Lords Sitting of 15 October 1991

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

Lord Macfarlane of Bearsden
Sir Norman Somerville Macfarlane, Knight, having been created Baron Macfarlane of Bearsden, of Bearsden in the District of Bearsden and Milngavie, for life—Was, in his robes, introduced between the Lord Charteris of Amisfield and the Lord Goold.
Lord Browne-Wilkinson
The Right Honourable Sir Nicolas Christopher Henry Browne-Wilkinson, Knight, a Lord Justice of Appeal, having been appointed a Lord of Appeal in Ordinary and created Baron Browne-Wilkinson, of Camden in the London Borough of Camden, for life—Was, in his robes, introduced between the Lord Oliver of Aylmerton and the Lord Goff of Chieveley.

Health Care in the UK
2.58 p.m.
Lord Molloy Lord Molloy asked Her Majesty's Government:
How they intend to improve preventive health care in the United Kingdom.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Hooper): My Lords, the Government are committed to the promotion of good health and the provision of preventive health care. The recently published Green Paper The Health of the Nation sets out our plans to reduce preventable diseases and targets specific areas for action in England. Similar initiatives are under way in Scotland, Wales and Northern Ireland.
Lord Molloy: My Lords, I thank the Minister for that reply. It is somewhat overdue, but better late than never. Is she aware that our standing in the World Health Organisation is not much to be proud of? We are very low in its league. The facts have to be taken into consideration. I welcome what the Government are now doing and I do not see anything wrong in that.
Is the Minister aware that three organisations— that is to say, MIND, the Health Visitors' Association and Age Concern—are very worried about many aspects of mental health? Is she further aware that some old people are not given the attention that they deserve? Is the Minister also aware that the Health Visitors' Association believes that it can contribute, with the other two organisations, in making recommendations to the Government to help them in their desire to create a better preventive health situation than we have at the moment?
Baroness Hooper: My Lords, our Green Paper has been widely welcomed by everyone interested in health matters, including Dr. Jo Asval, the Director of WHO Europe, who has said that it is the kind of initiative he would like every country to take. That means that we are the first European country to take this initiative. Indeed, the document is out for consultation at present and all organisations are being asked to offer their views on the final document.
Lord Ennals: My Lords, is the Minister aware that on this side of the House we recognise that there are some very useful proposals in the 142 page document, but that also there are some very significant omissions? Perhaps I may ask two specific questions? First, why is it that the Green Paper does not have a single word to say about complementary medicine, which has an enormous contribution to make to the health of the nation? Secondly, why does the document not deal specifically with the health of elderly people? They form almost one-quarter of our population.
Baroness Hooper: My Lords, we shall not apply that statistic to your Lordships' House! The subject of complementary medicine may well come up in the course of the consultation process. The objectives of the Government in producing a Green Paper were to set achievable targets in areas where our record needs improving. That is our intention.
Lord Ennals: My Lords, will the Minister please answer the second part of the question regarding the elderly?
Baroness Hooper: Yes, my Lords. The whole area of the needs of elderly people is contained within the targets which are set out in the Green Paper. We have not categorised a separate ghetto area for the needs of the elderly. However, we are well aware of the demographic factors and of the needs and requirements they impose on our National Health Service.
Baroness Denton of Wakefield: My Lords, does my noble friend agree that in this area, as in so many areas, women have an important role to play and that the recent publication by the department of a booklet on women and health—which has had to be reprinted already—has proved invaluable?
Baroness Hooper: Yes, my Lords. The action that we have taken in terms of the call and recall system for cervical and breast screening processes plays an enormous part, too, in ensuring the better health of women.
Lord Dormand of Easington: My Lords, one of the most effective ways of dealing with this matter is through the Health Education Authority. Does not the Minister agree that the authority does splendid work but that it is now facing an additional burden with its excellent work on the AIDS problem? In those circumstances, is the Minister satisfied that the authority's resources are sufficient to deal with the points raised in my noble friend's Question and the other matters that I have mentioned?
Baroness Hooper: My Lords, in relation to AIDS in particular, in the current year well over £30 million is being spent on public education and AIDS prevention. In the absence of a cure of any sort for AIDS and the HIV infection, public education remains the cornerstone of preventive action. This year, total funding for the Health Education Authority exceeds £30 million. That enables the Health Education Authority to carry out very valuable work in the seven major education programmes which it is conducting, including the HIV/AIDS programme.
Lord Taylor of Blackburn: My Lords, does the Minister think that that is sufficient for the work that the authority is doing?
Baroness Hooper: Yes, my Lords. The work of the Health Education Authority, taken together with the other valuable work being carried out by voluntary groups and others within the National Health Service, is all pointing in the right direction.
Viscount Caldecote: My Lords, does my noble friend agree that the best way of improving preventive health care in the United Kingdom is to get the best value for money on the funds expended by the Government on the health service? That is the best way to proceed in accordance with present government policy.
Baroness Hooper: Yes, my Lords. That is an important point. The preventive approach is certainly not a passive option; it needs each and every one of us to play a role. The Government's role is to provide clear information.
Lord Ennals: My Lords, perhaps I may ask a question arising from a reply given by the Minister concerning breast screening. Will the Minister say whether she is worried by the fact that only two out of five women are now taking advantage of breast screening? Is there something that can be done to improve that?
Baroness Hooper: My Lords, all the action that we are taking to encourage women to come forward for breast screening is to fulfil the aim of encouraging more women to benefit from the service.
Lord Bruce of Donington: My Lords, is the Minister aware that the efforts being made in connection with the subject of health care are of course totally admirable? However, is she aware that the efforts that are being made in this direction and the claims on the National Health Service would be lessened if the Government themselves were to tackle some of the root causes of bad health; namely, bad housing, poverty and unemployment?
Baroness Hooper: My Lords, the Government's Green Paper goes wider than health issues and includes references to these important aspects.
Lord Molloy: My Lords, will the Government be taking into consideration and examining some of the many variations in the health service; namely, geographic, ethnic, social and occupational? All the
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voluntary organisations feel that tackling these problems would help the Government a great deal in arriving at proper preventive measures.
Baroness Hooper: My Lords, we shall be taking all those interests into account.
Baroness Seear: My Lords, does the Minister agree that we can have too much of a good thing, even something as good as health?
Baroness Hooper: My Lords, I sometimes feel very much in agreement with the noble Baroness.

Car Security and Thefts
3.6 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they are taking further steps to reduce thefts of motor vehicles and the consequent danger to the public.
Viscount Astor: My Lords, the Home Secretary recently announced the Government's intention to bring forward proposals to strengthen the law against taking vehicles when the offence is aggravated by damage or dangerous driving. Car manufacturers also have an important role to play in this area. The Home Secretary met leading car manufacturers in September to discuss the further measures that should be taken to improve car security and he plans to meet with them again in December.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply. I welcome the proposal to increase penalties for the public menace of uninsured joyriding. Will the Government take into account the use of stolen cars to ram shop fronts in smash and grab raids? Will the Government also continue to press car manufacturers to make it less easy to break into motor cars?
Viscount Astor: My Lords, the terms of the new offences will be drafted and published in due course. All those considerations will be taken into account. With regard to manufacturers, the British standard on vehicle security is voluntary. It is prohibited under EC law for any member state to set a stricter requirement than is laid down in the existing EC directive on vehicle security. My right honourable friend the Minister of State, Mr. Patten, wrote to the interior ministers of the EC in July requesting their support in introducing legislation which would strengthen this.
Lord John-Mackie: My Lords, the noble Viscount mentioned that car manufacturers are going to deal with the situation in new cars. There are millions of new cars on the roads today. Therefore, would it not be a good idea if manufacturers could give owners some tips as to how to make their car ignitions safer than by just pulling out the wires as is done at the present moment?
Viscount Astor: My Lords, there are various devices which car owners can buy that will help. For example, steering wheel locks. It is important that all car owners

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should ensure that they park securely and lock their cars when leaving them. Many cars are left unlocked. Owners should also take all valuables with them, or lock them out of sight in the boot. They can also fit an alarm, have the car security coded and have a removable radio. Those steps will help in all areas.
Lord Marsh: My Lords, does not the Minister agree that regardless of any changes in the law, one of the biggest problems in this area is the failure of many courts to regard this activity as anything other than a childish prank?
Viscount Astor: My Lords, as I have already said, the Government intend to strengthen the law. One of the problems has been that for evidential reasons it has been difficult to sustain a charge of reckless driving or criminal damage in addition to one of taking a vehicle without the owner's consent. The purpose of the new offences combine these aggravated elements with taking a vehicle without the owner's consent. The new offence of aggravated criminal taking will carry obligatory disqualification. That means that the court will have to ban the offender and will be able to impose the ban and ensure that the offender will not be able to drive. If it is a young offender, then the ban will be effective even when he is old enough to have a licence.
The Earl of Onslow: My Lords, would not a profitable move be to encourage the insurance companies to place prohibitive premiums on cars that are not fitted with anti-theft devices and to void claims involving an unlocked car? People do things because of financial sticks or carrots. There should be a loaded premium for a car without an anti-theft device and an unloaded premium for a car with one.
Viscount Astor: My Lords, my noble friend makes an important point. When the Home Secretary met the Association of British Insurers in September it reported that this month it intended to double the number of insurance ratings from nine to 20 and in doing so for the first time take account of factory fitted security measures in assessing insurance groupings. The Home Secretary also asked the Association of British Insurers to consider whether there was still more scope for offering discounts to car owners who fitted effective security devices.
Lord Ezra: My Lords, can the noble Viscount say whether in his opinion audible car alarm systems which waken the neighbours at all times of the night are effective in deterring car thieves? Would not effective silent systems which serve the purpose of crime prevention but at the same time do not awaken everyone in the neighbourhood be preferable?
Viscount Astor: My Lords, the Department of the Environment set up a noise review working party which reported in 1990. The working party's report recommended among other things that the maximum legal sounding time of car alarms should be reduced from five minutes to 30 seconds. Draft regulations giving effect to the working party's recommendations were prepared earlier this year and were the subject of
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formal consultation during the summer. The Government are currently considering the responses of interested parties.
Lord Richard: My Lords, the Minister has told the House that he is seeking some kind of European action on this matter. Do I take it from that that his discussions with the car manufacturers have proved to be abortive and that they are not prepared voluntarily to take the action that the Government think necessary to try to make new cars safer? If that is so, does the Minister agree that that is a most disappointing and disturbing state of affairs? How far is he getting with his European colleagues in trying to agree a directive?
Viscount Astor: My Lords, it is up to car manufacturers to decide whether they wish to incorporate all the measures into the manufacture of their new cars. We are discussing various measures such as central locking and deadlocking. There are many different ways of helping to secure a car. The British standard is voluntary. There is no point in our going down that road unless we get some more support from Europe. My right honourable friend the Minister of State, Mr. John Patten, has written to this effect. We have had positive replies from Ministers in Luxembourg, Germany, Italy and Denmark, and we await further replies.
Lord Gisborough: My Lords, the Government increase the number of offences and increase the penalties for such offences but at the same time they make it increasingly difficult for magistrates to impose such penalties. Most of the time youngsters are given warnings. It is no use increasing the penalties unless the magistrates are allowed to impose them.
Viscount Astor: My Lords, my noble friend makes an important point. It will certainly be taken into account in looking at the new law.
Lord Glenamara: My Lords, will the noble Viscount try to dissuade the press, the media and everyone else from using the term "joyrider" —a term which the noble Lord, Lord Campbell, has used today? The term has a romantic sound about it. We should call these people what they are—car thieves.
Viscount Astor: My Lords, I agree with the noble Lord. We deplore the violence that has been caused and we have the deepest sympathy for the victims of these abhorrent crimes.
Lord Harmar-Nicholls: My Lords, arising out of the question on joining up with Europe, what can Europe do that we cannot do ourselves if we feel inclined to do it?
Viscount Astor: Agree an EC directive, my Lords.

