and that manufacturing was of little importance. But the wiser counsels that now prevail have not yet resulted in any effective action being taken to stimulate the massive increase in output which is a sine qua non for a strong economy. As was said by my noble friend Lord Vinson in our debate on the Qucen's Speech, we need a recovery strategy to ensure that growth does not rekindle reflation.
Recently, the Prime Minister, when addressing the Engineering Council, demonstrated his support for engineering and innovation. He said:
"We need to stay at the leading edge of innovation and technology if we are to achieve for this country what it expects of itself and what we wish to achieve".
That was a powerful and encouraging statement from the Prime Minister. However, that goal can be achieved only by greater investment in innovation. The vital question, to which I hope we shall receive a clear answer tonight, is whether these constructive thoughts are now to be followed up with effective action to stimulate investment and faster growth in manufacturing. Or do the Government still believe that market forces alone, if given free rein, will do the trick? I submit that action on the lines recommended in the 'Select Committee's report will make a good start on the road to lasting prosperity.
Finally, I wish to pay tribute to the members of the committee who worked hard and conscientiously for a long period. I wish to thank too our specialist advisers, Mr. Oscar Roith and Professor Roy Rothwell. Last but by no means least I wish to thank Miss Mary De Groose. our Clerk in the Committee Office. All contributed so much to preparing this very successful report. I commend it to your Lordships and beg to move.
Moved, That this House takes note of the Report of the Select Committee on Science and Technology on Innovation in Manufacturing Industry. (1st Report, Session 1990–91, H.L. Paper 18).—(Viscount Caldecote.)
5.44 p.m.
Lord Butterfield: My Lords, I am delighted to support the noble Viscount in recommending the embracing of the report. I must first plead for your Lordships' indulgence. I have been informed that my wife has slipped in Cambridge and has a black eye—this is perhaps not for Hansard. It would be generous of your Lordships to allow me to withdraw to defend my reputation in that university town before it gets the wrong idea of how she got the black eye.
I wish to assure the noble Viscount that anyone who is involved with young people in this country—I am sorry that there has been such an exit from the Gallery—must wish to find a change of heart towards the reputation of industry in our society. My father manufactured motorcycles but my mother did not like that very much. For a variety of reasons I finally
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became a doctor. I am not sure whether, if I had stayed in engineering, I would have done as much or more for the country.
The three sentences that I have selected from the report are in its summary of conclusions and recommendations. I make no apology for leaping to that chapter and hope that all noble Lords will take the opportunity of reading the report. The paragraph states:
"Industry's failure to remain competitive has grave implications for our future prosperity… We must change the national attitudes which lead to the belief that manufacturing is a second class occupation… We must have a concerted campaign to promote greater esteem for manufacturing".
Sadly, I slipped out of engineering and entered medicine. I had been fascinated by medicine as a result of the British and international pharmaceutical industry. It is a good example of a highly innovative industry. That move arose by prescribing medicines and being involved in testing new medicines and substances as a research worker. For six years I was chairman of the Medicines Commission, which is the instrument whereby the Medicine Act is bound together. It is indirectly responsible for the maintenance, purity, safety and efficacy of the medicines that we have in this country. I have also been called upon as a consultant by some of our leading pharmaceutical firms. I was for a time chairman of the editorial committee of the Office of Health Economics, concerned with the publication of educational pamphlets.
I am anxious to encourage your Lordships to pay real respect to this remarkable industry. During my professional career it has been up and down. It was low after thalidomide but it has pulled itself up by its bootstraps and is now an industry of which we can be proud. It earns almost £1 billion per year as a positive addition to the balance of payments. It is an industry to which our young people leaving school can go in the expectation of having a clean, rather than dusty, existence and that they will be at the cutting edge of a great deal of science. The industry has many of its roots in our biomedical and scientific history. I shall throw back a glance to William Harvey and the circulation (we are all anxious about diseases of the circulation) and to the Reverend Hale who was the first man to measure blood pressure—and 10 per cent. of the western world is concerned with high blood pressure. More recently was Fleming who discovered penicillin and Chain and Florey who developed it during the war for use against gas gangrene. Since the war there has been Frederick Sanger who won two Nobel prizes for his work which opened up molecular biology. More recently, and rather dazzlingly, were Watson and Crick who worked out the form of the deoxyribonucleic acid molecule.
It is important that I convey to your Lordships the way in which those discoveries have become ingrained in our manufacturing life. My inquiries show that although in population terms we are not as large as the rest of Europe, Japan or the United States, we have almost a quarter of the patents of the present leading 50 worldwide medicines. Taking the more recent new chemical entities—as we call the new substances coming into the medical world—we are able to hold

1443
up our heads as 14 per cent. are British developments. Surely it must be clear that anything that we can do to maintain a healthy and thriving industry is bound to be helpful to our balance of payments.
We have an astonishing reputation because we have been able to test those products through the NHS. The fact that the NHS purchases them through the remarkable arrangement which the industry has—the pharmaceutical price regulatory committee—is widely seen overseas as a sign of clear, ethical development. We must do all we can to maintain that reputation for British fair play and striving for the best.
The present situation is that to launch a world product you probably need to salt about £100 million into the research and development to get it through all the tests and bring it forward onto the market. Because that is done in England, you would have the wonderful advantage of a post-marketing surveillance scheme, which is what all the animal rights people should talk about much more. That follows the first 1,000 or more people who are taking a new chemical entity through the medicine's first period of use. It uses the people who benefit from it. I do not wish to describe them as guinea pigs because that has the wrong connotation. However, it allows those people to show up any difficulties or side effects which have not already been picked up in the earlier work carried out with tissues, molecules and animals.
Those costs lead the industry to be extremely anxious that there should be reasonable profitability when something is up and running because those pounds produce the innovatory laboratories which are to be found everywhere.
I remind your Lordships that it is essential that all vice-chancellors and professors should support industry in their universities and polytechnics. About 200,000 young people in 1980 were qualified to study science at university and about 40,000 were so qualified to study at the polytechnics. Whenever the Department of Education and Science cuts back on the potential for developing those young people into first class scientific and technological workers it is indirectly harming the innovative skills of the country.
Today the Cross-Benchers had a remarkable presentation by Helen Sharman who came from Sheffield, where she is a chemist at the university, to tell us about being Britain's first astronaut, or spaceperson. Earlier she was sitting below the Bar. She is a marvellous girl and a great credit to the young women of this country. What did she do while she was in space for eight days? She grew crystals. Why did she do that? She did that because there are no convection currents if there is no movement of the air and it is possible to grow crystals more quickly and more satisfactorily in space than on earth. She grew some biological crystals.
I ask the noble Viscount whether he thinks it is dreadful that that girl acknowledged to us at about 2.40 p.m. that no one has invited her to a government office, or any office, to debrief her on what she had done. I do not know what it cost her to grow crystals in space, but if one has an idea about a problem such as alzheimer's disease or rheumatism, one will wish to
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grow a crystal of that part of the body for which one has to find a compound to match and to work on. Growing crystals is difficult and unreliable, but Helen Sharman has found a quick way to grow them.
To the noble Viscount and to the other committee members I say that this is a wonderful, holistic report. I hope that it sets the country on fire.
5.55 p.m.
Lord Aldington: My Lords, I am proud to take part in the debate and as I shall show later, I illustrate my support for my noble friend Lord Caldecote. Before I do that, I should like to say to the noble Lord, Lord Butterfield—outside the House he is a noble friend but he is not allowed to be that inside it—that I am sure that the House will understand if he leaves immediately. I certainly understand. The noble Lord's courtesy to me throughout our association at the Leeds Castle Foundation and otherwise has been such that I shall not mind and will well understand if he leaves at once. He carries with him a message from myself and, I am sure, all noble Lords to his wife that we hope she gets well quickly and does not suffer pain.
We heard some wise words from the leader of the medicos. We should remember what he said about the importance of manufacturing industry. He spoke of the success of the pharmaceutical industry. Indeed, it is a global success. He spoke of the support of universities and polytechnics for industry and the links between them. The report said something about that and so shall I, if time permits.
The report on which I have already congratulated my noble friend is most influential. It is full of thoughts and recommendations of long term significance for the British economy and for the future of our manufacturing industry. My noble friend introduced the report in what I thought was an exemplary and very lucid speech. I thank him for that.
I add a few remarks which I believe your Lordships will understand. The report is beautifully laid out and is easy to read. It contains many tables to illustrate the arguments and gives value to students of our economy. When we read Select Committee reports, we should remember that we need to congratulate the chairman, the committee and the clerk. The system of Select Committees has grown over the years. It is extremely valuable to our House. It brings together noble Lords whose skill and experience is not surpassed. Together they are able to bring out the evidence better than most, to consider the implications of the evidence and to submit first class reports which are widely read outside as well as inside the House. They are read by industrialists, bankers, investors, academics and all those engaged in government. I use this opportunity to express my hope that no one will promote any reform of our Select Committee system which will prevent or crab such inquiries.
I have read, as has my noble friend, the Government's reply with interest. I am not as discouraged as he is. Perhaps that is because of my recollection of the Government's reply to the 1985 report. However, like my noble friend I was encouraged greatly by reading the speeches of my right honourable friend the Secretary of State for

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Trade and Industry. He has made a number of speeches on this and related subjects. I am pleased about what he said. I am encouraged also by the additional funding forecast for purposes related to innovation and the success of industry.
I am not as dismayed as my noble friend is, but, as I have said, that may be because of earlier experiences. Like him, I attach importance to the report of the CBI's manufacturing advice group whose conclusions lie harmoniously with the report and that earlier report, about which I see the noble Lord, Lord Williams, nodding.
Like others of your Lordships, I have never had any doubt about the importance of innovation. I agree, incidentally, with my noble friend, that innovation is more than just research and development. The words of the noble Lord, Lord Weinstock, which are quoted in the report are not new to me, because I have watched him put into practice the thoughts that he expressin there. It may well be that the main reason why our manufacturing base, efficient as it is, is now so much smaller than it needs to be to match the demand for manufactured goods in Britain is that we have had too little innovation and too few innovators.
I shall mention only a few of the report's opinions and recommendations. That does not mean that I do not value them all; I do. First, the paragraphs on national attitudes echo and bring up to date the theme of the 1985 overseas trade report. It continues to puzzle me why the people of Britain as a whole do not realise, hat manufacturing industry is vital to their well-being. The report rightly says that campaigns which were going on at the time of our inquiry—one was started after it—have been ineffective. As a result, even greater effort is needed now. Powerful voices that treated the 1985 report as special pleading are either not heard any more or are not so powerful. I prefer what Ministers are saying today about the importance of manufacturing.
Of the many good things that the report says about industry's role, I want to draw attention to two. Both were mentioned by my noble friend. The first relates to learning, from our competitors overseas and at home. I regard that as important. The second is the value of companies working in partnership with their suppliers and customers. Noble Lords may remember that my noble friend Lord Sieff gave us examples in 1985 of how that partnership had benefited Marks and Spencer and had replaced imports with home produced goods. The noble Lord, Lord Butterfield, today referred to the partnership between the pharmaceutical industry and the NHS.
That is a valuable lesson for all to learn. It is one that was not learnt by the machine tool industry which may explain why it dwindled so much. If it learns it now, that may lead to its recovery.
Short-termism is explained in a well balanced manner on pages 26 and 27. The key must be mutual understanding by financiers and manufacturers of the need for long-term investment in plant and in research and development. They must understand why investment is proposed, why it is not, and what will happen if it is not proposed. The problem of excessive
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takeovers is better solved by achieving an understanding between financiers and manufacturers than by Government taking more dramatic powers. There I may not be in full agreement with other noble Lords.
The report contains important recommendations on research councils and education into which I shall not go. I know just enough about those topics to realise that I do not know enough to talk about them to your Lordships.
I come now to the DTI's support for innovation and industry. Even at the height of the rhetoric regarding that support, it was always more than was consistent with the market forces only philosophy; but is it enough? It is here that I commend to the Government the lesson given to industry about studying what our competitors do.
The report contains some startling figures about the aid given to industry one way or another by our European competitors. Those figures are to be found in paragraph 7.5. Not all such aids come under the powerful axe of Sir Leon Brittan in the Community. I must remind your Lordships of what the Community is doing with its programmes. It is important. The committee had some comments to make about the support offered by the Community. I believe that the Government accept the recommendation on that point, and I am delighted. However, they are not the recommendations which involve the payment of money, and I believe that that is the key. The report refers to the procedures carried out in Brussels and to the failure of manufacturers in Britain to understand what is on offer to them. We must help Brussels improve procedures and help ourselves by understanding what is available.
The report calls attention to the additionality factor in Community grants. We have had long arguments on that subject. I note that the committee does not go into it other than to mention the attributive rule of the Government. I understand that it is right that any government should wish to have overall control over public expenditure. If they have anticipated receipts from the Community in their expenditure plans, it is right that they do not seek further additionality. They have done it once. I have a feeling that that is not always understood, which is why there are sometimes complaints.
I shall now refer to the importance of doing something to expand our manufacturing base. Doing something does not mean that the Government should throw money about. Industrialists are the only people who can expand our manufacturing base. The only way that it can be done is by increasing the number of innovators, and that is what the report is about. To help innovators to expand it is important that the Government should play a part, with the rest of the nation, in encouraging a greater understanding of the importance of manufacturing. Why must we expand the base? It is for the reason given by my noble friend which is set out in the report and which is discussed over and over again in the House. So long as our manufacturing base is too small—smaller than the demand for manufacturing goods in Britain—so long

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we shall have a deficit on our balance of trade in manufacturing goods and a deficit in our current account.
I share my noble friend's view of the importance of market forces and the danger of innovation and over-regulation by government. But there are times when market forces should be helped, not by government intervention but by government support. It is that line which has been taken by our competitors; it is that line which has been taken in Germany; it is that line which has been taken in France and it is that line which has been taken in Italy where things are a little different. But we should not neglect the success of those countries, particularly Italy, through their manufacturing industry. The gross national product per person of Italy is very nearly as great as ours despite the fact that a large chunk of south Italy is a poor producer.
Lord Williams of Elvel: My Lords, it is bigger than ours.
Lord Aldington: My Lords, the noble Lord says that it is bigger, but I am satisfied that the latest figures do not support that although it does not matter to my point which I make with as much power as I can. That is why it is important to look at what our competitors do. I have made the case for the importance of manufacturing industry to our economic future. I commend to your Lordships the closing words of the paragraph in the report which refers to expenditure by government. It states:
"The expenditure (by Government) involved should be regarded as a sound investment by Government in the future prosperity of the United Kingdom on behalf of us all and not as a cost to be reduced to a minimum".
That is good advice to the Government but also good advice for us all, for manufacturing companies, research bodies, individuals and companies. I thank my noble friend for the report.
6.11 p.m.
Baroness Denton of Wakefield: My Lords, six months ago I knew very little of the workings of your Lordships' House, but as an outsider I had always admired the excellence of the reports produced by your Lordships' Select Committee on Science and Technology. Once a subject had been for examination then as sure as night follows day, a whole new raft of information emerged and was of enormous value. The report that we are discussing today on innovation in manufacturing chaired by my noble friend Lord Caldecote, serves to confirm this view of excellence. As someone utterly committed to the cause of a manufacturing base for this country and as a director of manufacturing companies, I believe that we are indeed most fortunate that my noble friend and his colleagues chose to examine this issue and did so to such depth.
I agree with my noble friend Lord Aldington about the readability of the report. I found it fascinating. I wonder whether perhaps, with a different cover and title, it could become a bestseller because it deserves to be.
Lord Aldington: My Lords, it is Crown copyright.
Baroness Denton of Wakefield: My Lords, as the report indicates, there is much to do by all involved. The speed of change makes it even more urgent and difficult. Once a company could expect at least a three months' lead from an innovative edge—that is to say, the minimum time that it would take for a competitor to tool up. Now it is days. That was brought home to me most graphically by a French car designer. He went out to do some work in Tokyo, instructed the design and said, "I'm going off to be a tourist. I shall see you in four days when the model is ready". It was pointed out to him that it would be ready the next morning.
I cannot agree with my noble friend's suggestion that the Government should be blamed for the loss of our market share in the machine tool industry. We were there and we lost it. Should we suggest that we actually reward failure with more funds? I agree that the loss of the machine tool market share is crucial. I was pleased to see that your Lordships included marketing in the innovative process. Too often it has been neglected and an advantage lost. The report calls for more technical skills in the financial services area. I would extend that to require much greater linking of literacy and numeracy. Too often our education system seems to produce people who can write or those who can count. Yet as your Lordships know, the innovative process is seamless between the two.
My right honourable friend the Secretary of State for Trade and Industry has himself acknowledged that BS 5750 is not an attention-grabbing name for an ethos of quality which is essential in uplifting our manufacturing. Nor does the frequent use of initials by government departments in that area inspire confidence. I have frequently heard requests for explanation of "EDTEED" answered by "Well, it was the training agency". The training agency did not need explaining. Perhaps we could use initials less frequently because it would make matters easier.
The report identifies that the Government initiatives that already exist could be used more extensively to bring additional resource to the marketing area. It would be an ideal opportunity for the private sector secondees as your Lordships suggest. Those secondees, both ways—though I understand the department's fears that often people who go out stay out—are very important. Industry and government do not yet understand each other. The Cabinet Office's top management course of 24 people (50–50 divided between the private and public sector) is excellent. It would have to be to attract the attendance of the noble Baroness, Lady Blackstone. But it consists of 24 people and it is held only three times a year.
I have seen chairmen of very successful companies become excessively nervous at the prospect of meeting a parliamentary under-secretary whose specialist knowledge of a subject must by definition be less than theirs. The reason for that is a lack of understanding of each role. There must be greater exchanges. In that area it seems that the French are ahead of us. The need for industry, and most of all manufacturing industry, to be better understood, particularly by young people,

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is rightly identified as crucial to our future. Therefore, it is very good to read evidence from Sir John Harvey-Jones, the one man who more than anyone else has singlehandedly made the business culture look as exciting as it is.
Very little can make the adrenalin flow as fast as closing a successful sales deal or finding your working capital 50 per cent. over the limit. Sir John's BBC2 series was a masterpiece and an example of what can and must be done again. The responsible media played a considerable role in supporting competition in the innovation area. Schemes such as the Engineering Council's "Young Engineer of Britain" and organisations such as Understanding Industry, are growing steadily without heavy resources being thrown at them. They show that children can he fired up. I still recall a school visit to Rover when I worked there. At the end of a very constructive visit the teacher was heard to say, "And this is where you will end up if you do not do your homework". I hope that things are changing.
Industry Year should have been a start and not a project. We have lost five years; indeed, we have given them away. In innovation in larger corporations the garden shed is important. It is important for innovation to thrive; it must get away from the large company corporate culture. It was interesting to watch General Motors trying to handle that. It moved its Saturn project down south away from Michigan and then wondered why it was not working until it discovered that everyone got on the plane on Friday night and returned to Detroit and picked up the culture. The process had to start all over again. Eventually that state of affairs was changed.
On a visit this morning to British Nuclear Fuels in Preston, where I am a director, I was pleased to find one of our own garden shed-based projects, though I hasten to assure noble Lords that it was in fairly high-class buildings. The unique position of BNFL as the only British-owned company with elemental fluorine production capability had been identified. A significant growing market opportunity for fluorine chemicals was identified. There were also opportunities that would reduce the UK's dependence on imports and generate export earnings from bottled fluorine. The initiative has support already with bridgeheads in two British universities; namely, Leicester and Durham. They are setting up centres of excellence. It is highly profitable and brings high added value products. In its own area it has great opportunities, separately managed and moved out from the main culture. In large corporations senior management must give a loose rein and time if innovation is to thrive.
My noble friend's report draws attention to the importance of non-executive directors who are their own men and women. They can be a source of encouragement, wisdom and focus, and ensure that those appointed know the role that they must play is important to the long-term view which will make innovation possible. The executive directors are often much too close to the wood to see the forest never mind the view over the hill.
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It is to be hoped that financial institutions will begin to look more closely at the quality of non-executive directors and, indeed, overall management. Now is not the time for government to give more money to industries. They must search for real managements of "A-team" quality to achieve value for money. It would be better if the DTI helped market forces a little and asked one or two of the major institutional shareholders to check the quality of the management of their investments. If senior people need to be changed then they must force the changes. The messages of the report will only be instigated by the best management. Such DTI city conversations will do much to reduce the dreaded short-termism, and institutions and companies will come closer together in the manner which my noble friend Lord Caldecote must know so well from investors in industry.
By focusing attention on the sectors which will bring most national benefit, the DTI will not be asked to pick winners —which the report rejects. However, it will have influence without causing Brussels too much anxiety, although all of us with an interest in today's subject must be anxious about what will happen in the competition area in Europe when the current commissioner's term of office comes to an end.
At this point I should add that in criticising short-termism, industry must be conscious of the number of times it asks its own pension managers to drive through on short-term objectives. Again I argue that extra funding is not the easy answer. It may be seen by drawing a comparison between those industries with a chemistry base—pharmaceutical companies and parts of the large oil companies—that many medium-sized companies have become world-class practitioners, while those with physics and engineering bases coming from nationalised areas and supplying government contracts have on the whole missed the opportunity of becoming world-class players.
It would be unwise not to accept the needs identified in the report. But I hope that no further short-term projects on innovation will be launched. I understand that there are already over 100, and all below critical mass. Much better that existing best practice is spread from large companies to medium-sized companies to make them world class and that overseas experience is shared with medium-sized companies.
I watched Cad Cam put in by large companies to their smaller suppliers uplift the quality levels in quantum leaps. There are 73 factories in the UK employing over 2,000 people; double that number employing between 1,000 and 2,000, and 3,300 with 100 to 500 employees. As the report identifies, the medium companies could change the world.
I have not mentioned education. Others with much greater knowledge than I will do so. However, I must praise the effectiveness of one area of the German intermediate institutions which, although operated by government, allow young graduates to qualify for a PhD or other higher degree while on a five-year contract working on five- to 10-year research programmes funded and driven by industry. Those

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young people then take their intellect into industry. For me the best form of technology transfer is in a person's brain. We must improve intellect in British industry; that is the answer: not perpetuating the mediocre with more funds.
I hope that today's debate will bring added value to this splendid report and increase awareness of the importance of manufacturing innovations. I hope that it will extend thoughts on innovation to other areas as a pathway to success. I hope that the wife of the noble Lord, Lord Butterfield, is quickly recovered but I am sure that she was as pleased as many others were that the first British person into space was a woman. I am now proudly a member of the Science and Technology Select Committee. It is a privilege that I value.
6.26 p.m.
The Viscount of Oxfuird: My Lords, I too must apologise to the House as I may not be in my place when the debate concludes. I must meet potential overseas customers for my company.
I am sure that the House is grateful to my noble friend Lord Caldecote and his committee for initiating this debate on a subject of great interest to all Members of your Lordships' House. The high calibre of the committee and deeply relevant experience of so many of the industrial witnesses made the report riveting reading from cover to cover. For many months to come the well presented data within the report's appendices will prove an invaluable source to those of us who work within British manufacturing industry.
I was heartened by the emphasis that the report gives to market-led innovation. For most of the past 20 years or so my own time has been taken up in promoting the sale of British manufactured goods in the export markets of the world. Let me make two points from the viewpoint of the exporter.
First, it is enormously encouraging when one returns from an overseas visit with new intelligence regarding the perceived needs of the customer to be listened to by the board and to see resources deployed quickly and responsibly towards fulfilling that requirement. In making that point, I draw your Lordships' attention to the words of Sir Geoffrey Allen who not only emphasised the need for market-led innovation but also highlighted the importance of a proper business plan. Good innovation will yield improved profitability and better overall results for both the innovating company and the end user. A little time spent in quantifying both, before plunging too deeply into an investment which may in time be heavy, is essential.
My second point—again from the point of view of the exporter—concerns the importance of technical salesmanship. The report correctly emphasises the critical importance of trained manpower. Nowhere is that more important than at the sharp end—the customer interface. Too often have I seen a new idea undersold because the negotiating representative had not grasped its true significance or was too obsessed
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by the cleverness of the technical solution to emphasise the tangible benefits that the product could offer to the business needs of the end user.
Some years ago I was involved in the presentation of a novel technical solution to the problem of handling containerised loads in the Port of Bombay. It was all too easy to present the technical merits of the solution; it was not until the chief engineer of the port realised that by investing some of his scarce resources in the new technology he would significantly improve the productivity and throughput of that port. It was then that I began to make progress. How much easier it is to sell a product that has a really unique selling feature than just a "me too" product.
The report deals at length with the need to create the right environment for change, on the need for improved supplier relationships and on the problems that a cultural disdain for engineering and manufacturing industry presents to British industrialists. There is one graph in the report which I believe is well worth attention. That is the one which forecasts the routes of students for the year 1990. The graph shows that only 15 per cent. of students were interested in the manufacturing industries, whereas approximately 32 per cent. of those students were interested in the world of media.
The path of manufacturing and engineering was, and to quite a large extent still is, perceived as a difficult, uncomfortable route perhaps laden in the past with strikes, protests and to a certain extent the "dark Satanic mills" syndrome. That is not an alluring prospect. There is little sense of eagerness, understanding, fascination and pride promulgated by the media. The media have a responsibility to manufacturing.
I hope that your Lordships will forgive me if I make rather a parochial point about Scotland. In Scotland, the thirst for engineering knowledge has always seemed more acceptable than south of the Border. That legendary figure, the Scottish engineer, used to be found in all corners of the globe making the new technologies happen—indeed, it was not so long ago that I met one at the very bottom of Chile running a specialist lighthouse unit. But why is that? It comes in part from a deep respect for the education process and from a special understanding of the value of trained manpower. That has engendered a real understanding for the need for and the value of change, which lead to greater flexibility and the willingness to work at it.
Having said that, I have to say that I think the report is a little harsh in the way that it deals with the very real changes that have occurred within British industry during the past decade. For the past four years, I have been deeply involved in introducing the concept of total quality management into the company for which I work and also into a number of the supplier companies. It is quite remarkable what a little dedication from the top can achieve in a relatively short time. By listening to and involving all members of an industrial team one can quickly realise and release enthusiasms that have been pent up for years. Naturally that leads to a more flexible approach and to a very real change in attitudes. I believe that that augurs well for the future.