Wild Birds: Imports
3.15 p.m.
Baroness Nicol Baroness Nicol asked Her Majesty's Government:
Whether they intend to reduce the number of imported wild birds kept in each quarantine premises.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, on 1st April this year, my department reduced the maximum permissible number of imported non-psittacines per consignment from 6,000 to 4,000. My department has also been reviewing the optimum stocking densities for the various species of captive birds in quarantine. On the basis of that review, limits on the maximum number of birds in individual quarantine premises are being established as appropriate.
Baroness Nicol: My Lords, I am grateful to the Minister for that encouraging reply. Does she feel that the measures she has outlined will meet our two main worries about birds in quarantine, the first of which is that those carrying the psittacosis virus should be properly monitored? We are also concerned about the vulnerability of certain species, many of which die when they are in quarantine. Would it not be possible to lengthen the period of quarantine to meet both those problems?
Baroness Trumpington: My Lords, the purpose of post-import quarantine is not to control psittacosis. It is required to minimise the risk of certain avian diseases, particularly Newcastle disease and avian influenza, being introduced into the country through imported captive birds. I am assured that the period of quarantine is adequate for this purpose. When the noble Baroness and I spoke about this matter yesterday she mentioned her particular concern about humming birds. I am assured that the disgracefully high mortality rate among imported humming birds is probably associated with adapting to an artificial feeding regime and not to incubating illness in the quarantine itself.
Lord Cledwyn of Penrhos: My Lords, I am grateful to the noble Baroness for her helpful reply. Is she aware that the reports that we have read in the press over recent weeks and the harrowing pictures that we have seen on television of these birds have caused widespread concern in the country? While the measures she has described will obviously be constructive and helpful, is she satisfied that they will remove the cruel treatment of these birds?
Baroness Trumpington: My Lords, the whole trade is so disgusting that I do not like to dwell on it. The best we can do is to impose the strictest conditions on the importation of such birds from their country of origin. The mortality figures in the various countries of origin are worse than those incurred in transportation. Our vets visit those countries where there are any doubts and in one case we have stopped all importation of birds.
The Viscount of Falkland: My Lords, does the noble Baroness agree that, apart from straightforward smuggling, the main problem is the making of false declarations by importers? They say that a bird is of a common species when in fact it is of a rare species. There are not enough experts to detect this practice. Would not the simplest and most sensible measure to take be to restrict the number of ports of entry with quarantine facilities? We could then concentrate our expertise in order to stop this illegal substitution.
Baroness Trumpington: My Lords, perhaps I may set out the actual grounds. The import of captive birds is prohibited except under the authority of an import licence issued in advance by my department. All such birds must be accompanied by an official health certificate signed by an official veterinarian of the exporting country and must undergo a period of at least 35 days post-import quarantine in previously approved premises. Furthermore, IATA has issued very strict rules. British Airways, among other airlines, is not importing birds from certain countries.
Lord Moran: My Lords, is it not the case that every year there are thousands of seizures by Customs of illegal consignments of wild birds but only a handful of prosecutions? Moreover, if, as I believe, the Joint Nature Conservancy Council has recently advised the Government to make enforcement more effective, what steps do they propose to take to stamp out this illegal trade which is doing untold harm to some of the rarest and most beautiful of the world's birds?
Baroness Trumpington: My Lords, if the noble Lord refers to yesterday's Hansard he will find the answers to most of the questions that he has asked contained in a Written Answer from me to a Question put forward by the noble Viscount, Lord Falkland. It sets out the figures. DoE and MAFF Ministers have written jointly to the EC following the report of the JNCC proposing that the Community should strengthen measures to prevent any illegal trade in endangered species and to ensure that specimens of those species are used to bring conservation benefits. As regards the rest of the noble Lord's question, perhaps I may write to him in order to save time at the Dispatch Box.

Crime Statistics
3.21 p.m.
Lord Allen of Abbeydale Lord Allen of Abbeydale asked Her Majesty's Government:
Whether they will now give up publishing a quarterly statement of offences known to the police in England and Wales.
Viscount Astor: My Lords, there are no immediate plans to do so.
Lord Allen of Abbeydale: My Lords, I am much obliged to the noble Viscount for that Answer which at any rate preserves the splendid Home Office tradition of brevity. However, is it not unduly alarmist to publish figures which the media for the most part present every quarter as representing an accurate and

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precise figure for the total amount of crime in this country when in fact they are nothing of the kind? I am sure that the Minister will agree that many offences are not reported to the police at all and that the proportion of offences which are reported is affected by many considerations which have precious little to do with the total volume of crime. Therefore, would it not be better to limit the publication at any rate to once a year, with a full explanation as to why the figures are so unreliable, and at the same time expand the British Crime Survey and carry it out once a year instead of every four years as seems to have become the practice?
Viscount Astor: My Lords, we believe that police statistics are important and have their uses, although we accept that they do not represent the whole story. They are a by-product of administrative procedures. They appear regularly in great detail, giving trends and comparisons of different parts of the country. I must tell the noble Lord that it is up to the press to report the crime statistics in a responsible way and to inform the public what they are and what they mean.
With regard to the British Crime Survey, one is planned to go ahead in 1992. There were three in the 1980s, and I believe that that means that there is one about every three years. They show greater in-depth knowledge of certain trends but they are not intended to produce all the answers compared with police statistics; they are, after all, a random survey.
Lord Harris of Greenwich: My Lords, is the noble Viscount aware that many of us share the view expressed by the noble Lord, Lord Allen of Abbeydale, that no useful purpose is served by publishing these figures at quarterly intervals? Of course no one is suggesting that the figures should be suppressed. The central question is whether they should be published quarterly. Is the noble Viscount further aware that it is my view and that of many others that the figures do not demonstrate either the scope or the intensity of crime in this country? That is demonstrated by the very different figures produced by the British Crime Survey. Although we appreciate that nothing can be done before the next general election for obvious reasons, many of us hope that the next Government, of whatever political complexion they may be, will publish the figures annually and not quarterly.
Viscount Astor: My Lords, I think that we will keep this matter under review. The police statistics represent an accurate account of the amount of crime with which the police are faced. That is the important point. The police need to know and we need to know how that increases or decreases in certain areas of the country. That is important for operational reasons.
Viscount Whitelaw: My Lords, is my noble friend aware that when I was Home Secretary the only reason that I could ever find for these statistics was that they were a very valuable method of attacking the Home Secretary of the day? As there are many other much fairer and better methods for attacking the Home Secretary, it really would be much better to give up these statistics.
Viscount Astor: My Lords, I am all for not giving anyone the opportunity to attack my right honourable friend the Home Secretary more than is necessary. However, it is up to him to decide whether the figures should be published annually.
Lord Richard: My Lords, I am bound to say that I am a little lost in this miasma. What on earth is the point of publishing statistics which everyone seems to agree are totally inaccurate?
Viscount Astor: My Lords, whether they are published quarterly or annually, the statistics are not going to change. As I have already said, they are not supposed to represent the whole story; they cannot do so. The statistics relate to the police. Much crime is unreported and obviously will not be included in the statistics.
Lord Morris: My Lords, is it not quite clear from the numerous answers which my noble friend has given that the central issue in the supplementary question put by the noble Lord, Lord Allen of Abbeydale, is not so much the collating of the figures but the fact that the danger lies in publication? It would be much more useful if the figures were published less often; indeed, annually would be infinitely more useful.
Viscount Astor: My Lords, the figures would probably still be available. Local forces may still publish their figures; indeed, they may or they may not do so. It would be quite easy for the national press to put together, say, part of the picture. We believe at present that it is better to continue to publish them quarterly. However, as I said, we shall keep the matter under review.
Lord Ezra: My Lords, are not the Government being offered, uniquely perhaps, the opportunity to save public expenditure on this occasion? Therefore, should not the noble Viscount take the suggestion seriously?
Viscount Astor: My Lords, it is also possible that we are being offered the opportunity of being criticised once a year instead of four times a year. However, as I said, it is a matter for my right honourable friend the Home Secretary.
Lord Annan: My Lords, was the Minister's original Answer that the Home Office had not considered the matter perfectly accurate? Alternatively, did the Answer mean that the Home Office had taken account of the Question which the noble Lord, Lord Allen of Abbeydale, was going to put forward and had considered it fully in consultation with the Home Secretary?
Viscount Astor: My Lords, I can only say that the Answer was the one I gave. I also said that we shall keep the matter under review.

British Technology Group Bill
3.28 p.m.
Read a third time.
Clause 1 [Vesting of property etc. of NRDC and NEB in a successor company]:
Lord Peyton of Yeovil Lord Peyton of Yeovil moved Amendment No. 1:
Page 2, line 17, at end insert:
("( ) The Articles of Association of the successor company shall at all times from vesting until the Secretary of State has disposed of the securities allotted to him under section 3 contain a provision to the effect that—

(a) a special rights redeemable preference share ("Special Share") shall be issued to the Secretary of State or a person acting on behalf of the Secretary of State ("Special Shareholder"), which Special Share shall not be redeemable until 5 years after privatisation; and

(b) after the five year period referred to in paragraph (a) the Special Shareholder may require the Special Share to be redeemed after consultation with the Board of the successor company.").