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There are so many relevant parts of the report that one is spoilt for choice in those that can be highlighted in a short debate. However, one passage which struck home forcibly to me was the emphasis on the need to learn from others. Perhaps we in British industry have been a 'little too arrogant in our reluctance to exploit new ideas from abroad. Sir Robin Nicholson describes this well as the NIH —the "not invented here"—syndrome. Of course, the other side of the coin is the point already made by my noble friend Lady Denton which has also been made strongly by Sir John Harvey-Jones. We have a wealth of good ideas of our own. It is important to exploit these ourselves, rather than selling them to others abroad.
The report deals at length with the perceived problem of "short termism". In my view, it present a pretty well balanced case. There is the core of a real problem here, but there has been a tendency to use short termism as an excuse to blame the other fellow and not get one's head down to sort the problems out for oneself. I was heartened by the report's confirmation that there seems to be a new realisation in the City and within the investment institutions of the importance of using industrially experienced analysts who really understand the industries that they are researching and who recognise the merits of investing in the short term to achieve a longer-term business gain.
To balance that point, I have to say that we still have some way to go in changing the attitude of some of our leading clearing banks which seem able radically to change their position almost overnight, and wil hdraw that umbrella just when it is most needed. It seems to me that some of the decision makers within the banking community have not seriously researched and understood the industries that the y are supporting. It has been confirmed on the tape tonight that banking complaints for the past year increased by 62 per cent. The problem has led to quite unnecessary anguish for a number of dedicated industrialists who have had to spend more of their energy solving short-term and artificial problems created by unsympathetic banks than on managing the core of their businesses.
The report gives a valuable comparison of fiscal incentives and the cost of capital available in the leading manufacturing nations of the world. Both sides of the case for 100 per cent. capital allowances are fairly presented. I was pleased to see that the committee recommends that companies should be allowed to chose for themselves the rate of depreciation against tax for plant and machinery, without a return to a higher rate of corporation tax. Perhaps we could also return to straight-line depreciation.
I felt that one of the most interesting parts of the report is that which deals with the performance of the Department of Trade and Industry and on the need for a more stable and consistent approach if industry is to benefit from DTI initiatives. The report rightly stresses that industry is usually best placed to make its own decisions and that it is not the province of government to intervene. However, the DTI has a real role in establishing a sympathetic and stable
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environment to allow it to do so. My own view is that the DTI has made rather more progress in this area than the report acknowledges. Attitudes are changing and the DTI should be given some credit for the role it has taken in establishing the enterprise initiatives, for promoting total quality management and for taking the lead in promoting the need for open systems within the computer-based systems of our industries.
I should like to conclude on a note of hopeful cautiousness. I sense real change swelling up from the grass roots of many of our quite mature British manufacturing enterprises. The report acknowledges the fact that the best British manufacturing companies are among the best in the world—they are not only among the best, they also "head up" the best in Europe. Recently I had a chance to visit some of these companies and also some of those which have not quite made it as yet. I believe that there is a new generation of dedicated business managers. Many of them, like our present Prime Minister and the four who proceeded him, are drawn from a new grammar school educated meritocracy. They are giving, or have given, the leadership to change attitudes, engender flexibility and they lead innovation from the front. I believe that these men will take serious note of the findings and recommendations of the Select Committee and will learn valuable lessons from the report. I shall not go so far as to say that the report should be compulsory reading for all British industrialists, but I suspect that many of them will be eager to read it and to work to implement some of its recommendations.
The committee has presented us with a well-researched and balanced report that contains many valuable lessons for the future. I hope and believe that British industrialists, our academic institutions and the British Government will respond positively and constructively to the well-reasoned recommendations and that these will form the basis for new hope for the future of our industry here in Britain.
6.40 p.m.
Lord Sharp of Grimsdyke: My Lords, I wish to echo the compliments paid by previous speakers to the noble Viscount, Lord Caldecote, for initiating this important debate. I do so from the standpoint of an industrial career spent in part in the United Kingdom with ICI and in part in the United States with Monsanto: both world-class chemical companies. For the last decade I have served as chairman and chief executive officer of Cable & Wireless—a privatised company renowned for its application of leading-edge technology in satellite and fibre-optic communications, and a company of which I have the present honour to be life president.
I therefore welcome the report of the Select Committee and its central conclusion, reaffirmed by my noble friend Lord Caldecote in his opening speech and also by my noble friend Lord Aldington, that a climate in which innovation can more readily flourish is urgently needed. There are, however, other conclusions and recommendations which I cannot so readily endorse, such as preferential rates of interest

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for innovation. My intervention in this debate has necessarily to be limited, and I will confine myself to just two or three aspects of the committee's deliberations.
The report refers briefly—perhaps too briefly—to short-termism and mergers and the inhibiting effect they have on innovation. The report comments on a publication by Professor Marsh, Professor of Management and Finance at the London Business School, which roundly rejects suggestions of City short-termism. He drew attention to the lack of hard evidence of a short-term bias in share prices. My friend and ex-ICI colleague, Sir John Harvey-Jones, said of Professor Marsh that he,
"proves conclusively to his satisfaction that there is no such thing as short-termism".
Sir John goes on to say in his usual forthright way, and again I quote:
"I am bound to tell you that he did not prove that to me".
I have to say that I entirely agree with Sir John. There is evidence enough for those who wish to find it.
The question of merger and takeover policy and its effect on innovation and efficiency really deserves a debate on its own. I wish here to record my view that reliance on the competition criterion alone, which is currently the merger reference for Her Majesty's Government and for Sir Leon Brittan, is acceptable only in a perfect world.
Unfortunately for the purists, we are dealing in the United Kingdom and in other EC and overseas countries with the economics of imperfect competition and discriminatory administrative, political and shareholding barriers. I am now more persuaded by the view that centres of excellence in research, development and innovation are so rare and precious to this country that relying on the competition criterion alone is not sufficient, and that the deliberations of both the Secretary of State for Trade and Industry and the EC Commission should be obliged to consider the ramifications of any merger on manufacturing efficiency, innovation, research and development.
In recognition of the imperfect character of the market, I point to the fact that in this country some 12 fund managers have such a huge control over the equity of our major companies that their decisions alone could effectively determine the fate of any company under threat of takeover, even though the fund managers themselves do not own a single share.
The report quite rightly dwells on the cultural and historical influences on the general manufacturing environment, leading, as the report puts it,
"to the common perception of manufacturing as dirty, dull and unrewarding and that the relatively low remuneration and poor recognition of those involved in wealth creation is a deeply-rooted phenomenon".
Indeed, the report emphasises in bold black print:
"It is clear that the importance and value of industry must be more widely recognised if the United Kingdom's innovative record is to improve".
Linked to that high-minded assertion is the comment of an eminent witness that the country lacks industrial heroes and, to quote again, that,
"many of our great leaders of industry deliberately seek to avoid publicity and the high ground".
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Quite so, and I point to the media, among others, as directly or indirectly being responsible for this state of affairs. I refer in particular to the uniquely British embarrassment in accepting that those industrial leaders, entrepreneurs and innovators who excel at their job in creating wealth and employment should receive a reward commensurate with the high rewards earned by football, golf and tennis professionals, by rock and film stars and even by boxers whose appearance in the ring could last less than three minutes. We now have the British phenomenon that when the annual report of a company reaches the media the first page turned to is that which shows the remuneration of the chairman and highest paid director. Those figures are singled out for media attention. We have only to consider the recent brouhaha concerning the remuneration of senior managers of industry who, through their skills, really create the wealth of this country in contrast to those who inherit it and thereby avoid the critical glare of publicity.
If there was a published list of the wealth and income of all individuals in this country, whether derived from inheritance or ownership of land, property or equity, on the one hand, or derived from earned income only, on the other, I have absolutely no doubt that the remuneration of the chairmen of major manufacturing companies and other senior executives in British industry would come very low down indeed on that list. I apologise for speaking so bluntly, but it really is not possible for your Lordships to agree wholeheartedly to the proposition put forward by the committee that the importance and value of industry must be more widely recognised if at the same time there is an open licence to pillory senior executives on their remuneration.
I believe that successful and efficient management, enterprise and innovation should be highly rewarded. I also believe that mediocrity and failure in high places, in industry as elsewhere, should be appropriately penalised. I have never understood, for example, why senior directors or executives who have demonstrably failed, who are dismissed or resign in consequence, should walk away with huge payments in lieu of service contracts. If there is any revision of the Companies Act I would hope that such payments would be admissible only with shareholders' approval.
Finally, I should like to end on an upbeat note. The report comments on a witness's view that,
"one of the most surprising things in this country is that we have some of the best examples of industry and some of the worst almost side by side".
The Economist magazine in its issue of 7th September this year, in a most informative article, revealed that it had teamed up with the London Business School to rank the world's most successful companies. In order to eliminate differences between capital and labour intensive companies, between debt and equity finance, it concentrated on added value; that is, the measurement of how much more a firm's output is worth than all its inputs of materials, labour and capital. The London Business School/Economist team calculated added value during the decade 1981–1990 for some 2,000 publicly quoted companies, drawn from a Paris-based financial information service.

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Your Lordships will be interested to learn that of the top 30 of the best and largest companies in the world, the first two were British —number one being Glaxo and number two being Cable & Wireless. An American company came third. Japan and Germany were rare among the top earners.
We have a simple task in front of us. All we have to do is create an environment in which we can bring the rest of British industry up to the efficiency of the top two British companies I have mentioned.
6.50 p.m.
Baroness O'Cathain: My Lords, I greatly welcome the fact that the matters contained in the report of the Select Committee on Science and Technology on Innovation in Manufacturing Industry are being considered this evening. I congratulate the noble Viscount and the members of the Sub-Committee on the immense amount of work undertaken. But I have to say that after a careful reading of the report I have certain anxieties which I would like to air.
I do not believe that lack of industrial innovation is the major problem. We have a long history of great innovation throughout the industrial developments which have taken place over nearly 200 years. Transforming such innovation into marketable products to be sold profitably is the trick that does not yet seem to have been mastered. Technological aptitude is not lacking in this country—quite the reverse, We seem to have an obsession with every new piece of gadgetry. We have more mobile phones in the UK than in the rest of the EC; we had more video recorders per thousand population in the early days of their introduction than in the US or Japan; and we have more home computers per thousand population than any other country. None of us is afraid of technology. Even I at my advanced age I have recently taught myself computer skills, and these few words have been prepared on my little laptop computer. Incidentally, therein lies another problem. Britain, the major developer of computers, has to a large extent lost out on the manufacture and marketing of tiny laptops.
I have used the words "marketable" and "marketing" and I do so advisedly early on in my remarks. To many people marketing comes a long way down the list in the development of an idea. Indeed, the development of an idea through to its launch on the market place is innovation. Sadly, I see that the report has also fallen into the same trap. The very first section of the report lists in paragraph 1.5, the business process or activity, and marketing comes fifth in the list after research, design, development and manufacture. The marketing person should be alongside the designers and engineers in the first place. The good marketing person (I am not talking about an advertising whiz-kid) tells the designers and engineers what the customer wants, or is likely to want, following that person's analysis of trends in the market place.
I am told that sometimes the designer, engineer and marketing person are one and the same—but not that often. That is not at all surprising. Most people have neither the time nor talent to develop such
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significantly different skills. In over 15 years in manufacturing industry in this country I have only once come upon such a hybrid. I am referring to a design engineer whose business was shot to ribbons by the introduction of VAT on yachts in 1981. He had a small business on the south coast and his only skill was making yachts out of fibreglass. He did not know what to do. His main problem was to try to save the jobs of his employees. By chance his wife said to him one day, "I have done a stint at the local cottage hospital as a voluntary worker trying to help disabled people. With all your design and engineering skills, can't you design and engineer something which will help the wheelchair-bound to have a proper bath rather than rely on hoists, or else putting out the backs of carers?"
That man decided he would be able to transfer his great skills in fibreglass moulding to making such a bath. He did it and marketed it. Not only has it been a worldwide success, but it has been of enormous benefit both to the wheelchair-bound and to carers. I came across that man when I was a judge of the Prince of Wales award scheme for industrial innovation and production. I was gratified to learn that my putting forward of that project won the prize for 1982 and also the prize for the whole decade. He has gone worldwide with it. That is just one example of how a design engineer has good marketing skills.
In my years in manufacturing industry, during my period on the Design Council serving under the chairmanship of the noble Viscount, Lord Caldecote, and also during the time I served on the Engineering Council beside the selfsame noble Viscount (I have to remark that the pool from which one fishes for people to serve on such bodies seems very small), I was struck by the amazing creative talent which went into the conception of prototypes and the enthusiasm with which engineers and designers evolved state-of-the-art technological wonders. But then something went wrong. Often the upshot was that either the product never reached the high street or (slightly less galling but galling, nonetheless) it was subsequently launched by an overseas company which employed the original designers or bought the patents.
The ability of firms to innovate and the capacity of this nation to compete in knowledge-based world markets depend in large measure on the skills of our workforce. It is a pity that the report was published too early to reflect important new developments on the education and training front which will be critical determinants in our future investment in people and in corporate growth and innovation. First, last July the CBI promulgated, and the Government endorsed, new education and training targets. They provide a national framework for action to secure a skilled and competitive workforce of world class standard. Secondly, the National Council for Vocational Qualifications is engaged in a major project which by 1992 will give us recognised standards and portable qualifications applying to all jobs in all sectors at all levels.
Thirdly, in the past month the Secretary of State for Employment launched Investors in People. That sets a rigorous standard of excellence for employers' investment in the training and development of their

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workforce. Finally and perhaps most importantly, there has been the establishment of 82 training and enterprise councils in England and Wales and 22 local enterprise companies in Scotland. In a bold new initiative the Government have devolved responsibility for vocational education, training and enterprise development to the TECs and LECs, giving employers the lead responsibility for upgrading the local skill base and driving local economic growth and community regeneration. Taken together those ambitious targets—a framework of standards and qualifications, a kitemark of excellence and an employer-led delivery system—represent dramatic changes in our capacity to make the 1990s the skills decade. I suggest the points contained in chapter 9 of the report have now been largely met by those developments which are uppermost in my mind at the moment, as I have recently been appointed to the National Training Task Force.
The evidence to the Select Committee with some honourable exceptions—particularly that of 3i plc—has an awful ring of inevitability about it, with a moan that the world is unfair. Whoever said it was fair? There is a plea for government help yet no interference. There is a strongly argued case that something should be done to improve the standing of manufacturing industry, but there are not a lot of suggestions that perhaps a case can be made for self-help. How often do we see young industrialists currently employed on the television expounding the excitement that people can derive from working in manufacturing industry? The noble Baroness, Lady Denton, has rightly referred to the work in this area of Sir John Harvey-Jones, but how many of today's leaders of manufacturing industry make it an important part of their job to give the principal speech at prize-giving occasions at their local sixth-form college, comprehensive school or —dare I say it?—girls' school? Are they too busy? Is it irrelevant? Surely, one of the most important and relevant activities of senior managers, be they in manufacturing industry or the service sector, is to ensure that they are attracting the best new talent to their organisations thereby protecting their future.
My first job in British manufacturing was in 1966. How I wish that I had kept some of my papers from that date! It would have confirmed my view that little has changed. The litany, I fear, would read more or less the same: "Please give us a level playing field". That is not strictly true because I reckon that that phrase has only been around a short time, although it seems ages. "Please give us government help, but no interference". "Please crack down on short termism in the City".
As a banker—and I feel exposed here tonight—I know that few things irritate me more than criticising the so-called short termism of the City. Recently, the huge sums set aside for provisions do not all relate to property. The banks are seen as the current whipping boys and, I have to admit, not totally unfairly but largely so. Let it not be forgotten that despite what has been said here this evening, the banks have sustained
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UK manufacturing industry over long and difficult periods, including the 1960s and 1970s—periods of stop-go economic policy.
To sum up, let us all try to encourage manufacturing to produce what the market wants. The housewife does not necessarily want to buy a German kitchen. The teenager does not necessarily wish to buy a Japanese personal CD player. The man or woman who does not have the benefit of a company car does not necessarily wish to buy a Fiat or a Renault. Someone somewhere must plead with the manufacturing industry to wake up to the market place. In so doing, they will attract the best talent.
Would it be crazy to suggest that a good future subject for the Select Committee to examine would be the reasons why so much of our consumer expenditure does not support UK manufacturing industry? Government help is not the answer. Probably the best thing is to remember that the Lord helps those who help themselves.
7.2 p.m.
Lord Mottistone: My Lords, how very refreshing to succeed the noble Baroness, Lady O'Cathain, after her remarkable speech. She debunked the whole report when everyone else said how splendid it was, which I am about to say. What she said is true, but I see it as complementary to the report rather than critical of it. I do not agree that it is right to say that chapter 9 has more or less been answered already. However, what the noble Baroness said is important, and we should balance it against what many others will say and some of what I shall say.
I wish to congratulate my noble friend Lord Caldecote and his committee very much for producing a first-class report. For a country which for two centuries has depended more than any other on trade for its survival, let alone its prosperity, I believe that we have failed miserably—particularly in the past 50 or 60 years—to maintain our position in the world market place. If noble Lords are doubtful about that, I suggest that your Lordships read The Audit of War by Correlli Barnett which picks out exactly why we got into this position from which we have not yet recovered.
This excellent report of the Select Committee is most timely and I agree with those noble Lords who said that it was well written and easy to study. It requires careful study by all concerned especially, to my mind, manufacturing companies in recruiting the best people for key decision making, the Government for helping manufacturing companies to become competitive in the market place at home and abroad and not hindering them from doing so, and trade unions in encouraging their members to give priority to the success of their employers.
My closest relations and their friends are all employed in banking, finance and the law. Figure 17 in the report to which my noble friend Lord Oxfuird referred shows that they are not alone. Manufacturing industry was almost completely closed to one young man of my acquaintance because he read history at his university. He found a job on the production side of

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a food manufacturer, but it was not organised to retain him or to try to entice him back after he had tried elsewhere.
The CBI says that the best world practice must be spread throughout our manufacturing industry. The noble Baroness, Lady O'Cathain, said much the same. Of course, we agree, but that will only come about if a great many more manufacturing companies make an effort to recruit and retain the best people.
As a chartered engineer, I have been one of the many who have been puzzled for over 50 years as to why engineers in this country are not held in as high regard as in the countries of our main competitors. Some of the blame must fall on the attitude of the universities, especially 100 years ago. However, I believe that these days the main culprits with outdated attitudes to engineers are to be found in senior managements of big companies and their City acquaintances.
We must not only pay proper regard and reward to first class engineers when we meet them—and I note what my noble friend Lord Sharp said on this point—but also set a pattern which recruits first class brains from other disciplines to join them.
Turning now to the government contribution, the CBI says that government must play their part by creating a climate that makes long-term investment in manufacturing worth while. The Electronics and Business Equipment Association —which some noble Lords may know better as the EEA—says that prior to the 1987 election the DTI was perceived by its members as a supportive partner, willing and able to discuss and promote new markets, support exports, take a head role in European ventures and promote industry views elsewhere within the government machine.
The association goes on to say that from 1987—when, I have to admit, my noble friend Lord Young of Graffham became the Secretary of State for Trade and Industry—this positive perception has changed in almost every detail. No doubt my noble friend the Chief Whip, who is to reply, will remember that because he was there for part of the time.
The DTI is now non-supportive and merely the focal point of a totally inadequate UK industrial policy. This great disappointment has been represented to the Prime Minister whose advisers invited him in replying to concentrate on drawing attention to the pre-1987 attitude of the DTI. It has also been represented to my right honourable friend the present Secretary of State for Trade and Industry, whose reply in writing also referred to the past decade.
There is now, however, some hope from the more encouraging remarks regarding manufacturing industry made recently by my right honourable friend the Secretary of State, to which my noble friend Lord Caldecote referred, and also from the comments made at the CBI conference. However, these encouraging remarks need to be given more positive expression by his department. I am advised that the impression gained is that the Secretary of State's heart is in the right place, but that the officials are not yet converted to his approach.
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To be blunt, the Government generally and the DTI in particular need to have a long, hard think in conjunction with the best of the most successful British companies—to which my noble friend Lord Sharp and perhaps a few others referred—on how they can most usefully help industry without hindering it. I suggest to your Lordships that paragraph 10.9 of the report makes that point most succinctly.
The trade unions must also play their part more effectively. Paragraphs 12, 13, 14 and 15 of the report show how far down the productivity league table we still are. Although there have been steady improvements over the past 10 years, we started well down at the bottom of the table at the beginning of that period.
It was my privilege to be the director of an industrial training board in the early 1970s when my employers and friends included senior and experienced trade union leaders. From many conversations with them I obtained the impression —especially at that time—that trade union membership invited divided loyalty between the union and a company. That applied particularly to manufacturing companies with strong union membership. I am sure matters have improved in the past 20 years, especially in the past decade. However, fundamentally, manufacturing companies can only be truly competitive if all of their employees give their first loyalty to the company. Until we can be sure of that in this country, we shall continue to struggle to succeed collectively in the market-place.
It is nearly a year since this report was printed. I hope that its urgent and important message, and the message from this debate, are understood and acted upon by all those to whom they are addressed.
7.11 p.m.
Lord Butterworth: My Lords, I was a member of the Select Committee that produced this report and I was somewhat anxious about some aspects of the report. We seemed to highlight deep-seated areas of weakness. As has been said this evening, that factor is not true of the pharmaceutical industry. That industry has an excellent record of innovation. Our report was concerned narrowly with manufacturing industry. As one must now admit, the weaknesses in that area often go back to the middle of the 19th Century. As has been pointed out, the heart of our conclusion is that we ought to plan and bring about a change in our culture.
Our weakness in industrial technology has become more apparent as technology itself has become more sophisticated and more firmly based upon science. Industry is certainly not held in high esteem in our society. My experience in universities has shown me that industry is not obtaining its fair share of the most able men and women. They are simply not choosing to enter industry.
However, we must ask ourselves how a change in culture is to be brought about. It certainly cannot be brought about initially by the Government and certainly not by legislation. However, the Government can help at a certain level by restoring incentives, removing obstacles and introducing measures which may act as a catalyst to change, as the report details. I am bound to agree with my noble friend Lord