The noble Lord said: My Lords, this amendment has two aims. The first is that the provisions for the special share which at the moment are to be included in the articles of association should be in the Bill. The second is that the special share should survive for a period of five years after privatisation. I should like to register with my noble friend my considerable concern at the habit of legislating by means of articles of association which we in this House cannot amend but which others subsequently can.
My other concern is that the Government give undertakings, apparently firm, acknowledging the importance of the point covered but yet are unwilling to place them in the Bill; in other words, we are just informed. We are free to express an opinion, but no one really minds what that opinion is and certainly no weight is attached to it.
I am curious to find that the Government, at one and the same time, are determined to retain the discretion to change the articles of association before privatisation—here I refer to the words used by my noble friend the Minister in the early hours of the morning, when he said:
"We have several objections to the proposal. In the first place, such an amendment would prevent the Government, as the owner of the company up to privatisation, from exercising their discretion to change the articles before privatisation" —[Official Report, 22/7/91; col. 611.]—
and yet, in col. 613 my noble friend went on to give the further assurance that the basic principles of articles of association as they now stand, and in particular those underlying the special share provisions, would not be altered between vesting day and the day of sale. It seems —to put it mildly—odd that the Government should be so keen to retain a discretion which they are not going to use. I hope that my noble friend will be able to produce some explanation of that rather eccentric position.
On the same occasion, my noble friend told your Lordships that some of his noble friends were motivated by fear that the Government would not put into the articles of association what they had told Parliament they would put into them. That is not the case. I am content to believe my noble friend when he
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tells me that he will put into the articles of association the words that he has promised. There is no difficulty about that.
The question which disturbs me and, I believe, some others of your Lordships is why, in the name of conscience, if they acknowledge the importance of the point, are prepared to put the words into the articles of association and have no intention of changing them when they are in the articles, will the Government not go that one step further and yield to what seems to me to be a cogent argument that the words should be put into the Bill. I need not remind your Lordships that this is a legislative Chamber: our business is legislation. I find it strange that we should be asked to be content with words that are merely put into the articles of association, which, as I have said, we cannot amend although others can.
I do not wish to detain your Lordships for long, but I should like to refer to part of the statement made by the chairman in BTG's 1991 annual report. He there refers to the importance which he attaches, as do others, to the independence, integrity and impartiality of professional advisers. No one doubts that. He also refers to the possible loss of the "critical mass", as he calls it, of licensing and professional skills which have contributed so effectively to BTG's success over the past 40 years.
The chairman went on to say:
"Ministers have assured both Parliament and BTG's Council that these arguments are understood and will be taken into account by the Secretary of State when selecting the appropriate method of privatisation".
I do not know what comfort the chairman drew from that assurance, but it gives me very little. The Secretary of State understands the arguments; he will take them into consideration; but will he be decisively influenced by them? It appears not. That is a matter of considerable anxiety to me, and hence the amendment.
I should be glad to know whether the chairman has been given any more recent assurances than those contained in his annual statement. I do not wish to deal with this matter at any great length because the security of the pension fund is the subject of a later amendment, but I have received a letter from a member of the staff in which he says:
"Throughout the group morale is running low and apprehension high".
I am sure that that statement must be a matter of considerable anxiety to the Government. I hope that at this rather late stage my noble friend will be able to say that due to those genuine anxieties he has after all decided to concede what is to my mind an important point; namely, that a proposition which the Government themselves deem to be right and of importance will be incorporated in the Bill so that we can all know that it is the will of Parliament and will not be changed because of some later event which no one can now anticipate.
I have no need to say more at this stage. The point has been referred to before, if not completely dealt with. I hope that the Recess will have given my noble friend an opportunity for due reflection and for an important and welcome change of heart. I beg to move.
Viscount Caldecote: My Lords, I support the amendment. BTG has some special features, as has been said before. It has done, and is still doing, an excellent job for Britain. Secondly, its work is of a long-term nature, as the noble Lord, Lord Flowers, said in a previous debate, in that it has a great fund of intellectual property and spends substantial sums of money on developing inventions to bring into the market place in due course. That "due course" may be 10 years ahead. Those are special features of BTG.
The argument for privatisation is that, with the freedom it gives, privatisation will enable BTG to do its job even better than before. There is no question but that the principle is already accepted. It is our duty to ensure that as far as possible BTG will be able to continue to perform its task in the valuable way in which it has done it in the past. Partly because of the long-term aspect of its work, to which I have already referred, it needs above all time to adjust to the new regime. It wants to be free from threats and from the risk of damage to its work.
On Report, my noble friend the Minister made—I believe that your Lordships will agree—some confusing and contradictory remarks which have already been referred to by my noble friend Lord Peyton. The issue that we must now address is that of the clarification of the Government's intentions. It is not satisfactory, as my noble friend has said, for Parliament to assent to a Bill when doubts about it remain.
Your Lordships will note that the amendment now proposed does not mention the 15 per cent. limit on shareholding to which the Government raised strong objection at Report stage. It mentions only the requirement about the special share remaining for five years. It is confusing; on the one hand the Government say that they intend that that shall be the case and on the other that they want freedom to change that provision, together with other provisions, before privatisation.
It is not satisfactory to legislate on the basis of ministerial assurances relating to the draft memorandum and articles of association to which there is no reference in the Bill. If, as indicated by the Government, they intend to maintain the special share for five years after privatisation—and we accept that that is true—then this important provision should surely be included in the Bill. I therefore hope that the Government will accept the wisdom and logic of the amendment.
Lard Williams of Elvel: My Lords, I support the noble Lord, Lord Peyton, and the noble Viscount, Lord Caldecote, in their amendment. But my support is somewhat reluctant, as demonstrated by the fact that I did not wish my name to be added as a sponsor of the amendment. The reason is simple. I regard this as a long stop. I argued at Committee and Report stages that the articles of association containing the important provisions should be in the Bill not just from vesting until privatisation or the sale of securities but until changed by Parliament. In a Division your Lordships decided that that was not acceptable. I still think that it was the right solution; but nevertheless we must accept what your Lordships decide. We now
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find ourselves with an amendment which is less satisfactory than the one I hoped to see passed but which nevertheless goes some way to satisfy the concerns that have been expressed by the management and staff of BTG.
An important point has been made by the noble Lord and the noble Viscount. We simply cannot accept ministerial assurances that this, that and thus will happen, particularly in respect of articles of association which can be changed at any time by the then owners of the business.
As the noble Viscount pointed out, we have had discussions about the 15 per cent. and about the special share. All the Government have been able to concede is that something or other will be in the articles of association and not in the Bill. The important, fundamental point was made by the noble Lord, Lord Peyton, in introducing the amendment that if the Government are serious, they will allow us to put this in the Bill. For that reason I support the noble Lord.
3.45 p.m.
The Earl of Halsbury: My Lords, I rise to speak as a voice from the past and as a well-wisher in the present. I do so in the hope that I can dissuade the noble Lord who will answer the amendment from playing his cards close to his chest, not telling us what is going on behind the scenes. That sows distrust, which is not good for morale. With the leave of the House, I should like to read a letter I received this morning from the Committee of Vice-Chancellors and Principals:
"It is understood from … [the] advisers to the DTI, that other potential consortia and interested parties exist".
I believe it is well known to your Lordships that the universities, through the Committee of Vice-Chancellors and Principals, are trying to set up a consortium to provide a neutral shareholding for the British Technology Group. The letter continues:
"Although this commitment is in the Articles of Association and not on the face of the Bill, the [committee] is surprised that none of these apparently interested parties have made themselves known to the CVCP".—
although it is quite common knowledge that the CVCP is taking an interest in the matter.
"It is crucial that the universities have confidence in and feel comfortable with the composition of the successful consortium. So far the CVCP appears to have taken all the initiatives. If ministers' commitments to the universities are to be worth more than the Articles of Association and the Hansard paper they are printed on the CVCP expects to be kept fully in the picture as the sale process develops".
That is the position.
What I am afraid of is that the moment the Bill is passed in its present form, the Government will lose all interest in it for the time being because they are more interested in the run-up to the election. Out of that election only three issues can emerge: one is that this Government will be returned; the second is that there will be a hung Parliament; and the third is that the present Opposition will be in power. Under all three headings, the people who will determine matters will of course be the Treasury.
I do not wish to say anything against that worthy body of men in their capacity of looking after the nation's finances. They are an admirable body but

1011
they have tunnel vision when it comes to matters not directly connected with finance. Giving them a free hand is the wrong way to go about preserving morale because morale is something the Treasury has never heard of. I believe that we shall hear more of this in due course in the debate on defence.
The Government must come clean and not say, "Please put your trust in teacher". That is not the way to go about a delicate matter; it should be out in the open. We should like to know who is bidding for BTG. We do not wish to see the company knocked down to the highest bidder without regard for any other consideration.
Lord Desai: My Lords, it may be argued that in this case putting conditions in the Bill would detract from obtaining the highest value for this piece of property. My answer to that is that as properties go BTG is small beer. It will not fetch that much money; it will not make any difference to the PSBR, either now or later. However, it would be a big mistake if for the sake of obtaining the highest value we missed a chance of making the best deal for the growth of the economy in the long run. That is a more important consideration because the loss of value will be small compared with the possible loss of the growth potential the economy would receive by taking good care of BTG after its privatisation. I urge Ministers to think of the growth potential of a well managed BTG compared with the extra money gained by an unhindered sale of the company.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay): My Lords, as nearly three months have now elapsed since the previous stage of the Bill was taken in your Lordships' House, noble Lords will perhaps forgive me if I remind the House of the purpose of the Bill and what the Government have already done to meet the concerns which have been expressed in the House about the future activities of BTG.
The purpose of the Bill is to privatise BTG. As I explained to the House on Second Reading, although government-owned, BTG has for many years been run on commercial lines and has received no subsidies or loans of any kind from the Government.
We believe that the company is held back in its commercial development by what are now quite unsuitable constraints that derive from its position in the public sector. The management of BTG must seek ministerial approval for any investment above £250,000. It may not borrow above that amount. The company has already had experience of how its status as a government-owned company can interfere in the obtaining of contracts overseas. It must be borne in mind that 79 per cent. of the company's income now derives from overseas.
In concluding that the time is ripe for the privatisation of BTG, we enjoy the support of Sir Colin Barker, the chairman. In his statement in the 1991 accounts published in August he writes:
"The Council and Management of BTG continue to believe that the private sector offers BTG the best chance for
1012
further growth and success, and the best opportunity for Britain to retain its leadership position in worldwide technology flows".
Nor do I think that the Committee of Vice-Chancellors and Principals could dissent. In an article in Chemistry and Industry published earlier this year, the CVCP stated:
"privatisation is both desirable and logical for an organisation which acts as though it were already there and suffers nothing but trouble from the fact that it is not".
That is the justification for the Bill. At the same time, in response to concerns which were expressed in this House both on Second Reading and on Report, in particular regarding BTG'S ability to continue its traditional technology transfer activities after privatisation, the Government took certain action. We introduced a government special share for a five-year period which will guarantee two provisions in the articles of association. The first provision states that no individual shareholding should exceed 15 per cent. of the total voting rights in the company. Secondly, no material disposal of the net assets of the company—25 per cent. of net asset value or of the average income attributable to such assets—may take place without the consent of the special shareholder.
In addition, we placed two further special provisions in the articles of association. First, one director of the company should be appointed directly by the Committee of Vice-Chancellors and Principals of the universities after consultation with the polytechnics. Secondly, a further director should be someone who appears to the members of the board to have wide experience in the development, promotion and exploitation of public sector research. I should add that the 15 per cent. limitation on individual shareholdings is a benchmark figure. We are prepared to consider higher individual shareholdings, within the context of a consortium, should this prove necessary to attract the right consortium, but we would never consider individual shareholdings high enough to permit one party to achieve an overall controlling interest.
In adopting a special share in this case we have done something which we have previously only done in the case of large public utilities, or industrial concerns which involve key strategic interests. BTG is a small company with a turnover a fraction of that of most previously privatised companies in which the Government have retained a special share. However, we have been persuaded that BTG holds a unique place in the world of technology transfer and intellectual property. In providing for the limitation on individual shareholdings we have ruled out a trade sale to a single commercial purchaser. We have done this in recognition of the argument that if BTG were to be controlled by, for example, an industrial company with an interest in the success or failure of a particular area of technology, this could prejudice BTG's reputation for independence and integrity with its other clients.
In providing for a CVCP appointed director we have given the universities a right to board representation which they do not have today. The universities have been provided with a real

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opportunity to continue to contribute in a constructive way to the commercial operations of the privatised company. We have every confidence they will grasp that opportunity. We believe that our measures taken together will help preserve BTG'S independence and the continuation of its traditional technology transfer activities. It stands to reason that the greater the number of restrictions imposed on the freedom of the prospective buyers of the company to manage the company according to their own best commercial judgment, the more we risk jeopardising the process of the sale itself. That is an outcome only desired by those who oppose the privatisation of BTG on principle. I repeat that that does not include either the management of BTG or the CVCP.
BTG can only be sold to a consortium. I am pleased to be able to say that the level of interest in the privatisation is high. This interest comes from a wide range of institutions, most of them based in the United Kingdom. We want this interest to remain high so that a successful privatisation can be completed and a good price obtained for the taxpayer.
I shall now turn to the amendment, but before dealing with its substance I should inform the House that, after receiving advice from the Table, there was some doubt as to whether this amendment came within the rules governing the tabling of amendments on Third Reading given its prima facie similarity to an amendment which the noble Lord, Lord Williams of Elvel, had tabled on Report. The fate of that amendment was decided on Report. However, following representations which were made to us by my noble friend, in which he was supported by the noble Lord, Lord Williams, we have decided that this is a marginal case. I therefore suggest that your Lordships were probably right to allow full discussion of the amendment.
Lord Williams of Elvel: My Lords, I apologise for interrupting the Minister but I made no representations to the Government at all. Discussions occurred in a place I shall not mention but I made no representations to the Government about whether this amendment was in order.
Lord Peyton of Yeovil: My Lords, before my noble friend reacts to that intervention perhaps I should admit that I made representations to the Government. For once the Government paid attention to those representations and I am grateful for that.
Lord Reay: My Lords, I am grateful to my noble friend for that intervention. I take the word of the noble Lord, Lord Williams, that he did not support my noble friend on this matter although it was my understanding that he had done so. I take the noble Lord's word that he made no representations to the Government.
The purpose of the amendment is to ensure that the Secretary of State puts certain provisions in the articles of association and does not change them between vesting and sale. These provisions are, first, that there should be a five-year special share, as already provided in the draft articles of association, but one that is not redeemable before the end of the
1014
five-year period, and, secondly, that after five years the special share may be redeemed following consultation with the board of the company. In the draft articles of association before the House redemption by the company would be automatic at the end of five years. A key provision governing the special share in the articles of association would therefore be regulated by statute.
As my noble friend has already explained, his amendment would have another effect as well as that of putting these provisions on the face of the Bill. Under the terms of the amendment the Government would hold a special share in the privatised company for a rigid five-year period. It is not our current intention to redeem the share before the five-year period is completed nor can I currently foresee any circumstances in which early redemption would be necessary. However, we feel it is a prudent precaution to retain an element of flexibility against the possibility of unforeseen circumstances arising which this amendment would remove. We think it preferable not to fetter irrevocably the discretion of the Government in the way proposed by the amendment of my noble friends. I might add that in the unlikely event of the Government wishing to redeem the share before the end of the five-year period, the articles as drafted require the Government to consult with the company.
I have another objection to putting this provision on the face of the Bill. This objection was put very well by the chief executive of BTG in the letter he circulated dated 19th July where he stated:
"Any amendment which meant that further changes to the Memorandum and Articles could only take place by reference to Parliament would be commercially undesirable and unhelpful because it would place constraints on BTG which its competitors would not have to suffer".
If there is to be a special share—and we are all agreed that there should—then the right and proper place for it is in the articles of association. Articles of association together with its memorandum are the company's constitution. They are a contract between the members and the company. They govern the company's operations and the company can only amend the provisions protected by the special share in accordance with the terms laid down in the articles, that is with the consent of the special shareholder. It would be a unique impediment for a private sector company to have its affairs regulated by statute in this way.
It would be totally unprecedented to have the requirement for there to be a special share written into the Bill. There have been a host of privatisations where there have been special share provisions—for example, the privatisations of the water companies, the electricity companies, British Aerospace, British Gas, Rolls-Royce, Jaguar, Cable and Wireless, Enterprise Oil, British Telecom and British Steel. In all those cases the special share provisions have been contained in the articles of association. I do not think that noble Lords have deployed a good argument as to why we should do things differently on this occasion.
I have been asked for an assurance. I should like, therefore, to give an assurance one more time. Anxiety has been expressed about the possibility that the