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Caldecote that, so far at any rate, the Government's response to our detailed recommendations cannot be described as helpful.
However, the principal responsibility for change must remain with industry. If fundamental changes are to occur in management, business, the education system and in financial institutions, those changes must first occur in industry itself. Indeed the very nature of successful innovation has changed and is constantly changing. The problem is changing and the game has moved on. Innovation which only assists in making yesterday's products better will not generate the growth we need. By innovation we now mean the ability to bring to the market a continuous stream of sophisticated products ahead of the competition.
Too frequently, in some areas of industry, research and development are regarded in terms of an external black box that is only loosely connected to the industrial enterprise. The input into the black box is money and by mysterious and incomprehensible works within the black box, the money either produces good results or it does not. Too often it does not.
A professor of manufacturing industry at the Harvard Business School has commented on research and development in American companies. He said research and development are regarded simply as the company's fruit machine that rarely hits the jackpot. Innovation occasionally produces remarkable breakthroughs, but I maintain that modern commerce depends to an extraordinary extent upon a continuous stream of innovation at every step of the economic process. That applies to the invention of new products, the streamlining of existing ones and to the continuous improvement of production, distribution and, as has already been mentioned, marketing.
I shall return to the matter of the continuous stream of innovation. Before I do so, I wish to draw the attention of noble Lords to the well known complaint that the British are excellent at innovation but poor at follow-up development. If that is true, I believe it constitutes a criticism of management. It suggests that management has been dislocated both from innovation and from research and development. Too often chief executives have become frustrated at being unable to influence the output of their research departments which have retreated into splendid isolation beyond the understanding and control of management. Frequently the distance between innovators and executives is increased because they speak different languages. The executives speak the language of industry while innovators frequently speak the language of science.
The change which is required is to bring innovation and R&D within the ambit of corporate decision making. The operators of research and the innovators, whoever they may be, must be made full partners in the decision making process. Let us remember that sometimes that process may require a change in language conventions. Taking decisions on innovation should be no different in kind from taking any management decisions. If innovative contributions are to form a continuous stream, management needs to be
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able to assess systematically all research projects and all innovative projects and synchronise them with strategic corporate decisions.
I wish to quote a sentence from Lowell Steele, the former director of strategic planning at General Motors who made the point well when he said:
"How can the Japanese move so fast in introducing new products and responding to market dynamics? The answer does not lie in access to or use of more advanced technology … the US still equals or leads the world in every field. The answer lies in management".
In other words, Japanese ascendancy rests squarely on leadership in management, and especially the management of innovation.
It is getting late, so perhaps I may turn from Japan and very quickly mention our visit to Germany because I am sure that there is an important lesson to be learnt. Those of us who were privileged to go to Germany were impressed by the universal appreciation in Germany of the importance of innovation. Everyone we met—management, workforce, unions, bankers, central government, and lenders—understood not only that innovation was fundamental to industrial expansion and that without a stream of innovatory ideas the best industries would eventually wither, but also the nexus between management and innovation. On the German visit I was impressed by the extent to which both government and lender were prepared extensively to support industrial research which they judged to be commercially promising.
I suspect that, since our report was published, views have been changing in this country about the extent to which the Government might support innovation and research. The division between basic research and near market research is proving increasingly unsatisfactory and we need greater flexibility in our approach. As we force industry to become more and more competitive the funds which industry is able to make available for research may become more limited.
I should like to tell your Lordships about one visit we made in Germany because it illustrates the point that I am trying to make. We saw public funds being deployed on major industrial research projects. There was one project which was quite extraordinary. It was based in a Max Planck institute. I am sure that your Lordships are aware that a Max Planck institute is concerned with basic pure research. The research, which was enormously expensive, involved a project attempting to find a new material for the manufacture of engines. The researchers were deep into ceramics, to avoid the heat limitations inherent in the use of metal. Your Lordships may imagine our surprise when we discovered that the professor in charge of the whole operation was an Englishman. He had been professor of ceramics at the University of Leeds. The significance of that research is tremendous, because whoever gets ahead in that field will capture the high ground and make enormous commercial and financial gains.
I have some crucial questions for my noble friend the Chief Whip. To what extent is the DTI prepared to alter its present practices? To what extent is it prepared to tolerate greater flexibility so that important projects can be fully supported, not only by industry but also by government?
7.24 p.m.
Lord Laing of Dumphail: My Lords, in congratulating my noble friend Lord Caldecote on his report I should like to focus in the main on short-termism as a reason why industry has failed to invest enough in research and development. Before I do so it would be wrong to ignore the ravages of inflation—a point I believe has not been mentioned—which, with the erosion of the value of savings and the increase in the cost of money means that there is less money to invest and pressure for quicker returns.
Short-termism in our society has, as I see it, led to an imbalance in the relationship between those who provide the capital for British industry and those who manage businesses, which I shall try to demonstrate may be structural. I am grateful to my noble friend Lord Sharp for his remarks, with which I wholly agree.
I am a firm believer in the validity of the market economy. However, to work efficiently over a long period it needs to be in a healthy state of balance. In a free market system the nation functions through the interaction of interdependent yet distinctly separate institutions. Dangers exist if a monopoly is allowed to develop or control of wealth or power is concentrated in the hands of a limited number of people. In the 1920s and 1930s management had substantial economic power over working people and sometimes abused it. The pendulum then swung to the point where in the 1970s trade union leaders had very considerable power in many sectors of industry and, similarly, sometimes abused it. That came to be seen as detrimental to the national interest. We now have to ensure as far as we possibly can that the power of capital concentrated in the hands of a few institutional investors is not similarly detrimental.
When the business community was made up of a great many small companies, and private shareholders predominated, it was extremely unlikely that the actions of any one or even several could damage the national interest. Now, however, we have some very large companies which are crucial to our economic well-being, and relatively few dominant shareholding institutions which own about three-quarters of the UK's equity market compared with only half in 1978. A quarter of the market is in the hands of only 12 fund management groups and the top 50 hold over half the equity. Therefore, the national interest should be a factor in their and our considerations.
The providers of capital and its productive users seem to be living and operating in different worlds with different timescales. That is extremely unhealthy for the national economy. For a publicly-owned company in this country the interests of the shareholders are paramount and their rights are enshrined in law. While a company must be run for performance rather than for the benefit of management, it is wrong to define performance as short-term gains for shareholders. That subordinates all other constituencies to them.
The problem for the nation is that immediate shareholder gains do not optimise the creation of wealth, which requires a balance between the short term and the long. It is management's responsibility to
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provide that balance by exercising its commercial judgment. The crucial factor in that judgment is management's belief, rightly or wrongly, that it is being judged by the financial institutions on short-term results. That was confirmed recently by institutions expecting, and saying, that companies should at least maintain their dividends when quite clearly their results did not justify it.
That short-term pressure means that companies forgo investment in areas which are essential to their long-term prosperity in order to protect the bottom line. We are not making the vital technological quantum leaps which, as the Japanese have shown in some important industries, lead to winning dominant world market shares.
Can it be just coincidental that the UK and United States, the two countries with the freest market systems and the highest level of predatory activity, have had the lowest level of reinvestment as a percentage of total output over the past 20 years, at 12 per cent. and 13 per cent. respectively? Japan, not surprisingly, has the highest investment rate at 22 per cent. There are, of course, many reasons for Japanese, and German, success and to focus on just one would be a mistake. However, what is common to those two countries is that their companies can take a longer view because their markets for capital operate differently from the Anglo-American and the threat of takeover is virtually non-existent.
The opposed takeover is justified in the UK as being a spur to management, but the absence of it does not seem to have done much to stop the onward march of German and Japanese industry. The response of British managements to threat of takeover is often to concentrate—probably to excess—on bottom line and on their share price at the expense of investment for the long-term development and future security of the business.
The culture in which the shareholder is the principal person worthy of consideration and protection must be challenged. Other stakeholders—I like that word; I used to try to run my company for the benefit of the stakeholders—have recognition, for example, in Japan, Germany, Holland and in some American states.
The fundamental business system in this country has worked well. However, we must ensure that in an environment of expediency we do not end up compromising the basic strength of our free market heritage. The joint stock company was a device to meet a specific financial need at a time when ownership and property were essentially individual, and in Victorian times the concept of limited liability enabled the family company to bestride the globe. Looking at the situation today, the idea of a company as a piece of property is somewhat bizarre. Just as the powers of managements in the 1920s, and of unions in the 1970s, had to be constrained, we should consider seriously in the widest possible debate whether the present balance between capital and managements may need adjusting. I was delighted that one of the recommendations of the Select Committee's report helps to restore that balance.

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Other countries have developed their own ways of maintaining a balance. I hope that one day your Lordships may wish to devote time to debating that wider subject. We have to ask ourselves whether the structures which worked so well in the past will necessarily work sufficiently well in the future for the Europe of 2000.
7.32 p.m.
Lord Ezra: My Lords, I am particularly pleased to speak after the noble Lord, Lord Laing. I have known him for a number of years. I have had the pleasure of visiting his most effectively run company and have been impressed by the way in which he has practised what the remainder of us preach. We were also very fortunate to hear the noble Lord, Lord Sharp, whom I have also known over a number of years. We met first in Paris during the 1940s and 1950s and attended meetings of the OEEC together. He too has had a remarkably successful career in industry, as has the noble Viscount, Lord Caldecote. Indeed, all speakers have brought considerable knowledge to the subject.
The level of the debate is entirely justified by the importance of the report, which is brief, readable and to the point, but supported by an enormous amount of evidence, both oral and written. I find it a little surprising that a report of this importance, which was published in January, should be debated only in November. It has lost nothing by the delay; it is still very relevant. However, I believe that that delay merits some inquiry.
Two matters disturb me about the report. First, as the noble Viscount said in introducing the report, it takes over from where the 1985 report produced under the chairmanship of the noble Lord, Lord Aldington, left off. Indeed, it virtually repeats what was in that report. It is disturbing therefore that six years after the recommendations in the Aldington Report, we now have the Caldecote Report repeating those recommendations. Secondly, as the noble Viscount, Lord Caldecote, told us, while the Government's response generally accepts the broad argument of the report, in detail it failed to accept any of the major recommendations. I find that disturbing also.
A perusal of the report will show, as those of us know who were involved in the original report, who have read the present report and who have had various experiences in industry, there is no simple answer to the problem that we debate. All parties are involved, and all parties will need to take action if we wish to remedy the situation with regard to manufacturing industry.
A number of important points are made in the report on enterprises. For example, those firms which have achieved the most successful innovative progress are those where innovation has started from the top. There has been encouragement from the boardroom downwards. Equally, those firms which have achieved the best relations with their suppliers, and therefore have stimulated British enterprise in that respect, also have started it from the top. When I was at the Coal Board I made a point of developing close relations with our suppliers. We assisted them in every way
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possible to develop the world's best mining machinery technology. We then found that we could competitively buy our requirements from British firms.
However, it takes a lot of trouble on the part of major buyers to get the proper response from their suppliers. It is not enough to go back two or three times and say, "You haven't produced it so we'll go elsewhere". I shop at a major store nearby. When I wish to buy a present, I go to its gifts department. The buyer for the gifts department is interested in the Far East because the department is filled with very interesting Chinese, Indian and Japanese products. However, very often I go with the intention of buying gifts for my foreign friends. The last thing I wish to do is to send some gift from as far afield as that. I should be delighted to see many British products in the department store. Insufficient attention is paid to stimulating British suppliers.
On the institutional sector, a number of remarks have been made about the problems that the concentration of power in the hands of a limited number of institutional investors has created. Some institutional investors clearly show a long-term attitude, but in my experience many others take a short-term view. I was particularly disturbed in the report by a footnote on page 33 that the chairman of a leading unit trust group is reported to have written to companies in which the group invests, urging them not to cut their dividend payments in the current recession. That does not seem very responsible advice from a leading institutional investor.
Working down the line, we come to the position of Government. Much has been said in both the Aldington Report and the later report on what needs to be done in our opinion —I was a member of the Aldington Committee—in the way of a change in government attitude. That was also borne out in the recent CBI report. The Government have taken up a firm position of seeing the limit of their task as removing what they consider to be obstacles, and, having cleared the ground, to leave it to market forces to work. However, a number of noble Lords have shown tonight that in certain circumstances that is not enough. It certainly is not practised among our major competitors. The experience of the representatives of the committee who visited Germany and Japan bears that out. The fact is that no one is talking about intervention but about positive support. The forms of support are spelt out in the report, in particular fiscal support to stimulate investment, research and training.
The summary of the report is clear: there is still much work to be done. However, I wish to conclude on a positive note. I shall glimpse into the future and assume that another report on manufacturing industry will be published in 1996. Perhaps on that occasion the noble Viscount, Lord Caldecote, and the noble Lord, Lord Aldington, will act as joint chairmen. I have worked out what should be, and I hope will be, contained in that report and I shall give your Lordships a glimpse of the future. As my comments will appear in Hansard, they can be compared with what the report then actually states.

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First, I expect the report to state that during the period that had elapsed since the publication of the present report there had been greater public recognition of the importance of manufacturing and that an increased number of highly trained young people had joined industry to make a career there. Secondly, I expect it to state that the continuous stream of innovation had been established (to which the noble Lord, Lord Butterworth referred) and that innovation had been noticeable not only in the pharmaceutical industry but in many other sectors.
Thirdly, the report will state that as a result of those initiatives there had been a substantial increase in productive capacity in manufacturing industry and a continued rise in productivity. In turn that would have led to a sustained positive balance of trade in manufacturing. The financial institutions will deliberately have developed a policy for supporting long-term development and research and not opted for short-term gains. The Government will have introduced fiscal policies which will have successfully stimulated greater investment in industry and more research and training. As a result of all that we shall have established a lead position in the European Community and the prospect of a single currency will no longer hold any fears.
It is quite simple; between now and then all we need to do is to make it happen.
7.43 p.m.
Lord Williams of Elvel: My Lords, the House will be grateful to the noble Viscount, Lord Caldecote, for introducing the debate on this excellent report. The report was published a long time ago—on 29th January 1991—and it is odd that we are debating it now on 28th November 1991. Since its publication your Lordships have debated manufacturing industry on two or three occasions. During our debate on the humble Address, manufacturing industry played an important part. Therefore, we are traversing somewhat well-worn ground. I shall refer later to the excellent report of the Select Committee on Overseas Trade chaired by the noble Lord, Lord Aldington, in 1985.
I wish to look away from the report which your Lordships have debated at considerable length and with a great deal of expertise. A volume of new evidence has been produced during the past year or so from the CBI, EEF, ACOST and other organisations. It indicates that a consensus is growing around the approach indicated in the report before us. That new consensus is right. It is different from the attitude described by several noble Lords; that market forces prevail, that that is the end of the matter and that nothing more is to be said.
I wish to look at four key points for the future and indicate where we should be moving so that when we have the report indicated by the noble Lord, Lord Ezra, it will be in the terms that he described rather than describing how we have failed yet again. First, I believe that no one doubts that to correct our balance of trade, and hence our balance of payments deficit, we must have a substantial increase in manufacturing output. That was a fundamental message of the report
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and I believe that no noble Lord can seriously contest the argument. There used to be a theory that services would in some way take over from manufacturing industry as a generator of foreign earnings and that we could forget about the industry.
One must remember that even in the depths of a recession we are, according to the Autumn Statement, facing a balance of payments deficit of £6.5 billion. After every previous recession we have come into a balance of payments surplus—perhaps we have gone into it with a deficit but we have come out with a surplus. According to the Autumn Statement we shall next year emerge from the recession with a balance of payments deficit between £11 billion and £11.5 billion. That is so even with the modest recovery forecast contained in the Autumn Statement. There are spokesmen who say that that does not matter so long as one can finance the deficit. I do not believe that to be true; we cannot go on like that. All the figures show that we shall never get the deficit under control even in recession, let alone during a period of recovery, unless there is a substantial increase in output volume in manufacturing industry. How do we achieve that?
I agree that we must try to ensure that there is best practice in all firms. I agree with the comments of the CBI. I agree with the report's virtuous recommendations about training, marketing and so forth. However, the report emphasises two aspects that I wish to point to in particular. First, we must have an industrial policy and I do not apologise for saying that. We must know where we are going. I do not believe those noble Lords who say that there has been a sudden change in the attitude of DTI Ministers to the problem. I thought that the noble Lord, Lord Mottistone, was a little unfair on the noble Lord, Lord Young of Graffham, whom I regarded as a slightly interventionist Secretary of State for Trade and Industry. Nevertheless, I do not believe that DTI Ministers have grasped the idea that we must have an industrial policy. They are still under the yoke of the doctrine of market forces. Until we change that attitude, as we will, we shall not get anywhere. The problem has nothing to do with officials; it has to do with Ministers and the direction of government.
Secondly, the report rightly pointed out that we must develop a closer partnership between government and industry. Ministers, officials and industrialists must ensure that they are working along the same lines. The noble Lord, Lord Ezra, and others pointed to experience in Germany. The noble Lord, Lord Butterworth, said that he is impressed with what happens in Germany, France, Japan and so forth. The noble Lord, Lord Laing, rightly pointed out that it was only in the economies of the United Kingdom and the United States, which have that curious theory about market forces ruling everything, that investment in new technology and techniques is so low.
The second major point which I must make is that generally the United Kingdom is not spending enough on civil research and development compared with our competitors. How do we solve the problem? There are some fairly worthy ideas on that subject. I include the technology trusts which my party has put forward. However, the only promising avenue which I see is

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redeployment of the resources which are going to R&D in defence industries. I fail to see any of that in Options for Change, a document dealing with the size of our armed forces. Proportionately we spend a great deal on R&D in the defence industry. I should like to see some of that, so far as it is consistent with the proper defence of the country, switched to civil applications of R&D.
Obviously, education and training in science and technology must be at the top of the agenda. Training in skills is fundamental. However, the third point I wish to take up from the noble Lords, Lord Sharp and Lord Laing, is the question of short termism and the financial community. I do not believe that we can avoid tighter rules on takeover bids. I am bound to say that my experience as a banker is that the amount of management time and effort spent in fighting off bids or putative bids or thinking about quarterly earnings figures in order to fight off a possible bid from someone else is detrimental to the long term future of industry. That is now generally accepted.
It is also true—figures from the DTI show this time and again—that takeovers do not, on balance, add to the general efficiency of industry. That was proved in the Green Paper of the 1970s which studied merger policy and proved again in the DTI document published a few years ago which also studied merger policy. Those matters are not necessarily successful. What is successful is long term commitment to the in-house development of technology.
How do we achieve that? The noble Lord, Lord Laing—and I am not being impertinent—made an extremely effective and useful analysis of the shareholdings in British industry showing how a few fund managers can almost, by a few telephone calls, determine the fate of a company. We must try to develop a system—wider share ownership, though possibly desirable, is not a cure—whereby relations between the fund managers who run other people's moneys (not their own) and the institutions for which they work and companies can become much more developed and loyal than they are at present. My right honourable friend John Smith has put forward some ideas. I do not want to go into those ideas. However, we are seriously considering the possibility of trying to develop a system, which the noble Lord, Lord Laing, was groping towards, whereby we have a much closer relationship between the fund managers and managers of companies.
The fourth point is the question of the role of government and allied to that I introduce the role of Parliament and political parties. In my view the report quite rightly says that government/industry relationships are unsatisfactory and we must do better. Before coming to that point, I believe that Parliament should do better. In this House we are fortunate to have representation from industry, bankers and the commercial sector. I am bound to say that in my view it is the job of industry to make sure that candidates for another place who have experience in industry, are put forward and are supported. That is a matter which industry should take on board. It is not sufficient for companies to say, as some companies do, "If you are
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going to fight for a seat in Parliament, you had better forget about your industrial career". We should encourage better contacts between political parties, the activists in parties and industry. Over the past few years my party has tried to do that. At local level we have talked to industrialists who were surprised that representatives of the Labour Party should wish to talk to them. All parties should do that.
I turn to the role of government. I cannot add to what the report says in criticising the role of government with regard to industry. We are in fairly serious trouble as regards the relations between government and industry when the Secretary of State, who I shall not name, arrives at his office at the DTI asking "What is this place for?" The report made that absolutely clear. The latest examples of privatisation—the Insurance Services Group of the ECGD and the British Technology Group—are examples of how DTI Ministers have not yet got the message.
I shall not weary your Lordships by explaining my party's proposals. I introduce a commercial plug at this point by saying that a document is available which I shall be delighted to sell to noble Lords outside the Chamber. We have many proposals which are spelled out in great detail about what we propose to do. They are broadly along the lines of this report. There are some differences of opinion but they are not significant. That is because the consensus which I mentioned at the beginning of my speech is now emerging. Whichever party wins the next election, the time has come to change the role of government vis-à-vis industry. There was the Aldington Report in 1985 and the Caldecote Report in 1991. If we are to have the Ezra Report in 1996 or 1998 in the terms which the noble Lord wants, then we must work on that new consensus. I do not believe that this Government are doing that.
Whatever the result at Maastricht, the problems which we have are problems at home. Whichever party forms the next government, it will have to deal with those problems.
7.58 p.m.
Lord Hesketh: My Lords, may I first of all thank my noble friend Lord Caldecote and the members of the committee for giving us the opportunity to debate their important and valuable work in producing the report Innovation in Manufacturing Industry. The Government warmly welcome the report as it addresses a topic which they regard as particularly important. Indeed, my right honourable friend the Secretary of State for Trade and Industry, when giving evidence to the committee, said that he could not imagine a healthy UK economy without a vigorous and successful manufacturing sector. He went on to say that he believed that manufacturing industry was vital for the future prosperity of the country.
The Government agree with the committee that the prime responsibility for innovation rests with industry. The government's role must be to establish the right climate in which enterprise and business can flourish, and to act as a catalyst for change in attitudes towards industry and innovation. A wide range of policies determine this including taxation, education,

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competition, privatisation, trade union laws, deregulation and reducing the burdens on industry. I could go for others as well, but I will not.
We believe that the Government have done much to assist the achievement of the right climate by, among other things, cutting tax rates, to restore incentives; reducing the share of the nation's income taken by public spending, to release resources for industry; scrapping pay controls, price controls, dividend controls, exchange controls, and countless other controls, to restore managers' right to manage; reforming trade union law; reviving vocational educational and skill training; by the privatisation policy that has been followed over the past decade; and, most importantly, by encouraging competition.
One particularly important, and noteworthy, achievement that I should like to mention is our success in reducing UK corporation tax to 33 per cent. At that level it is now the lowest in any European Community or G7 country. The rate for smaller companies is even lower at 25 per cent. That means that mare money is left with industry, so that a greater proportion of company profits is available to invest. Investment is essential for a company to innovate and so stay ahead and, most importantly, to remain competitive. I am sure that all noble Lords will agree with me that R&D which has been planned and funded by industry is, by far, the most important R&D. It is encouraging, therefore, that the latest statistics available on such company-funded R&D show growth in real terms of more than 50 per cent. over the six years leading up to 1989.
However, even taking account of the rise in company-funded R&D, it is still not enough. Comparisons between Britain and the most successful economies suggest that the British private sector still invests less in R&D than its competitors, and manages the commercial development of new products and processes less effectively. If UK manufacturing industry is to compete in national and international markets, its success in doing so will depend increasingly on its willingness to invest in effective R&D, leading to innovative products which the market needs and wants. Of course, the pre-condition of private investment in R&D is profitability. Without profits, industry has neither the resources nor the incentive to invest in its future.
The Government recognise that the market on its own will not undertake enough pure or pre-competitive R&D. Therefore, the Government support research in areas where there are net national benefits to be gained and where industry alone cannot be expected to shoulder the whole burden of funding. To that end the Government support civil R&D to the tune o r some £3 billion a year, a not insubstantial sum of money, and one that is as much as the Japanese Government spend as a percentage of GDP.
But the idea that government should spend more on R&D and that that will automatically lead to innovation and commercially successful products is untrue. As the Government have said in their response, innovation is more than just R&D, it involves the continual introduction of new products and processes, using new designs, deploying new
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skills, and opening new markets. Successful innovation will help a firm stay ahead of its competitors and provide a healthy level of profits in the future.
I am encouraged that the Government and the members of the Select Committee share the view that there must be a national change of attitude to recognise the full importance of innovation to a successful manufacturing economy. That is why, when the committee's report was published, the Government were able to respond positively by endorsing many of the report's recommendations. Indeed, a significant number of its recommendations had already been implemented prior to publication of the report. For example, we have introduced a package of new measures, collectively worth nearly £50 million, for smaller firms as they have an important role to play in innovation which depends chiefly on their R&D activities. Smaller firms often find it particularly difficult to raise funds, and the new schemes will help them to be more innovative and exploit more effectively the science base.
The largest of the new innovation schemes is SPUR (support for products under research). I hope that that will be the last time that I shall use an acronym this evening. My noble friend Lady Denton made a telling point on the subject of acronyms when discussing innovation, and I am hoping to resist further urges. SPUR was introduced in February this year and offers smaller firms a fixed 30 per cent. grant towards eligible project costs, up to a maximum grant of £150,000, to develop new innovative products and processes. SPUR has been widely welcomed and got off to a most promising start, and over 1,000 registrations of interest have already been received. Other recommendations that we have implemented include: an expansion of the number of awards under the SMART scheme for very small firms with fewer than 50 employees; tax relief for individuals to cover training leading up to and including national vocational qualifications; and making DTI schemes more readily accessible and easily understood.
On a personal note, when I had the privilege of going to the DTI on my first day as Minister of State there, I arrived on the basis of having applied for a period of 10 years for grants from the DTI. I had never successfully obtained one. On accessibility, it is important to emphasise the difficulty that the ordinary layman—entrepreneur or innovator—has, in achieving access to the great doors of state in Whitehall.
On my last example, I might just mention what the DTI has done to assist. The new DTI brochure Technology and Change — Help for Business, published in May 1991, draws together for the first time, all the innovation services offered by DTI. That is supported by an innovation enquiry line on which people can phone without charge for information about the schemes available. Both those initiatives have significantly improved the access of the ordinary man in the street to DTI schemes. At the same time, the rules and procedures for all collaborative schemes were simplified. The take-up of schemes such as LINK and EUREKA has been accelerating. That is significant.

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But I touched upon the crux of the matter earlier when I said that the Government and the Select Committee agree that there should be a national change in attitude to recognise the full importance of innovation to a successful manufacturing economy. Cultures and attitudes cannot, as we all know, be changed by law or decree. What government can do is restore the incentives, remove the obstacles and introduce measures which cumulatively will act as a catalyst to change attitudes and practices of management, in business, the education system and financial institutions. That is what my right honourable friend the Secretary of State for Trade and Industry had in mind when he recently established an innovation unit in his department. The innovation unit will act as the catalyst for change in attitudes to innovation. It seeks to overcome the cultural bias against business and practical skills that inhibit innovation in the UK's industrial base. To do that it will draw on the services of senior industrialists who, with direct experience of innovation in business, are joining the unit on secondment—a further example of the Government's commitment to the committee's recommendations.
The new unit aims to improve the commercial exploitation of our excellent science and technology base; increase the importance and improve the management of innovation in business; improve communications on innovation between companies, investors and banks; raise awareness in education of the wealth-creating potential of technology and engineering; and, lastly but by no means least, to increase public awareness and understanding of the role of innovation in wealth creation.
I am sure that I join all in your Lordships' House in hoping that Lady Butterfield will be restored to good health as soon as possible. I also take the opportunity to make a commitment that the department will investigate Miss Helen Sharman's crystals, mentioned by the noble Lord, Lord Butterfield, and her recent endeavours in space.
I was encouraged to hear of another Member of your Lordships' House with an interest in motorcycles, which the father of the noble Lord, Lord Butterfield, certainly had. It is also important to remember that the vision of the noble Lord, Lord Ezra, has certain attractions, but I dare not make a statement as to whether or not he is correct that by 1996 a single currency will hold no fears.
My noble friend Lord Caldecote rightly referred to the proposals for recommending tax credits on R&D. However, there is the difficulty of actually defining R&D. That must be addressed if one is to pursue the argument. I was greatly impressed by the speech of my noble friend Lord Laing of Dumphail and by his extremely strong feelings as regards both shorttermism and his principle of interest in stakeholders in a company above and beyond that of the property of the shareholders. I am sure that there will be a future debate giving an opportunity for that subject to be discussed again.
I was also pleased and surprised that my noble friend Lord Aldington was happier than he was in
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1985. I was also pleased and impressed when he quite rightly pointed out the importance that we have as a country to make young people understand the opportunity of manufacturing industry as a career. I agree with his support for innovation and information, which is vital. I am also grateful for the remarks made by my noble friend Lord Caldecote as regards cultural change as he saw it in the United Kingdom and also for the way in which he welcomed the Innovation Advisory Board.
My noble friend Lady Denton mentioned a cause close to my own heart, which is not exciting but one that is destroyed by bureaucracy's acronym-creating ability; namely, BS 5750. I have been deeply impressed by the pleasure that that gives to various companies that I have the opportunity on most Fridays to visit in order to present certificates. It shows that they believe that although difficult to understand by its descriptive powers it clearly provides commercial advantage for their own future betterment.
My noble friend Lord Aldington asked whether there was additional funding. I drew his attention this evening to the extra £50 million provided since the report was published. The noble Baroness, Lady O'Cathain, pointed out three remarkable facts that are worth remembering: there are more VCRs per head of population in this country, more cellular telephones than in the rest of Europe and more personal computers per head of population. That does not indicate a country that is uninterested in change or innovation. The noble Lords, Lord Ezra and Lord Williams, drew attention to the lateness of your Lordships' debate. It is worth remembering that the report was published only in March rather than January. The response from the Department of Trade and Industry was made in June and then followed the summer holidays. I like to think that in terms of balance we have just about got it on the right spot.
My noble friend Lord Sharp of Grimsdyke quite rightly finished expressing his views in the debate by pointing out the success, little advertised, both of Glaxo and Cable & Wireless in achievement and comparability around the world for British companies. I have always strongly felt that as regards this country's ability in innovation and creativity we do ourselves down. I should like to conclude the record by saying what other people think of us rather than what we think of ourselves. Other people such as Japan and the United States invested nearly one dollar and one yen out of every two in the United Kingdom last year as compared with the rest of Europe. We may put ourselves down, but in manufacturing industry in the past decade our productivity rose by 52 per cent. and exports by 61 per cent. Those are figures not of failure but of success.
8.15 p.m.
Viscount Caldecote: My Lords, we have had a most valuable and interesting debate. I am very grateful to all noble Lords who have supported the report and also those who have provided constructive criticism. There is very wide agreement that we need a culture change very urgently. We need more innovation. It is mainly industry's task but the Government can help.