1015
Government might vary the articles of association, particularly those pertaining to the special share provisions, prior to sale. I should like to repeat the assurance that I gave noble Lords at Report stage that the basic principles underlying the articles of association will not be altered prior to sale.
By that I mean that the Government will retain in the articles of association those key provisions which have previously outlined, to wit: first, the Government will hold a special share in the new company for a period of five years, subject to what I have already said; secondly, individual shareholdings will be restricted to 15 per cent., but that will be applied flexibly as I have indicated; thirdly, the new owners will not be permitted to dispose of the whole or a material part of the company's assets without the special shareholder's consent; fourthly, the CVCP has the right to appoint a director to the board of the new company; and, fifthly, an additional director will be appointed with experience of the commercial exploitation of public sector research.
Those are the principles which I can assure the House will still be incorporated in the articles of association at the point of sale. Those are the limits within which any discretion, for example over the 15 per cent. shareholding, will be exercised. I hope that my noble friend will be satisfied with what I have said and will feel able to withdraw his amendment.
4 p.m.
Lord Peyton of Yeovil: My Lords, while I am grateful to my noble friend for replying to what I had to say, I cannot say that I am even remotely content with the substance of his answer. If it would be of interest to the Government, I should be perfectly prepared to leave out of the amendment the requirement that the special share should survive for a period of five years provided that in return they would write into the Bill the main provisions relating to the special share. However, my noble friend has made it quite clear that he will not do that. I must make it quite clear to him that, reasonable as he may consider his point of view to be, I do not think it right that Parliament should be expected to legislate on the basis of ministerial assurances, of acknowledged importance, which are written into the articles of association but cannot be put into the Bill.
There is one further point that I wish to make. I asked my noble friend whether the chairman, who he himself has quoted, has accepted any assurance and done so with some satisfaction. All that the chairman has said in his annual report is that:
"Ministers have assured both Parliament and BTG's Council that these arguments are understood and will be taken into account".
Of what value is that? I suppose that it is something that Ministers understand what has been said. To say that the arguments "will be taken into account" does not bind Ministers in any way. I should be grateful if my noble friend would intervene to answer that point and I shall give way immediately.
Lord Reay: My Lords, my noble friend did indeed ask me about representations which I might have received from the chairman of BTG and how I might have responded to them. I received a letter from the chairman, to which I replied yesterday seeking to give him the assurances for which he asked. Rather than repeat the words that I used in that letter I thought it better to give an assurance directly to the House, and I did that.
Lord Peyton of Yeovil: My Lords, I am afraid that that reply does very little to alter my position. In the circumstances I feel obliged to seek the opinion of the House.
4.4 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 106; Not-Contents, 115.

Division No. 1

CONTENTS

Airedale, L.

Jenkins of Putney, L.

Ardwick, L.

John-Mackie, L.

Aylestone, L.

Kilbracken, L.

Beaumont of Whitley, L.

Kinloss, Ly.

Beloff, L.

Kinnaird, L.

Birk, B.

Kirkwood, L.

Blackstone, B.

Lawrence, L.

Blease, L.

Leatherland, L.

Broadbridge, L.

Listowel, E.

Bruce of Donington, L.

Llewelyn-Davies of Hastoe, B.

Caldecote, V.

Lovell-Davis, L.

Callaghan of Cardiff, L.

McCarthy, L.

Campbell of Eskan, L.

McNair, L.

Carmichael of Kelvingrove, L.

Mason of Barnsley, L.

Carter, L.

Mayhew, L.

Castle of Blackburn, B.

Milner of Leeds, L.

Cledwyn of Penrhos, L.

Mishcon, L.

Clinton-Davis, L.

Molloy, L.

Cudlipp, L.

Morris of Castle Morris, L. [Teller.]

Dacre of Glanton, L.

David, B.

Murray of Epping Forest, L.

Desai, L.

Nicol, B.

Donoughue, L.

Ogmore, L.

Dormand of Easington, L.

Park of Monmouth, B.

Ennals, L.

Peyton of Yeovil, L.

Erroll, E.

Pitt of Hampstead, L.

Ewart-Biggs, B.

Porter of Luddenham, L.

Ezra, L.

Prys-Davies, L.

Fisher of Rednal, B.

Redesdale, L.

Fitt, L.

Richard, L.

Flowers, L.

Ritchie of Dundee, L.

Gainsborough, E.

Robson of Kiddington, B.

Gallacher, L. [Teller.]

Rochester, L.

Galpern, L.

Rugby, L.

Gladwyn, L.

Russell, E.

Graham of Edmonton, L.

Scanlon, L.

Grey, E.

Seear, B.

Halsbury, E.

Sefton of Garston, L.

Hampton, L.

Shackleton, L.

Hanworth, V.

Shannon, E.

Harris of Greenwich, L.

Shaughnessy, L.

Harrowby, E.

Sherfield, L.

Hatch of Lusby, L.

Simon of Glaisdale, L.

Hilton of Eggardon, B.

Stoddart of Swindon, L.

Hollis of Heigham, B.

Strabolgi, L.

Holme of Cheltenham, L.

Taylor of Blackburn, L.

Hughes, L.

Thomson of Monifieth, L.

Jacques, L.

Tordoff, L.

Jay, L.

Turner of Camden, B.

Jenkins of Hillhead, L.

Underhill, L.

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Varley L.

White, B.

Wallace of Coslany, L.

Williams of Elvel, L.

Wedderburn of Charlton, L.

Wilson of Langside, L.

Wharton, B.

NOT-CONTENTS

Abercorn, D.

Joseph, L.

Alexander of Tunis, E.

Knollys, V.

Alport, L.

Lauderdale, E.

Arran, E.

Lloyd of Hampstead, L.

Astor, V.

Long, V.

Auckland, L.

Lyell, L.

Balfour, E.

Mackay of Clashfern, L.

Birdwood, L.

Macleod of Borve, B.

Blatch B.

Manton, L.

Blyth, L.

Margadale, L.

Boardman, L.

Marlesford, L.

Borthwick, L.

Merrivale, L.

Boyd-Carpenter, L.

Mersey, V.

Brabazon of Tara, L.

Middleton, L.

Bridgeman, V.

Milverton, L.

Brougham and Vaux, L.

Monk Bretton, L.

Butterworth, L.

Morris, L.

Buxton of Alsa, L.

Mountevans, L.

Caithness, E.

Mowbray and Stourton, L.

Campbell of Alloway, L.

Munster, E.

Carnock, L.

Nelson, E.

Cavendish of Furness, L.

Norrie, L.

Clanwilliam, E.

Onslow, E.

Constantine of Stanmore, L.

Orr-Ewing, L.

Cottesloe, L.

Oxfuird, V.

Cullen of Ashbourne, L.

Pearson of Rannoch, L.

Daventry, V.

Pender, L.

Davidson, V. [Teller.]

Perry of Southwark, B.

Denham, L.

Quinton, L.

Denton of Wakefield, B.

Radnor, E.

Downshire, M.

Reay, L.

Effingham, E.

Renfrew of Kaimsthorn, L.

Elibank, L.

Renton, L.

Ellenborough, L.

Rochdale, V.

Elles, B.

Savile, L.

Erroll of Hale, L.

Sharples, B.

Faithfull, B.

Slim, V.

Flather, B.

Smith, L.

Fortescue, E.

Soulsby of Swaffham Prior, L.

Fraser of Carmyllie, L.

Strange, B.

Fraser of Kilmorack, L.

Strathcarron, L.

Gainford, L.

Strathmore and Kinghorne, E.

Gisborough, L.

Strathspey, L.

Goold, L.

Sudeley, L.

Gridley, L.

Suffield, L.

Hailsham of Saint Marylebone, L.

Teviot, L.

Thomas of Gwydir, L.

Harding of Petherton, L.

Tombs, L.

Hardinge of Penshurst, L.

Trumpington, B.

Harmar-Nicholls, L.

Ullswater, V.

Harmsworth, L.

Vaux of Harrowden, L.

Henley, L.

Vinson, L.

Hesketh, L. [Teller.]

Waddington, L.

Hives, L.

Wade of Chorlton, L.

Hooper, B.

Westbury, L.

Howe, E.

Whitelaw, V.

Jeffreys, L.

Wise, L.

Johnston of Rockport, L.

Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.12 p.m.
Clause 3 [Initial Government holding in the successor company]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 1A:
1A Page 3, line 8, at end insert ("and before he has laid before Parliament a statement announcing—

(a) the identities of those to whom the disposals are to be made, and

(b) the consideration for the disposals.")

The noble Lord said: My Lords, the object of this amendment is to ensure that Parliament has a Statement before the Secretary of State disposes of the securities in the transferee company. This is a much weaker amendment than the one that I moved in Committee and on Report. At that time I argued that it was essential for the future conduct of BTG that Parliament should be informed of the new ownership before the Secretary of State took a decision. That did not meet with the favour of the Government and I am now arguing the lesser case.
In the light of all that has been said in our earlier debate by the noble Lord, Lord Peyton of Yeovil, and particularly by the noble Earl, Lord Halsbury, it still seems to me to be sensible that we in Parliament should know exactly who the beneficiaries of the sale are. In my view, it is not proper to announce the decision to the world in a press announcement before announcing it to Parliament, particularly when Parliament may be in recess. The object of the amendment is to make sure that the Statement would be made to Parliament and would be open to parliamentary comment and discussion before action was taken by the Secretary of State; in other words, to ensure that he cannot use the recess, as I am afraid is frequent practice, to make statements that properly concern Parliament.
The advantage of having this provision in the Bill is that we would know before any action was taken on the sale who the buyers were. That would be a statutory obligation on the Secretary of State. Furthermore, we would know what the consideration was to be and how that was to be handled; whether it would be a straight cash transaction or whether it would be some form of loan stock or other method of consideration which the Government have used in previous privatisations and propose to use in the privatisation of the export credits Insurance Services Group.
If the amendment is accepted by the Government—it is a very weak amendment—it would be an earnest of the Government's view that Parliament should have some discussion before the event and should be assured by the Government that their solution regarding privatisation meets all the points that the Minister has quite rightly been preaching to us this afternoon; namely, that the integrity of the business will be maintained and that the consortium that will buy it is satisfactory to the Government and to Parliament. As I said, this is a very innocent amendment and I hope that the Government will accept it. I beg to move.
Baroness Hollis of Heigham: My Lords, I rise to support the amendment. The Bill is highly controversial in many of its aspects, as we have seen in the close Division on the previous amendment. It is controversial because the originators of intellectual property—our scientists, universities and research councils—have in the past always appreciated the way in which the BTG has brigaded both the commercial and the public interest. All those bodies are anxious that that brigading should continue.
The issue is crucial to the continued public interest. As members of society with an interest in our industry