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My noble friend Lady Denton thought that I was blaming the Government for the lack of market share in the machine tool industry. That is not so. I believe that they made mistakes about 25 years ago. I was suggesting that some action needed to be taken in industries of that kind where it is important to help them to get hack. It is necessary to help the weak, and to help small companies to become big again. It is not a question of helping lame ducks, but of helping good, small companies to become big again. They need help with investment problems.
I entirely agree with the noble Baroness, Lady O'Cathain, about the importance of the market. If she reads the report, she will see that we place a great deal of emphasis on that and I do not believe that there is anything between us on that subject. I was not arguing for subsidies of any kind but merely that industry should be supported as the Japanese machine tool industry was. When it was changing from numerically controlled machine tools to computers on the machines, they gave special tax incentives to help that part of industry which it was thought was very important to the future of Japan. That measure was very effective.
I liked the plea from my noble friend Lord Laing of Dumphail for innovation in the structure of companies and also the views of the noble Lord, Lord Ezra, on the 1996 report. I hope that that will come true. My noble friend Lord Hesketh gave us some encouragement. I am very grateful to him for his reply. I believe that the Government are putting too much emphasis on supporting research and not the more expensive and later parts of the process of innovation. A great deal is being done, and I welcome the work of the Innovation Unit of the DTI; but I believe that we are agreed that not enough is being done.
Perhaps I was lacking in recognition of the new attitude in the DTI and that of the Secretary of State of Trade and Industry towards innovation. I take this opportunity to pay tribute to him for his very exciting and encouraging contribution of £375,000 over four years to the Fellowship of Engineering MacRobert award for innovation in engineering which he announced this week. That is a very encouraging pointer to the new outlook in the DTI. We all hope that we can go forward rapidly from there to even greater support and towards the growth of manufacturing industry. I thank all noble Lords who have taken part in the debate.
On Question, Motion agreed to.

Companies Act 1985 (Bank Accounts) Regulations 1991
8.18 p.m.
Viscount Astor Viscount Astor rose to move that the draft regulations laid before the House on 16th October be approved [1st Report from the Joint Committee].
The noble Viscount said: My Lords, in moving these draft regulations, I shall also speak to the Bank Accounts Directive (Miscellaneous Banks) Regulations 1991. The purpose of these regulations is short and simple: to implement the EC Bank
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Accounts Directive. The directive, on the other hand, is neither short nor simple. Neither, inevitably, are the regulations. The directive complements the fourth and seventh company law directives, which established for companies other than banks and insurance companies the accounting requirements for individual and consolidated accounts. They were implemented in this country by the Companies Acts of 1981 and 1989 respectively. The bank accounts directive applies most of the general provisions of the fourth and seventh directives to banks. It also specifies comprehensive balance sheet and profit and loss account formats; it defines what items should be included under each statement heading; it specifies certain additional disclosures to be made by way of notes to the accounts; it establishes special valuation rules to be applied in stating certain balance sheet and profit and loss account items; it specifies certain adaptations in respect of the requirement to prepare consolidated accounts; and it lays down rules in relation to the publication and auditing of accounts.
The implementation of the directive will update the accounting requirements for banks and bring them into line with those which apply to the generality of companies. Compliance with the regulations will be required in respect of accounting periods beginning on or after 23rd December 1992.
As noble Lords will have noticed, there are two sets of regulations and it may be helpful if I briefly outline the scope of each. First, there is the set which uses the powers under Section 257(1) and (2) of the Companies Act 1985. That is the one which will apply to nearly all UK banks. The second set is needed to deal with banks which are not companies to which the Companies Acts apply. In all cases, authorised UK banks will continue to be subject to the provisions of the Banking Act 1987.
The directive is not only complex, but it contains numerous member state options. To ensure that all relevant factors were identified and fully considered before the regulations were drafted, the Department of Trade and Industry issued a consultation document in July 1989. That invited views on a number of points, including how the member state options should be exercised and whether it would be appropriate to include additional disclosure requirements in the regulations going beyond those in the directive and in Schedule 4 to the Companies Act 1985. The consultation document was circulated to some 600 interested firms, organisations and individuals, and to all UK authorised banks. Copies were placed in the Libraries of both Houses and were also available on request.
In July 1990 a further consultation document was issued, inviting comments on the draft regulations. That was copied to all those who responded to the earlier document. Again, copies were placed in both Libraries and were available on request. The existence of both documents was publicised by Parliamentary Questions and press notices. A final consultation document containing revised draft regulations was issued in August 1991. In addition, the Department of Trade and Industry had a number of meetings with

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representatives of the British Bankers' Association, which made a positive contribution to the process of implementing the directive.
Those who replied to the consultative documents included the Institute of Chartered Accountants in England and Wales, and a number of banks and accountancy firms. All the comments received were carefully analysed by the department, in consultation with the Bank of England, the Treasury and the Building Societies Commission. The draft regulations have the support of the banking industry.
I have spoken about the purpose, scope and content of the regulations. I believe their value and importance are self-evident. I commend the regulations to the House.
Moved, That the draft regulations laid before the House on 16th October be approved [1st Report from the Joint Committee].—(Viscount Astor.)
Lord Williams of Elvel: My Lords, the House is grateful to the noble Viscount for moving the Motion and discussing the orders. We have no problems with them. Indeed, the Government seem to have gone further than the directive in not allowing the creation of a hidden reserve—that the directive does allow—of up to 4 per cent. or below of cost or market value, loans and advances, debt security shares and variable yield securities. We approve of that. I have always argued that inner reserves for banks under the old 1948 Act should not be allowed. I am glad to see that that is not to be permitted.
We also approve of the Government going a little further than the directive in prohibiting the creation of a fund for general banking risks of a curious nature. The layout and method of foreign currency translation, publication and auditing in our view track the directive. We are therefore quite happy with them.
On Question, Motion agreed to.

Bank Accounts Directive (Miscellaneous Banks) Regulations 1991
Viscount Astor Viscount Astor rose to move that the draft regulations laid before the House on 16th October be approved [1st Report from the Joint Committee].—(Viscount Astor.)
The noble Viscount said: I beg to move.
On Question, Motion agreed to.

Library Charges (England and Wales) Regulations 1991
8.24 p.m.
Viscount Astor Viscount Astor rose to move that the draft regulations laid before the House on 22nd July be approved [27th Report from the Joint Committee Session 1990–91].
The noble Viscount said: My Lords, these regulations will empower library authorities in England and Wales to make charges for providing the library facilities which are set out in the regulations. They will replace the limited charging powers which
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library authorities presently have, correct certain anomalies in the existing legislation and introduce new charging powers. They have been drawn up only to cover those library facilities made available by library authorities in the course of carrying out their functions under Section 7 of the 1964 Act.
The draft regulations were sent out for comment to representatives of those responsible for, or with an interest in, the administration and operation of the public library service in England and Wales. The final draft was prepared after considering all the views expressed during the consultative period.
I must now address a point which has caused some anxiety in another place. It was as a result of the consultative exercise that my honourable friend the Minister for the Arts decided to remove the upper limit of £1.50 on reservation charges. The Federation of Local Authority Chief Librarians strongly urged its removal. The Government accepted the arguments that there was no indication of need that a maximum charge, which could soon become a norm, should either be specified or set so high.
As no recommendations for the level of charges are made in respect of other services, there seems little reason for specifying a maximum in relation to readers' requests. It would be more appropriate simply to confirm the ability to charge and allow authorities to regulate that charge.
Before specifying the particular facilities which library authorities would be empowered to charge for in the regulations, I wish to reassure noble Lords that the Government have taken positive steps to ensure that the traditional free public library service is not undermined by the regulations.
An important safeguard for free access to the library service has been built into the provisions of the 1964 Act, as substituted by the Local Government and Housing Act 1989. The Government excluded from the scope of the enabling power two main elements which are generally regarded as the traditional free public library service. Those are, the borrowing and consultation of written material. That statutory safeguard, which is repeated in the draft regulations, demonstrates the Government's commitment to maintaining the essential free traditional public library service.
As I said, the regulations will preserve the existing powers to charge contained in the 1964 Act. They will also correct certain anomalies. They will introduce new charging powers and give library authorities power to charge for assistance given by library staff.
All the powers to charge will, as at present, be discretionary. Authorities will be able to decide whether or not to charge for any service. When they do decide to charge, they will be able to decide whom they charge and the concessions which they give. Authorities are required to make those charges known in advance to members of the public. The Government's principal aim is to facilitate the improvement of the public library service for the benefit of its users; to give the service access to additional sources of revenue, while preserving the principle of free access to the traditional service. The regulations are just one of a series of steps that the

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Government have taken to help library authorities, and they will continue to take steps to make the library service efficient, modern and good value for money.
The regulations will help in that process. They clarify existing legislation and introduce modest new charging powers which reflect the new type of library facilities commonly provided since the introduction of the 1964 Act. I commend them to the House.
Moved, That the draft regulations laid before the House on 22nd July be approved [27th Report from the Joint Committee Session 1990–91].—(Viscount Astor.)
Baroness Birk: My Lords, the noble Viscount explained the origin of the regulations. I do not wish to examine that aspect in any depth as it is getting late. It was the Green Paper entitled Financing our Public Library Service: Four subjects for debate, published by the Government in February 1988, which held out the prospect of raising a great deal more money for public libraries by charging for more services and charging more for those services. That was always regarded as unrealistic and indeed was opposed by the vast majority of the thousands of individuals and organisations who responded to the Green Paper.
It is to the credit of the former Minister for the Arts, Sir Richard Luce, that he took those representations on board and modified his proposals in the light of them. The consequence is that in the broadest terms little change is being made to the law on library charges. As the noble Viscount pointed out, it will still be unlawful to charge for the lending of books and it will still be lawful to charge for the lending of other materials like cassettes and videos. More important, the former Minister for the Arts was insistent that the new legislation should do no more than allow local authorities to charge for some services but not compel them to do so. I therefore wish to pay tribute to Sir Richard for being that unusual thing, a listening Minister. He took heed of the representations made to him and avoided the idea of compelling charges for specific services.
So far, so good. There are, however, aspects of the regulations now before your Lordships' House which are worrying. One of the strongest characteristics of the British library system is the facility for inter-lending between different libraries. By this means, a member of the public who finds that his or her own local library does not have a certain book in stock can arrange for it to be obtained from another library. For example, it may be another public library, a university library or, in the last resort, it could be the British Library. It is the view of the Library Association, which represents 24,000 librarians in the United Kingdom, that aspects of the present regulations will endanger that valuable inter-lending practice.
The regulations will allow libraries to make a charge for reserving material for a reader. That will apply whether the material requested is stocked by the library to which application is made or has to be obtained from another library. In the draft regulations which were sent out for consultation to a large number of organisations, a limit of £1.50 was set on the reservation charge which could be levied. Sir Richard Luce and his short-lived successor Mr. Mellor both
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intended to impose that £1.50 limit as a maximum charge for the reservation of books. But the present Minister for the Arts, Mr. Timothy Renton, decided to remove it.
Defending that decision in another place on Monday, the Minister called in aid the representations which had been made to him by the Federation of Local Authority Chief Librarians. He rightly said that that organisation had taken a different view from that of the Library Association and that he preferred the former's view. But the Minister went further. He claimed that a majority of chief librarians favoured having no upper limit for the charge. I understand that there is no basis for that allegation. No survey was made of the individual views of each chief librarian in England and Wales on that point. It is the firm view of the Library Association that the vast majority of its members favour having a maximum. The Minister suggested that any maximum figure may tempt local authorities to treat it as a minimum or norm. But there is an equally compelling view that having no maximum at all will lead to a progressive rise in charges well above the maximum which the previous Ministers contemplated.
Westminster City Council, for example, recently decided that the librarian in charge of each of its branch libraries will be free to levy anything from 20p to £2 as a reservation charge. If the present Minister for the Arts had not removed his predecessors' proposed maximum, that upper figure would simply not have been admissible. So here, right away, even before the regulations are in force, we have an actual example of the upward pressure to which there is now to be no ceiling.
I know that the noble Viscount will point out that in existing law there is no maximum set for such charges. However, in recent years there have been new and harsh pressures on local authority finance and, therefore, pressures for raising more in charges. The danger of excessive charges is now more real than before. That is why it is even more important to have a maximum now than it was in the past and why the Minister's predecessors were more wise than he in deciding to impose one. I deeply regret that on this matter the Government have declined to take the advice of the Library Association which, under its royal charter, is enjoined to scrutinise legislation and tender advice to the Government upon it.
There is a further point on which I should like a definite assurance from the noble Viscount tonight. Regulation 4(1) says that where a charge is authorised by the regulations, the amount and the incidence of the charge,
"shall be at the discretion of the relevant authority".
The Library Association has pointed out that these words appear to allow an authority to charge as much as it likes for a reservation. I understand that the Office of Arts and Libraries has suggested that a local authority would not be free to charge more for reservations than the actual cost incurred in processing them. But the words of the regulations do not seem to bear out that interpretation. Therefore, if the regulations are passed in their present form, it could be a matter upon which only a court of law

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could decide in the end. When the noble Viscount replies, can he make it clear whether it is the Government's view that, under these regulations, a library can only charge for the actual cost of processing the reservation and no more? I await with interest his reply.
I should like to conclude by recognising the important role played by our public libraries in the life of the country. We are all concerned about the encroachment of television on national reading habits, and illiteracy is, unfortunately, still a real problem. Our public libraries have for well over a century now constituted a valuable cultural and information resource. I repeat that we appreciate the fact that the Government are not changing the basic service; but we are concerned that these regulations could start a process of transforming it into something much closer to a commercial service. If that were to happen, the cultural life of the country would suffer greatly. Moreover, authors, publishers and booksellers would also suffer.
I therefore appeal to local authorities which are, I deeply appreciate, very hard pressed financially—indeed, many of them are capped—to exercise the powers given to them under these regulations with the greatest caution in order to protect the wonderful legacy which has been handed down to us by our predecessors. We must ensure that we pass on to our successors a system which, it is to be hoped, will be no poorer than the one we inherited.
Viscount Astor: My Lords, the noble Baroness, Lady Birk asked me about reservations. She pointed out, quite rightly, that the regulations allow a charge to be made for making a reservation and for notifying the user that the item is not available. All the direct and indirect costs associated with those two activities could be covered in the charge. Authorities cannot levy unreasonable charges. Their charges are subject to judicial review. It would seem reasonable to set the charge to prevent abuse without, at the same time, deterring those who need to make the reservations. Local authorities are also permitted to charge for the services which they provide each other and for providing material on inter-library loan. However, the regulations do not allow for the cost of obtaining a requested item to be passed on to the operator.
Should charges be seen to get out of hand, the Minister will consider setting a ceiling on this or on any other charging provision as seems to be appropriate. Indeed, he will monitor the charging levels. All library authorities will be contacted in two years' time so that he can assess the situation.
Baroness Birk: My Lords, the noble Viscount did not answer my question about whether it is a fact that local authorities will be allowed to charge only the extra incurred in the processing of the reservation. I asked that question specifically and requested that he reply to it tonight.
Viscount Astor: My Lords, I believe that I did reply to that question. I said that the process of notifying the user that an item is not available and all the direct
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and indirect costs associated with the two activities involved could be recovered in the charge. That is the answer to the question.
Baroness Birk: My Lords, with the greatest respect, that is not the answer. As I understand it, the Minister is not saying that it is restricted to the cost of processing the reservation; he is saying that libraries can do more or less what they like. But how many of us understand the regulations as they stand at present?
Viscount Astor: My Lords, I do not think that that is right. If a library charged too much, the reservation charge could become the norm and there is, therefore, a risk that the reservation charge could be tantamount to the charge for borrowing. That is something that authorities cannot do.
Baroness Birk: My Lords, I am sorry but I feel that I must pursue this point. How does the noble Viscount define "too much?". If there is no maximum, how can one define what is too much?
Viscount Astor: My Lords, I have already said that the authorities cannot charge unreasonably. It is up to the authorities to look at their costs to decide what they want to charge. Indeed, they have the discretion to decide whether they want to charge or not. They do not have to charge. They have that discretion.
On Question, Motion agreed to.

Scottish Seed Potato Development Council (Amendment) Order 1991
8.40 p.m.
The Earl of Strathmore and Kinghorne The Earl of Strathmore and Kinghorne rose to move that the draft order laid before the House on 14th October be approved [1st Report from the Joint Committee].
The noble Earl said: My Lords, this order amends the Scottish Seed Potato Development Council Order 1981 and is presented in accordance with the requirements of the Industrial Organisation and Development Act 1947. It increases from £15 per hectare to £25 per hectare of seed potatoes classified the maximum annual charge which may be levied on producers by the council in order to meet the expenses incurred in the exercise of its functions. The levy on producers in 1990 was £15 per hectare, discounted to £14 per hectare for early payment. The increase in the maximum levy is intended to take account of any increase in costs between now and 1995, when the continuation of the council and its operations will be statutorily reviewed.
Paragraph 6(1) of the Scottish Seed Potato Development Council Order 1981 authorises the council, subject to the approval of the Secretary of State, to impose an annual levy on every producer of classified seed potatoes at a rate not exceeding £15 per hectare. The council operated on a rate of £10 per hectare from its inception in 1982 until 1987, and only in 1990 was the statutory maximum of £15 per hectare levied, with a discount of £1 per hectare for early payment.
The area of seed potatoes classified in Scotland has gradually declined since 1982, when the classified area was 20,341 hectares, to 14,205 hectares in 1991, thus reducing the council's prospective income. This is the primary reason for the proposed increase in the maximum levy to? 25 per hectare. I am very happy to commend the draft order to the House.
Moved, That the draft order laid before the House on 14th October be approved [1st Report from the Joint Committee]. —[The Earl of Strathmore and Kinghorne.]
Lord Carter: My Lords, the House will be extremely grateful to the noble Earl for having explained the order so clearly. It must be something of a record for a farmer to agree with an increase in farming costs; but I have no comments to make beyond saying that we understand and approve the purpose of the order.
On Question, Motion agreed to.

Disability Living Allowance and Disability Working Allowance (Northern Ireland Consequential Amendments) Order 1991
8.43 p.m.
The Paymaster General (Lord Belstead)The Paymaster General (Lord Belstead) rose to move that the draft order laid before the House on 14th October he approved [1st Report from the Joint Committee].
The noble Lord said The noble Lord said: My Lords, I beg to move that this order, which was laid before the House on 14th October 1991, he approved.
The Disability Living Allowance and the Disability Working Allowance Act of the last Session introduced two new benefits for disabled people; namely, disability living allowance, which provides help with the extra costs of disability for people of working age and below; and disability working allowance, to top up the earnings of disabled people in work. Disability living allowance will replace mobility allowance completely, and attendance allowance for people under 65 from April 1992. The Bill also made a number of consequential amendments to certain United Kingdom tax Acts, all of which were of a beneficial character.
The Bill introducing these new benefits also contained a clause which enabled an Order in Council under the Northern Ireland Act 1974, subject only to negative resolution procedure, to be made providing the same benefits for Northern Ireland. However, as such an Order in Council cannot make consequential amendments to United Kingdom Acts, and as the Bill did make a number of such consequential amendments to certain United Kingdom tax Acts, which are as I have said all of a beneficial character, it is necessary to make a separate order for this purpose under Section 38(2) of the Northern Ireland Constitution Act 1973. This is the order for which I am now seeking the approval of your Lordships' House.
Article 2 amends the Capital Gains Tax Act 1979 to give additional relief for certain trusts for people with
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disabilities. It ensures that people on the highest or middle rate of the care component of disability living allowance in Northern Ireland will qualify for this relief in the same way as people currently receiving attendance allowance in Northern Ireland.
Article 3 amends the Value Added Tax Act 1983 to take account of the replacement of mobility allowance in Northern Ireland. At the present time charges for leasing cars on a long-term basis to people receiving mobility allowance may be zero-rated for VAT.
Article 4 amends the Inheritance Tax Act 1984 in the same way as Article 2 amends the Capital Gains Tax Act. Certain trusts for people receiving the highest or middle rate of the care component of disability living allowance will qualify for special relief from inheritance tax, in the same way as trusts for people receiving attendance allowance.
Article 5 repeals a reference to mobility allowance in so far as it applies to Northern Ireland, in Section 617(1) (a) of the Income and Corporation Taxes Act 1988. Mobility allowance is being replaced by the mobility components of disability living allowance.
Article 6 amends the Capital Allowances Act 1990 so that allowances on vehicles leased to people presently on mobility allowance will apply to vehicles leased to people receiving either rate of the mobility component of disability living allowance.
The people of Northern Ireland will qualify to receive the two new benefits for disabled people which were recently provided for people in Great Britain by the Act to which I have referred. This order ensures that certain recipients of one of those benefits—namely, disability living allowance—will be treated in the same way under various tax Acts and removes references in those Acts to mobility allowance.
I am sure that the House will wish to support this order which is in essence intended to bring Northern Ireland into parity with Great Britain so far as consequential tax changes are concerned. I beg to move.
Moved, That the draft order laid before the House on 14th October be approved [1st Report from the Select Committee].—(Lord Belstead.)
Lord Prys-Davies: My Lords, I should very much like to thank the noble Lord, Lord Belstead, for having explained so clearly and so carefully the purpose of the order and its relationship to the statutory instrument which was laid before Parliament on 1st August last. Although my comments will be very brief indeed, that does not mean that we minimise in any way the importance of disability legislation for the disabled people of Northern Ireland.
I must confess that I was in some difficulty in grasping the full meaning of the amendments which are being made by the order which is before the House this evening: they are amendments to the five principal Acts which the noble Lord, Lord Belstead, has explained very clearly to the House. Fortunately for me, the order was before the Second Standing Committee on Statutory Instruments on 20th November and I was immensely reassured to read in the report of the proceedings of that committee that this order was in a sense a technical order. This has been confirmed and also the Minister has explained

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very clearly tonight that the effect of this order, together with the earlier instrument, will be very beneficial for the people of Northern Ireland. I am very pleased to give my support to the order.
I shall not detain the House for very long, but I should like to ask the Minister two straightforward questions. Is he able to tell the House when it is anticipated that this order, or the various parts of it, will come into force? I should also like to ask the Minister what consultations took place in Northern Ireland prior to the statutory instrument being tabled last August. If the Minister is able to throw light on those two matters, that would be helpful. I very much approve of this order.
Lord Beistead: My Lords, I am grateful to the noble Lord, Lord Prys-Davies, for his support for this order. I am also grateful to him for very kindly having given me notice of the two specific questions he wished to ask.
So far as the commencement of the order is concerned, as for the rest of the United Kingdom these amendments to the tax Acts will come into force on 6th April next year. The noble Lord asked about consultation. As is normal for new social security provisions, consultation was on a United Kingdom-wide basis. This was the parent legislation. The new benefits were first announced in the publication, The Way Ahead, which was widely distributed in January
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1990. That and the detailed proposals for the new benefits were made available to disabled persons' organisations, many of which I am pleased to say contributed useful suggestions.
We come back to where we started. In this order we are talking not about the benefits but about beneficial consequential tax changes which are parity measures to bring Northern Ireland into line with Great Britain. I commend the order to the House.
On Question, Motion agreed to.

Access to Neighbouring Land Bill [H.L.]
Lord Murton of Lindisfarne: My Lords, I beg to introduce a Bill to enable persons who desire to carry out works to any land which are reasonably necessary for the preservation of that land to obtain access to neighbouring land in order to do so; and for purposes connected therewith. I beg to move that the Bill be now read a first time.
Moved, That the Bill be now read a first time—(Lord Murton of Lindisfarne.)
On Question, Bill read a first time, and to be printed.

Aire and Calder Navigation Bill
Committed to an Unopposed Bill Committee.
House adjourned at nine minutes before nine o'clock.