1019
and the future of scientific invention, we are all anxious about the terms of the future sale of BTG —who buys and on what terms. The Minister has gone a long way to meet some of those anxieties, but perhaps not as far as many of us would wish. The amendment moved by my noble friend Lord Williams seeks to ensure that, to dispel some of the fears still associated with the disposal of the BTG, all the details associated with those transactions should be made fully transparent. We are talking about the transparency of the disposal in terms of the identities of those who buy and the terms on which they do so. We are also talking about transparency in the sense that that information would be given in the public domain to Parliament, where it could be properly scrutinised, and not just through the financial correspondence columns of the press.
Such an amendment, were the Government minded to accept it, would not in any sense limit or constrain the value of the BTG at the point of its disposal. I urge your Lordships to agree that it would help to allay the lingering fears that such a disposal might be made to dubious owners and on dubious terms. If the Minister were to accept the amendment, it would be a genuine statement of goodwill and good intent which would allay so many of the fears still surrounding the Bill.
Lord Reay: My Lords, this amendment would require the Secretary of State, before disposing of the shares of the successor company, to lay a Statement before Parliament announcing the identities of the shareholders to whom the company was to be sold and the price to be paid, possibly even by each member of the consortium.
I fear that the amendment would introduce all kinds of uncertainties, obstacles and confusion into the sale process. First, as the noble Lord pointed out, it would mean that no sale could be completed during the parliamentary recess as no Statement could then be laid before Parliament. Secondly, it would have an unquantifiable but probably significant deterrent effect on buyers coming forward. Parliamentary scrutiny of their participation and the price that they were paying would be seen by potential investors as a major and often unacceptable hurdle to cross in the complex and expensive business of buying a company.
But even if all the members of a consortium—which is difficult enough to put together at the best of times —were willing to expose themselves to this additional scrutiny by Parliament, what might be the effect of such scrutiny? I suggest it might very well destroy the agreed sale. For example, it could happen that an unsuccessful party, perhaps one that had put in a higher offer than the successful bidder, sought to challenge the terms of the sale and make a public issue of it with the clear intention of trying to frustrate the preferred bid, even though an agreement had been reached with that bidder. Alternatively, some member of the consortium could drop out during the process, or some other consortium or individual party could enter with a higher offer and in that way confuse the issue.
I know that on an earlier occasion the noble Lord argued that contracts could be initialled and
1020
exchanged before parliamentary approval was sought so that no other bidders would be able to put in an offer or revised offer after that moment since the Government would be bound, subject to parliamentary approval, to complete with the party with whom they had reached the agreement. But I must point out it is not clear that this procedure could be followed before the details were laid before Parliament. It could be argued that even an agreement to dispose subject to a condition precedent itself constituted a disposal, in that the Secretary of State was no longer free to deal with other parties. In any case, aside from that objection, Parliament might choose to favour a subsequent higher offer and such offers would in no way be ruled out by the initialling of any agreement. There could be parties which had reached an agreement with the Government but which were not acceptable to Parliament, and there could be other parties which had made alternative offers. Any of those parties might feel that they had a cause for grievance and seek to challenge the Government's decision in the courts.
We see the whole proposal as a recipe for chaos which no government could possibly accept. It is something quite unheard of and was was never contemplated in any other privatisation. One might almost think that it reflected a desire on the part of the noble Lord to prevent privatisation by some means other than persuading the Government to withdraw the Bill. We believe that once Parliament has passed the enabling legislation it is for Government as the executive to carry out the wishes of Parliament and, as they have done in all other cases, themselves assume responsibility for the way the sale is carried out.
The normal procedure is for Parliament to be informed of the sale once it has been completed. The Government intend to abide by that practice in this case. I hope that that assurance will meet concern that Parliament should be informed of the identities of the purchasers as well as the consideration as soon as the sale has been completed. Parliamentary scrutiny does not end there. Ministers remain accountable to Parliament and its Select Committees, including the Public Accounts Committee in another place, which can be depended upon to exercise close scrutiny of the executive's decisions leading to the identification of the eventual purchasers.
We see no good reason in this instance to depart from normal parliamentary practice, least of all when such a departure could seriously jeopardize the sale of BTG—an outcome which is not desired by BTG's management and council nor by the CVCP. I ask the House not to accept the amendment.
Lord Williams of Elvel: My Lords, I find it curious that the noble Lord the Minister has replied to an amendment which I moved in committee rather than the amendment I am moving today. If the noble Lord would be kind enough to read the amendment, he will see that there is no question of making it a condition precedent. That was the amendment which I moved in committee, rightly I think, but the noble Lord did not like it. I am now moving, as I said, the weaker amendment. What is required by my amendment is a simple statement from the Government to Parliament

1021
saying, "We have done a deal with X, Y and Z". That is all. There is no question of a conditional agreement; there is no question of that statement destroying an agreed sale. I have been involved in many agreed sales which have been announced but where other people can come in. That is the normal practice of the market. I thought the Government's intention was to get the best value for the business. There is no sinister intent to try to stop a deal that the Government have agreed. If the Government are not satisfied and the members of the consortium (if there is to be one) are not really strong, then there is a problem, but that problem should be one that comes out at the point of the statement.
Ckarly, it must be in the Government's interest to have higher offers. That is the whole point of privatisation and that is what the Treasury insists upon. But to say that my amendment as drafted would in any way destroy an agreed sale other than in the way agreed sales can be overturned by the market in normal conditions is sheer fantasy. I am astonished that the noble Lord the Minister has replied to an amendment which I have not moved.
The noble Lord seems to take exception to my thought that Parliament should be informed of the sale before anybody else. He seems to take exception to my thought that it is unfortunate if, as my noble friend Lady Hollis said, such a sale is slipped into the financial columns of the press, during a parliamentary recess; without Parliament being informed. I can only say that this is a privatisation which we have argued time and time again is unprecedented. It has nothing to do with British Steel, British Telecom or British Gas; it is a special case on its own. We and the CVCP need to know exactly who are going to be the owners, and the Government should not be shy about that. If the Government have a proper deal to do, they ought to come before Parliament and say, "We have done a deal and this is the way we have done it". They should not be ashamed of that. If they now propose not to do it and say, "We will put down a Question for Written Answer and sooner or later after the recess we will let somebody know exactly what has happened", I believe that that shows the Government have no confidence in being able to achieve the kind of balanced sale that the management and council of BTG and your Lordships all want—that is, a sale which will preserve the integrity and continuity of this business.
I have found the noble Lord's reply—I do not mean this personally—even less satisfactory than the one he gave to the noble Lord, Lord Peyton, on his amendment. Therefore I must seek the opinion of the House.
4.28 p.m.
On Question, Whether the said amendment (No. 1A) shall be agreed to?
Their Lordships divided: Contents, 88; Not-Contents, 124.

Division No. 2

CONTENTS

Airedale, L.

Aylestone, L.

Allen of Abbeydale, L.

Birk, B.

Ardwick, L.

Blackstone, B.

1022

Blease, L.

Jenkins of Putney, L.

Bottomley, L.

John-Mackie, L.

Broadbridge, L.

Kilbracken, L.

Bruce of Donington, L.

Kirkwood, L.

Callaghan of Cardiff, L.

Listowel, E.

Carmichael of Kelvingrove, L.

Llewelyn-Davies of Hastoe, B.

Carter, L.

Lovell-Davis, L.

Castle of Blackburn, B.

McCarthy, L.

Cledwyn of Penrhos, L.

McNair, L.

Clinton-Davis, L.

Mayhew, L.

Cudlipp, L.

Milner of Leeds, L.

David, B.

Molloy, L.

Dean of Beswick, L.

Morris of Castle Morris, L.

Desai, L.

Nicol, B.

Donoughue, L.

Ogmore, L.

Ennals, L.

Pitt of Hampstead, L.

Ewart-Biggs, B. [Teller.]

Porter of Luddenham, L.

Ezra, L.

Prys-Davies, L.

Fisher of Rednal, B.

Rea, L.

Fitt, L.

Redesdale, L.

Flowers, L.

Richard, L.

Gallacher, L.

Ritchie of Dundee, L.

Galpern, L.

Robson of Kiddington, B.

Gladwyn, L.

Rochester, L.

Graham of Edmonton, L.

Russell, E.

Grey, E.

Russell of Liverpool, L.

Halsbury, E.

Scanlon, L.

Hampton, L.

Seear, B.

Hanworth, V.

Sefton of Garston, L.

Harris of Greenwich, L.

Shackleton, L.

Hatch of Lusby, L.

Strabolgi, L.

Hilton of Eggardon, B.

Taylor of Blackburn, L.

Hollick, L.

Thomson of Monifieth, L.

Hollis of Heigham, B. [Teller.]

Turner of Camden, B.

Holme of Cheltenham, L.

Underhill, L.

Howie of Troon, L.

Varley, L.

Hughes, L.

Wallace of Coslany, L.

Jacques, L.

Wedderburn of Charlton, L.

Jay, L.

White, B.

Jeger, B.

Williams of Elvel, L.

Jenkins of Hillhead, L.

Wilson of Langside, L.

NOT-CONTENTS

Abercorn, D.

Erroll of Hale, L.

Alexander of Tunis, E.

Faithfull, B.

Allenby of Megiddo, V.

Flather, B.

Alport, L.

Fortescue, E.

Arran, E.

Fraser of Carmyllie, L.

Astor, V.

Fraser of Kilmorack, L.

Auckland, L.

Gainford, L.

Balfour, E.

Gisborough, L.

Birdwood, L.

Gridley, L.

Blatch, B.

Hailsham of Saint Marylebone, L.

Blyth, L.

Boardman, L.

Harding of Petherton, L.

Borthwick, L.

Hardinge of Penshurst, L.

Boyd-Carpenter, L.

Harmsworth, L.

Brabazon of Tara, L.

Hayter, L.

Bridgeman, V.

Henley, L.

Brookes, L.

Hesketh, L.

Brougham and Vaux, L.

Hives, L.

Butterworth, L.

Hood, V.

Caithness, E.

Hooper, B.

Campbell of Alloway, L.

Howe, E.

Carnock, L.

Hylton-Foster, B.

Cavendish of Furness, L.

Jeffreys, L.

Clanwilliam, E.

Jenkin of Roding, L.

Colnbrook, L.

Johnston of Rockport, L.

Constantine of Stanmore, L.

Joseph, L.

Cullen of Ashbourne, L.

Knollys, L.

Daventry, V.

Lloyd of Hampstead, L.

Davidson, V. [Teller.]

Long, V. [Teller.]

Denham, L.

Lyell, L.

Denton of Wakefield, B.

McAlpine of West Green, L.

Downshire, M.

Mackay of Clashfern, L.

Effingham, E.

Macleod of Borve, B.

Elibank, L.

Manton, L.

Ellenborough, L.

Margadale, L.

Elles, B.

Marlesford, L.

Erroll, E.

Merrivale, L.

1023

Mersey, V.

Sharples, B.

Middleton, L.

Smith, L.

Monk Bretton, L.

Somerset, D.

Montagu of Beaulieu, L.

Soulsby of Swaffham Prior, L.

Morris, L.

Stodart of Leaston, L.

Mountevans, L.

Strange, B.

Mowbray and Stourton, L.

Strathcarron, L.

Munster, E.

Strathmore and Kinghorne, E.

Nelson, E.

Strathspey, L.

Norrie, L.

Sudeley, L.

O'Cathain, B.

Suffield, L.

Onslow, E.

Swansea, L.

Oppenheim-Barnes, B.

Terrington, L.

Orr-Ewing, L.

Teviot, L.

Oxfuird, V.

Thomas of Gwydir, L.

Pearson of Rannoch, L.

Tombs, L.

Pender, L.

Trumpington, B.

Perry of Southwark, B.

Ullswater, V.

Quinton, L.

Vaux of Harrowden, L.

Reay, L.

Vinson, L.

Renfrew of Kaimsthorn, L.

Waddington, L.

Renton, L.

Westbury, L.

Renwick, L.

Whitelaw, V.

Rochdale, V.

Wise, L.

Saltoun of Abernethy, Ly.

Wynford, L.

Savile, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.35 p.m.
Lord Flowers Lord Flowers moved Amendment No. 2:
After Clause 6, insert the following new clause:—
("Offers for sale of securities
Where an offer for sale of any securities of the successor company is to be made by or on behalf of the Crown or any invitation or advertisement is to be issued by or on behalf of the Crown in connection with the offer, the Secretary of State shall consult such persons appearing to him to be representative of the universities of the United Kingdom as he considers appropriate.").
The noble Lord said: My Lords, I move this amendment, to which I put my name as did the noble Lords, Lord Kirkwood, Lord Williams of Elvel and Lord Beloff, in the same minimalist spirit that characterised our proposed amendments at earlier stages; that is to say, minimal assurances are sought that the research community is to be involved at all relevant stages in the process of privatisation. I shall not rehearse the arguments that have already been offered for stressing the unique nature of this particular privatisation and its importance to the research community. I have no wish to bore myself or other noble Lords who already understand perfectly well what is at stake, even if it seems that the Minister does not.
My anxiety that the assurances which we sought have been granted in the articles of association but do not appear on the face of the Bill is by now well known. It has already been rehearsed today by the noble Lord, Lord Peyton, and need not be repeated. The present amendment simply asks that appropriate representatives of the universities be consulted about the details of sale. Nothing that the Minister said in response to the first amendment led me to suppose that that will necessarily be the case. It does not seem much to ask and yet it would give much comfort to the research community. If the Minister gives his word today that such representatives will be consulted, he will have granted, albeit belatedly, what we sought.
Perhaps I may be permitted just one brief elaboration of our remaining worries. Under its present forceful management, BTG has been very successful in attracting business from the United States. The noble Lord, Lord Reay, has already referred to that. It has shown that in some cases at any rate it can look after the interests of American inventors better than the Americans can. Experience gained from processing British property rights is being profitably exported to our competitors. We are proud of BTG for that.
However, it is easy to imagine its success being exploited to our detriment. It is easy to imagine that British invention will have less and less significance to a privatised BTG. All it requires is for BTG to fall into the hands of business interests whose chief preoccupation is not with the support of British innovation. As the noble Earl, Lord Halsbury, has already indicated, it is hoped that in some way or other universities and some of the charitable foundations will join with others in a consortium to buy BTG. If that is to have any hope of being fulfilled, it is essential that the universities not only know who their bedfellows are to be in the new company but feel comfortable with them. If they do not, they will not join in.
Moreover, they most probably will feel bound—as I have remarked at an earlier stage—to set up their own version of BTG, building on the experience already acquired by a number of them. That would be an unnecessary and wasteful exercise. The Government have a duty to avoid that difficulty. They should not simply be driven by the Treasury's short-term objective of maximising the profits from the sale but should have regard to long-term benefits.
If the Minister accepts this perfectly harmless amendment, as I very much hope that he will feel able to do, it will provide the minimum safeguards that we seek that BTG will not fall into the wrong hands at an early stage. If he cannot accept it, I hope that he realises that he will be sending an unmistakable signal to the universities and to the remainder of the research community. It will tell them that they can no longer be confident that their interests and their contributions to the future of British technology will be safeguarded and promoted by the body whose duty that hitherto has been. It is for that reason that I urge the Minister to consider this extremely modest amendment with great care. I beg to move.
Lord Kirkwood: My Lords, it is a small but important amendment to the Bill. All it asks is for the Secretary of State to recognise the importance that the universities and their members attach to the only real asset possessed by BTG—that is, the intellectual property rights—when the sale of securities in that company is being considered. After all, that intellectual property has been generated in the main by researchers in universities and research councils working with public funds. They feel a strong proprietorial interest in how IPR are used and disposed of.
It should be remembered that BTG was originally set up to provide funding for development of research ideas into commercial products and processes and as an institution to which patents arising from work in

1025
universities and research councils could be entrusted for their full exploitation for the benefit of all concerned, including the inventors. If the researchers see that the successor company is not being run to their long-term interest and lose faith in it, they will not be happy to see their patentable work being taken up by the new company. As the noble Lord, Lord Flowers, has stressed, that will inevitably lead to a demand for the resurrection of the old style BTG. I cannot believe that to be the intention of the Government in drafting the Bill. I urge your Lordships to support the amendment.
Lord Williams of Elvel: My Lords, I should like to give our support to the amendment of the noble Lord, Lord Flowers. I am sure the House will be grateful to the noble Lord for returning overnight from Hong Kong for this important event. He wished to participate in your Lordships' Third Reading because this is the last opportunity that we have for trying to incorporate into the Bill even the most minimal amendments. We began with what I considered a fairly minimal amendment from the noble Lord, Lord Peyton, and the House decided to refuse that on the advice of the Government. We then considered an even more minimal amendment—if such there can be—Amendment No. 1A, which I moved. On the advice of the Government the House decided not to accept that.
The amendment moved by the noble Lord, Lord Flowers, and supported by the noble Lord, Lord Kirkwood, does no more than write into the Bill a process of consultation. For the life of me I cannot see why that should not be in the Bill given the arguments advanced by the noble Lords, Lord Flowers and Lord Kirkwood, and those that I have heard from all quarters that the morale of the staff in BTG is being gravely affected by the attitude of the Government. They do not seem to wish to entertain any form of const ltation with the people who produce most of the business—the universities. That seems to be the essence of the argument.
If the Minister is able to give us an absolute and clear undertaking that he will abide strictly by the text of the amendment, then I dare say that the noble Lord, Lord Flowers, may wish to consider whether he puts it to the opinion of the House. However, having heard the Minister on the previous amendment I am bound to say I am extremely pessimistic about that possibility.
If your Lordships decide that even this amendment and all other amendments are not acceptable it will mean that the articles of association—which have been quite properly brought forward by the Government as a result of requests from all sides of the House during different stages of the Bill—will have no formal consideration in another place. If there is no amendment from this House there will be no consideration of Lords amendments in another place and therefore no consideration of the articles of association. I believe that that is a denigration of the role of a revising Chamber.
1026
I support the noble Lord, Lord Flowers. I very much hope that the Government will accept that this simple and minimal amendment should be incorporated on the face of the Bill.
4.45 p.m.
Lord Beloff: My Lords, I had put my name to the amendment in the light of the general considerations advanced on behalf of the universities in previous stages of the Bill. However, my determination to say something about it has been much increased during the course of our proceedings today, in particular after listening to the very important speech of the noble Earl, Lord Halsbury.
When we dispersed in July, one would have thought that the Recess would enable the Government to enter into proper consultation with universities about the possibility of a consortium in which they would find their role and that the Government would be able to indicate to us the broad lines of their thinking as to the participation of the scientific community in the development of its own initiatives, research and discoveries. Instead we return—and the Minister has my sympathies—to a cloud of embarrassment. We are talking about something which we cannot grasp, which is not before us and which we cannot see.
I fear that there are only two possible explanations. One is that the Department of Trade and Industry is not very interested in the universities and their possible contribution to Britain's industrial future. If it were to consider itself as having a sponsoring role it would be in the forefront of those who argue that it is essential that the interests of the scientific community be protected in some form after privatisation. At this late stage, it might have had difficulty in convincing the universities, but if the Minister had been able to say, "These negotiations have gone on. We have perhaps not yet reached a conclusion but we hope to. We are fully seized of the anxieties of universities", then perhaps the amendment might not have been necessary. The other explanation is that the Minister and his department share our views and anxieties but have been overruled by other considerations emanating from the Treasury.
There may well be a Secretary of State who is too lily-livered to stand up to the Treasury, and it would not be the first time. Also, we must take into account the hostility which the Treasury appears or has appeared recently to show to the universities in a number of other respects. For example, when VAT was raised, the health authorities were reimbursed for the extra burden on the health service. However, universities were asked to accept the burden at the expense of their proper operations.
We are now told that, having been exhorted by successive Ministers to do more to commercialise their operations in respect of their inventions and discoveries, the universities are not merely to be taxed on the profits of those operations but are to be taxed retrospectively. That is a monstrous indication of the indifference somewhere in government—and I suspect in the Treasury—towards the academic community as a whole.

1027
while agreeing that this amendment is, if one likes, a matter of form, I appeal to the Minister even at this late stage to give some encouragement to noble Lords on this side of the House to believe that the Government are concerned about the future of British research and that they intend to show that they are so concerned.
The Earl of Halsbury: My Lords, on Amendment No. 1 I appealed to the Minister to abandon secretiveness and take us into his confidence and not face us in due course with a fait accompli achieved by anonymous, faceless officials who wish to do things all their own way. He did not deign to reply to my appeal so I renew it in supporting this amendment.
Baroness Park of Monmouth: My Lords, I support the amendment. BTG has hitherto combined most of the best features of public service and private enterprise. The Bill, as it stands, must give the universities the impression that they cannot get through to the Government even on the very special issue of the future of intellectual property.
The pity of it is that many of the Government's intentions in this matter seem to be wholly at odds with their own declared and proper policies. The Secretary of State for Education and Science told the universities, in his speech to the CVCP in September, that there are two issues that we need to get right: research funding and quality assurance. He said that there need to be significant increases in efficiency. He was concerned that any changes should deliver increased efficiency without compromising standards. It is hard to see how the measures proposed to change an already efficient and profitable institution will achieve that.
The other Minister most concerned—the Secretary of State for Trade and Industry—when speaking at the party conference this month recognised the country's outstanding success in scientific research but considered that our weakness had been in turning brilliant ideas and significant innovations invented in Britain into commercially successful products. That is exactly what BTG has been doing so why change it?
I have always been a strong advocate of bringing industry and the universities together. I urge the Secretary of State for Trade and Industry, when he speaks of plans to help the universities to respond to the needs of industry, to recognise that the present operations of BTG already go far in exemplifying just that. He struck a very sympathetic note when he spoke of "the ears of government out there listening to industry". I accept that the Minister has gone a long way towards meeting our anxieties. However, I ask that the ears of government listen really hard to the voices of the universities on this issue.
We ask that the Secretary of State should listen to those who wish to ensure that the consortium which takes over is, first, British and, secondly, accepts the same commitment as the present body to support innovation in the long term. The universities should be given the fullest opportunity to establish from those consortia applying what are their intentions. Those considerations should determine the final choice.
1028
For the Government to establish some rapport with the universities on this issue is all the more important at a time when, as the noble Lord, Lord Beloff, reminded us, if we are to believe recent press statements the Inland Revenue is apparently planning to penalise universities retrospectively for being efficient, business-like and cost-effective in the use of their buildings for conferences.
Any action tending to reassure the universities that they can get through to Ministers and are heard would be especially valuable now. I urge the Minister to consider that.
Lord Peyton of Yeovil: My Lords, I apologise to your Lordships because I was not here when the noble Lord, Lord Flowers, moved the amendment. However. I wish to make it quite clear that it was and remains my intention to support the amendment.
I endorse what the noble Lord, Lord Williams, said about the amendments which have been moved this afternoon being, as he put it, "minimal". I prefer the word "Mondest". The amendments have not been of earth-shaking consequence but they sought a very small concession on the part of the Government, in this instance, to the universities. It would certainly be within your Lordships' recollection that our legislation is littered with requirements to consult all manner of people of much less eminence than the leaders of the universities with whom we are here concerned.
Therefore, I hope that my noble friend will be prepared to give what is not much more than a courteous nod in the direction of the universities. I hope that he will say that their opinions are important and that he will seek out those opinions.
I endorse what my noble friend Lord Beloff said about how nice it would be if every now and again the Government were to attend to the wishes and views of those behind them. I accept that my noble friend, who is not the head of his department, must take his instructions from elsewhere. Perhaps he will communicate to those who give him the instructions that he must not accept amendments wherever they come from or whatever the reason for them, that those who sit behind him are deeply and bitterly disappointed by the repetition of such attitudes.
The Earl of Harrowby: My Lords, the noble Lord, Lord Williams, referred to the possibility of the noble Lord, Lord Flowers, withdrawing his amendment. I ask him not to do that. As a very recently retired chairman of a large industrial company using high tech, I have the greatest respect for BTG. I hope that if Ministers are not prepared to accept the amendment, they will recognise the strength of general feeling of noble Lords on both sides of the House that this Bill is bad and undesirable. A Division would give us an opportunity to show that fact once more.
Lord Butterfield: My Lords, I support the noble Lord, Lord Flowers, and other noble Lords on this amendment. I should like to refer to an event which shows the importance of the consultation process which the noble Lord, Lord Flowers, and other noble Lords have included in the amendment. The amendment states:

1029
"the Secretary of State shall consult such persons appearing to him to be representative of the universities".
As I understand it, many years ago a young man was working in a laboratory trying to synthesise the steroid ring, which is the core of the contraceptive pill. He was fairly close to achieving that when the money began to run out and he lost one of his major research assistants. He went to the NRDC—the National Research Development Corporation—to ask whether it could give him a bridging grant. However, there was no way in the August-September Recess that anyone could consult with government to obtain that bridging grant for him.
Anxious to complete his researches the young man accepted an offer of a modest sum from an American pharmaceutical house. Its terms were exactly the kind of terms adumbrated by my noble friend Lord Flowers in his anxieties for the future. They were, "Yes, dear Dr. Herchel Smith, we will give you some money and support your chap, but we want a major stake in the royalties of any invention which emerges". A major invention did emerge. The clinical school at the University of Cambridge is immensely grateful to Dr. Herchel Smith, who, among other things, established a couple of Chairs for us and various other major university benefactions. But how much better it would have been had there been means to support that young man, so far down the road that many people could have guessed he would succeed in the synthesis of the steroid ring, which was of such immense importance. I believe a quarter of the people taking the contraceptive pill all over the world are taking pills based on his invention. How much better it would have been had the whole development been kept in this country and had there been the amount of consultation which I understand my noble friend Lord Flowers and his colleagues are seeking in the amendment.
I feel a tinge of concern for the Minister. It seems to me that we are all bowling very hard bouncers at him. But there is a simple thing to do under these circumstances and I am sure that the Prime Minister would go down this line: declare!
5 p.m.
Lord Reay: My Lords, the purpose of the amendment is to require the Secretary of State to consult with the universities about any offer for sale or invitation or advertisement to be issued in connection with the sale.
As I understand it, the justification for the proposed consultation is that the universities represent a very special interest group which must be closely involved with the choice of purchasers and the terms of the sale agreed. I entirely acknowledge that universities have played and continue to play a vital role in the activities of BTG. It is in recognition of that role that we have provided in the articles of association that one of the directors of the company should be appointed by the CVCP—a right which they do not possess at the present time—and also that another director should be experienced in the commercial exploitation of public sector research.
1030
In addition, my department and its advisers on the sale have been in regular contact with the CVCP, and my colleague Edward Leigh and I also had meetings with the committee. My department explored ideas from the CVCP for taking a shareholding as part of a consortium in the privatised company. In our view the amendment is unnecessary. We have already consulted directly and fully with the universities, not to mention the eloquent and influential contributions made by members of the academic world in your Lordships' House during the passage of the Bill.
Some noble Lords seem to fear that despite the special share and the other provisions in the articles, a successful consortium could emerge which was anathema to the universities. I gave specific assurances to the House on that point, which I should like to repeat; namely, that the Government fully intend to sell BTG to buyers who will take a long—term view and who will want to continue its traditional transfer technology activities. We shall choose the right consortium carefully, bearing in mind both those factors and the need to achieve the best possible return for the taxpayer. Specifically in the information memorandum which we shall be issuing to interested parties we shall be seeking assurance from them on those points and we shall closely scrutinise their proposed plans for meeting those objectives.
I question whether it is correct to consider picking out the universities for any further special treatment. There are other interested parties in the privatisation who may feel that they are equally entitled to be consulted in the same way. We must not, for instance, forget that a large and growing proportion of BTG's supply of inventions comes from non-academic sources—over 50 per cent. in 1991. Apart from the private sector inventors, there are also the worldwide licensees. There are in addition the management and the employees. There are also overseas academic institutions, joint venture partners, polytechnics, government research establishments and so on. All those interests could make a claim for further consultation. All those interests would be discriminated against, in favour of British universities only, by the proposed amendment.
But that leads me to an even stronger reason why it may be wrong to single out the universities in that way for involvement in consultation at this stage. The CVCP indicated that it may be interested in taking a stake in the privatised BTG. Therefore the universities could be involved with specific bidders, or even as bidders themselves. In that situation it would be wholly inappropriate, even if we accepted the desirability on other counts, for the Government to consult with the universities before making the sale. We would be putting the universities in an invidious position, and it would be quite improper for us to do so.
In the light of that I must counsel noble Lords to accept that the best route to meet their concerns is that down which we have already travelled—the safeguards and further assurances the Government have given and our continuing pledge to consider very carefully all representation. I ask the noble Lord to withdraw the amendment.
Lord Flowers: My Lords, I am extremely disappointed in the Minister's response. Noble Lords will be able to judge from the short speech that I made why I am disappointed and there seems little point in repeating it.
All we are asking is that the universities should be consulted with regard to who their partners are to be. That is all. It is a harmless request. To deal with one point made by the Minister, I am sure that the universities—which, after all, are the largest customers of BTG—would be regarded as a suitable representative of the research community at large. The amendment is completely harmless. I know that many other noble Lords agree with me. In those circumstances I seek the verdict of the House.
5.8 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 111; Not-Contents, 102.

Division No. 3

CONTENTS

Addington, L.

Hylton, L.

Allen of Abbeydale, L.

Hylton-Foster, B.

Alport, L.

Jacques, L.

Ardwick, L.

Jay, L.

Aylestone, L.

Jeger, B.

Beloff, L.

Jenkins of Hillhead, L.

Birk, B.

Jenkins of Putney, L.

Blackstone, B.

Kilbracken, L.

Blease, L.

Kilmarnock, L.

Bonham-Carter, L.

Kirkwood, L.

Bottomley, L.

Listowel, E.

Broadbridge, L.

Liverpool, E.

Brookes, L.

Lovell-Davis, L.

Butterfield, L.

McCarthy, L.

Caldecote, V.

Mclntosh of Haringey, L.

Carmichael of Kelvingrove, L.

McNair, L.

Carter, L. [Teller.]

Mallalieu, B.

Cledwyn of Penrhos, L.

Mayhew, L.

Clinton-Davis, L.

Milner of Leeds, L.

Dacre of Glanton, L.

Molloy, L.

Dainton, L.

Montagu of Beaulieu, L.

Darcy (de Knayth), B.

Morris of Castle Morris, L.

David, B.

Mulley, L.

Dean of Beswick, L.

Nicol, B.

Desai, L.

O'Cathain, B.

Elibank, L.

Ogmore, L.

Ennals, L.

Park of Monmouth, B.

Erroll, E.

Peyton of Yeovil, L.

Ewart-Biggs, B.

Pitt of Hampstead, L.

Falkland, V.

Porter of Luddenham, L.

Fitt, L.

Prys-Davies, L.

Flowers, L.

Rea, L.

Gainsborough, E.

Redesdale, L.

Gallacher, L.

Richard, L.

Galpern, L.

Ritchie of Dundee, L.

Graham of Edmonton, L.[Teller.]

Robson of Kiddington, B.

Rochester, L.

Grey, E.

Russell, E.

Halsbury, E.

Seear, B.

Hampton, L.

Sefton of Garston, L.

Hanworth, V.

Serota, B.

Harris of Greenwich, L.

Shackleton, L.

Harrowby, E.

Sherfield, L.

Hatch of Lusby, L.

Soulsby of Swaffham Prior, L

Hayter, L.

Stedman, B.

Hilton of Eggardon, B.

Strabolgi, L.

Hollick, L.

Taylor of Blackburn, L.

Hollis of Heigham, B.

Thomson of Monifieth, L.

Howie of Troon, L.

Tombs, L.

Hughes, L.

Tordoff, L.

Hunter of Newington, L.

Turner of Camnden, B.

1032

Underhill, L.

White, B.

Varley, L.

Wilberforce, L.

Wallace of Coslany, L.

Williams of Elvel, L.

Wedderburn of Charlton, L.

Wilson of Langside, L.

Wharton, B.

Winchilsea and Nottingham, E.

NOT-CONTENTS

Abercorn, D.

Johnston of Rockport, L.

Abinger, L.

Killearn, L.

Allenby of Megiddo, V.

Knollys, V.

Arran, E.

Lauderdale, E.

Astor, V.

Long, V.

Balfour, E.

Lyell, L.

Belhaven and Stenton, L.

Mackay of Clashfern, L.

Birdwood, L.

Macleod of Borve, B.

Blatch, B.

Margadale, L.

Blyth, L.

Marlesford, L.

Boardman, L.

Merrivale, L.

Borthwick, L.

Mersey, V.

Boyd-Carpenter, L.

Middleton, L.

Brabazon of Tara, L.

Milverton, L.

Brougham and Vaux, L.

Monk Bretton, L.

Butterworth, L.

Morris, L.

Caithness, E.

Mountevans, L.

Campbell of Croy, L.

Mowbray and Stourton, L.

Carnock, L.

Munster, E.

Cavendish of Furness, L.

Norrie, L.

Cochrane of Cults, L.

Northbourne, L.

Colnbrook, L.

Oppenheim-Barnes, B.

Constantine of Stanmore, L.

Orkney, E.

Daventry, V.

Orr-Ewing, L.

Davidson, V. [Teller.]

Pearson of Rannoch, L.

Denham, L.

Pender, L.

Denton of Wakefield, B.

Pennock, L.

Downshire, M.

Quinton, L.

Eccles, V.

Reay, L.

Effingham, E.

Renton, L.

Ellenborough, L.

Renwick, L.

Elles, B.

Rochdale, V.

Faithfull, B.

Saint Oswald, L.

Ferrers, E.

Savile, L.

Flather, B.

Sharples, B.

Fraser of Carmyllie, L.

Smith, L.

Fraser of Kilmorack, L.

Somerset, D.

Gainford, L.

Stodart of Leaston, L.

Gisborough, L.

Strange, B.

Greenway, L.

Strathcarron, L.

Hailsham of Saint Marylebone, L.

Strathmore and Kinghorne, E.

Sudeley, L.

Hardinge of Penshurst, L.

Suffield, L.

Harmsworth, L.

Swinfen, L.

Henley, L.

Thomas of Gwydir, L.

Hesketh, L. [Teller.]

Trumpington, B.

Hives, L.

Ullswater, V.

Hooper, B.

Vaux of Harrowden, L.

Howe, E.

Waddington, L.

Huntly, M.

Westbury, L.

Jeffreys, L.

Wise, L.

Jenkin of Roding, L.

Resolved in the affirmative, and amendment agreed to accordingly.
5.17 p.m.
Schedule 1 [Provisions supplementary to s. 1.]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 2A:
Page 10, line 48, at end insert—("and
(c) the NRDC Group Pension Fund including any accrued surpluses shall remain solely for the benefit of the members of the fund and their dependants and shall not be used by the successor company for any other purposes.")
The noble Lord said: My Lords, the purpose of the amendment is very simple. As your Lordships will be aware, the pension fund has been a contributory one. The contribution from the employer has obviously been indirectly from the taxpayer since at the moment

1033
this provision is in the public sector. Under the note on the pension fund in the British Technology Group accounts, it is revealed that, in admittedly the last preliminary actuarial valuation, the fund has a substantial surplus which has accrued to the scheme. The annual report states:
"On the basis of this draft valuation and on the actuaries' subsequent recommendation, the trustees have agreed to continue the suspension of the employer's contributions and benefit improvements are being considered".
The important point is covered by the following words:
"It is not anticipated that contributions will be necessary for a period of 10 years or more".
In other words, there will be a pensions holiday for the employer for 10 years or more on this actuarial valuation. The surplus that has accrued to the scheme is one that should be to the benefit of the taxpayer. It is what the taxpayer has contributed to the pension scheme of the present employees of the British Techrology Group.
If the Government are saying that the accrued surplus will be for the benefit of the members of the fund—and that is the point of my amendment—then as a taxpayer I am perfectly relaxed, if I may put it like that. It is sensible to increase the benefits of the members of the scheme. However, if the owners of BTG, when it is privatised, are to be relieved of the necessity to contribute towards the pension scheme at all and, as has happened on several occasions, strip out the surplus funds from the pension scheme, that is a completely different matter. That is stripping out money that the taxpayer has put in for the benefit of the present employees of BTG and using it to repay themselves the costs or part of the costs of purchasing the business in the first place. I hope very much that we shall get assurances from the Minister on exactly how he intends that the privatised company should treat this surplus. I beg to move.
The Earl of Halsbury: My Lords, I do not know whether I have the temerity to query something said by the: noble Lord, Lord Williams of Elvel. However, the taxpayer has not put up anything towards the pensions of NRDC. It has all been paid off out of the profits. NRDC owes the taxpayer nothing.
Lord Williams of Elvel: My Lords, with the leave of the House, the taxpayer has been the owner of the business. As the noble Earl will know, the profits of the business are the property of the owners of the business.
Lord Reay: My Lords, when this amendment was tabled at Committee stage, I gave a detailed explanation of the complex issues regarding the pension fund and I made the Government's position clear.
At Committee stage the noble Lord raised a number of specific anxieties. The first of these related to the election of trustees, a practice that all of us would like to see continue after privatisation. There is no reason why this should not be the case. As has been stated on several occasions throughout the passage of this Bill, there is an express provision in paragraph 2 of Schedule 1 to the Bill that states:
1034
"Any agreement made … in relation to the Corporation … which is … effective immediately before the appointed day … whether or not in writing …shall be taken as from the appointed day as referring to the successor company".
Further, for the avoidance of doubt, paragraph 4 of Schedule 1 states that this provision extends to
"any agreement or arrangement for the payment of pensions".
I can only reiterate what I said in Committee. In the Government's view, the amendment would fall foul of statutory requirements, in particular the Income and Corporation Taxes Act 1988, and the NRDC trust deed itself.
It is not for the Government to dictate how accrued surpluses should be treated, particularly where this could jeopardise the favourable tax status of the fund by requiring benefits to be raised, or a surplus to accrue, beyond those limits permitted by the Inland Revenue. The treatment of surpluses is a matter for the trustees of the scheme, subject to the corporation's consent, based on advice they receive from the actuaries they appoint. In the past, on actuarial advice, active members, deferred pensioners and pensioners have enjoyed enhanced benefits and the employer has benefited from a contribution holiday. It would be contrary to the rules of the scheme to deny the employer, who has after all contributed to the surplus, the right to benefit from any surplus in this way.
Lord Williams of Elvel: My Lords, the point I was trying to make to the noble Lord was that the employer who has contributed to the scheme by using the profits which are his property and which could have been distributed to him by way of dividend has accumulated a surplus. If that surplus is now to be transferred lock, stock and barrel without any remuneration to the employer who has previously accumulated that surplus in the scheme, that is unfair both to the employees who are still contributing their widow's mite and to the taxpayer.
I imagine that the noble Lord will have heard the arguments that I have brought forward, and I hope —that is all one can do at this stage—that the Government will have that in mind when negotiating the sale price of the business. That is the proper way to go about it. I hope that when we come to the next two amendments the noble Lord will be a little more expansive on the changes that are taking place in negotiations between trustees and the unions on the trust deed itself. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 2B:
2B Page 10, line 48, at end insert—
("( ) From vesting day, the right of the employer to veto any nomination for an elected trustee of the NRDC Group Pension Fund is terminated.").
The noble Lord said: My Lords, it may be for the convenience of the House if I speak also to Amendment No. 2C. The purpose of tabling these amendments is to ask the Minister whether he will give the House some indication of how negotiations on the revised trust deed are proceeding. When we debated the matter before the long Recess, he said that this was

1035
a matter to be decided in negotiation about the new trust deed. I have to tell him that employees are worried that not enough progress is being made. They would like to see a proper trust deed put in place before privatisation takes place.
We have discussed the specific points of the amendment. I accept that as they stand they are in certain respects defective and I would not wish to press them. However, I hope by moving these amendments I shall give the Minister an opportunity to tell the House and the employees how negotiations are going on the new trust deed. I beg to move.
Lord Reay: My Lords, I understand that we are taking Amendment No. 2C with Amendment No. 2B. Amendment No. 2B would remove the employer's existing right to veto any nomination for an elected trustee. As I stated during Committee stage, this amendment is not necessary. It can only be used after full consultation with the recognised trade union and if, in the opinion of the corporation, the person nominated is unsuitable to be a trustee.
The current trustee structure—three nominated by the corporation, three elected by the staff and an independent chairman acceptable to the other six—protects their independence and that of the fund. The chairman, who has a casting vote when necessary, has traditionally been chosen for his independence. It should also be noted that under trust law the trustees are required to act in the best interests of the members, or risk personal liability.
With regard to the question which the noble Lord asked me about a trust deed, I can say that there is a proper trust deed in place. That is a matter for the trustees.
I turn now to Amendment No. 2C. This amendment would give the trustees a veto on new members entering the scheme. During his preamble to the amendment at Committee stage the noble Lord suggested that all BTG employees on reaching the age of 30 must join the scheme. This is not so. The Social Security Act 1986 requires that all occupational pension schemes must operate on a voluntary membership basis. The NRDC scheme was accordingly amended in October 1988 to allow for that change in the law.
The trustees already have significant control over the introduction of new members in that they have a discretion to refuse to accept a transfer of past service benefits if these are not adequately funded. This is true of single or bulk transfers. The position in respect of future service is also within the control of the trustees as the employer's contribution rate necessary to fund future benefits is determined by the actuary appointed by the trustees. Any new members would have had to pay their way for the past and contribute at an appropriate rate if they wished to participate in the NRDC scheme for the future.
There are also employment law considerations. The option to participate in a pension scheme is often part of the terms and conditions of employment and is a benefit provided by an employer for his employees. An employer could be placed in an untenable position
1036
should the trustees be given a power of veto on membership above and beyond that which they held in regard to the adequate financing of the fund.
Any amendment to the NRDC pension scheme is a matter for the trustees and the corporation, not the Government, and I submit that it is not for the Government or Parliament to interfere in arrangements which are in any case subject to the due process of the law. In his report to members of the scheme in February 1991 the independent chairman of the trustees, specifically addressing worries raised by the prospect of privatisation, stated that:
"the trust deed gives at least as much protection as can be reasonably expected and at a level which compares favourably with other pension funds".
He also reported that the legal advisers to the scheme advised that the pension fund trust can operate on the same basis as it does at present, when and if the ownership of the business changes. Therefore, in our view, these amendments are not necessary or appropriate. I hope that the noble Lord will not insist on them.
5.30 p.m.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord for that reply, although he did not answer any of the questions that I asked, but one has in the end to accept that at Third Reading. I am sorry that he was not able to give the employees any assurances about how negotiations on the revised trust deed are progressing. It would have been very easy for that to have been done and it would have given the unions and their members a good deal of reassurance that everything was being done fair and clean. Nevertheless, the noble Lord has not been able to give me any further information. There is no more that I can reasonably say or do. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2C not moved.]
Lord Reay: My Lords, I beg to move that the Bill do now pass. I took the opportunity of the debate on the first amendment at Third Reading to spell out what the Government had done during the passage of the Bill through the House to meet concerns expressed in all quarters of the House regarding the continuation of BTG's activities after privatisation. I do not think it necessary to repeat it now. Suffice it to say that in taking a time limited special share, and combining that with writing four special provisions into the articles of association, we may not have gone as far towards guaranteeing the continuation of BTG's traditional technology transfer activities as all noble Lords would have wished, but I believe that we have gone about as far as is consistent with carrying out a successful privatisation of the company. I am grateful to noble Lords who took part in our debates for the constructive and moderate nature of their interventions and I congratulate them on the valuable contribution they have made to the outcome I have described.
Moved, That the Bill do now pass.—(Lord Reay.)
Lord Williams of Elvel: My Lords, the House will be most grateful to the noble Lord, Lord Reay, for the

1037
thoughtful way in which he has handled the Bill. He has shown extreme courtesy to noble Lords who have contributed to our debates. It has been a long process. Our proceedings have gone over the long Recess. We must recognise that the Government have persisted—some of us would say with stubbornness, others would say with resolution—in their intention. We must accept that their intention will become law.
Your Lordships have today made a substantial contribution to a better Bill, not just because the amendment which the House has accepted will be on the face of the Bill but because it will give another place an opportunity to consider the articles of association that have come out in your Lordships House during our debates and which another place has not been able to consider before.
It is no secret that on these Benches we oppose the Bill. I said so at Second Reading and I have said so continuously. I have no reason to change my mind. I would issue two warnings to the Government as they move forward towards privatisation. They both concern the information memorandum to which the Minister referred earlier. First, if my party achieves office at the next election we will establish, if BTG is by then privatised, a rival transfer technology and patent agency. We believe that this is something properly in the public sector. We also believe that the setting up of that agency would attract many of the staff currently employed at BTG. Therefore, potential buyers should be made aware of that point. As in other privatisation prospectuses, it is only fair that buyers should be made aware of the risks that attend the purchase.
Secondly, future buyers should also be made aware of the dispute at BTG which is currently before ACAS. There is a dispute between the trade unions and the management side following a management decision to attempt to change the date of the employees' annual pay award. What is at stake in the dispute is not necessarily a value but the mechanics of granting pay awards. The unions feel strongly about this matter. They have taken it to ACAS. It is in front of ACAS at the moment. I am not suggesting that there will be industrial action. That is not for me to comment on. It is for the unions to take a decision on as and when it becomes necessary for them to do so. However, I believe that a potential purchaser of the company has the right to know that a complex and difficult dispute is at present in front of ACAS. That should be in the information memorandum.
At Second Reading I said that this privatisation was unprecedented. I have said it again today and other noble Lords have said it again today. It is unprecedented because it does not follow any of the characteristics of previous privatisations, the list of which the noble Lord the Minister read out again today. It therefore needs very special consideration and treatment. It is not simply a property that can be flogged off to the highest bidder. For that reason we have continued to press amendments to make sure that the Government are aware of that and live up to their responsibilities in making sure that the
1038
ownership of the company after privatisation will maintain the integrity and continuity of the business. That is fundamental.
We have passed an amendment today. It will go to another place and therefore your Lordships will have an opportunity to reconsider the matter should another place decide that it does not like the amendment. I conclude by thanking those of my colleagues on the Opposition Benches who have contributed to our proceedings. I also thank those on the Cross Benches who have contributed and those noble Lords who are members of the CVCP for their extensive contributions to our debates. I again thank the noble Lord the Minister for his kindness and consideration.
Lord Kirkwood: My Lords, I support the noble Lord, Lord Williams. On this side of the House we greatly approve of that.
On Question, Bill passed, and returned to the Commons with an amendment.

Severn Bridges Bill
5.38 p.m.
The Minister of State, Department of Transport (Lord Brabazon of Tara): My Lords, I beg to move that the Bill be now read a second time.
The purpose of the Bill is to authorise the provision of a second tolled road bridge over the Severn estuary between England and Wales and of the road links needed to connect it to the existing motorway network. It also provides the necessary framework to enable the new bridge to be privately financed through a concession agreement between the Secretary of State and a private concessionaire.
The Bill is important, first, because of the long-awaited improvement in communications which the new bridge will provide between England and Wales, and, secondly, because it represents a further significant stage in the Government's initiative to encourage the fullest participation by the private sector in the provision of the country's transport infrastructure.
As the powers to enable the provision of privately financed roads given by the New Roads and Street Works Act 1991 are now available to us, I ought to explain to your Lordships why we have introduced the Severn Bridges Bill as the means of seeking powers for the new bridge. There are essentially two reasons. First, this scheme involves—as I shall explain later—the repeal and replacement of the legislation which authorises the tolling of the existing Severn Bridge so as to provide a common tolling and operating regime for both bridges. That would have required a separate Bill in any case. Had we attempted to seek powers for the scheme partly through a Bill and partly through the new order-making procedures, that would inevitably have resulted in delay and confusion, with the risk of inconsistency between the two sets of powers.
The second reason for seeking all the necessary powers in the Bill is to enable the provision of the new bridge to go ahead as quickly as possible. On the basis

1039
of the Bill now before the House, and depending of course on the outcome of the consideration of the Bill by your Lordships, we hope that construction of the new bridge could start early next year, with completion by early 1996.
The background to the second Severn crossing starts with the opening of the existing Severn Bridge in 1966, 25 years ago. Since then it has provided the main road link between South Wales and England as part of the M.4 motorway. As such it has assumed a crucial economic importance.
Traffic on the bridge has increased greatly over the period. It now carries an average of over 50,000 vehicles a day, and delays to traffic have become an increasing problem at peak times of the day and at holiday weekends. That is essentially due to sheer lack of capacity at the bridge.
After initial feasibility studies into options for a second crossing, the Government announced in 1986 that a second road bridge would be provided at the English Stones, some three miles downstream of the present bridge. After further preparatory work, a competition to provide the new bridge was launched in December 1988.
The outcome was the selection in April 1990 of a privately financed proposal from the consortium Severn River Crossing plc. This was followed up last October by the formal signature of a concession agreement with the company. Copies of the agreement were placed in the Library of the House soon after. The concession agreement is conditional on enactment of the Bill now before your Lordships, without which it cannot take practical effect.
Alongside the competition to provide the new bridge itself, work continued on the development of the design of the motorway links which would connect it to the existing network. These roads would be provided under separate publicly funded contracts to be arranged in the usual way by the Department of Transport for the link roads in Avon to the M.4 and M.5 and by the Welsh Office for the link road in Gwent to the M.4. At each stage of the development of these proposals there has been extensive local consultation on all aspects of the scheme, including its effect on the environment. The part of the estuary which would be crossed by the new bridge is of considerable ecological interest and we are therefore taking great care to ensure that the effects of the scheme on the estuary will be minimised.
In terms of the practical effect of the scheme on people, the aim has been to minimise as far as practicable the impact on the local environment and on local communities. That applies both for the period of construction, where we are proposing wherever possible to keep the inevitable heavy construction traffic away from local centres of population, and for the completed roads themselves, where the aim has been to minimise their visual impact and the severance to local communities.
A detailed and comprehensive environmental statement has been prepared in parallel with the Bill to explain all the environmental considerations affecting
1040
the scheme and the full extent of the work that has been done to ensure that there is the minimum adverse impact. Copies are in the Library of the House.
I see that the noble Lord, Lord Clinton-Davis, wishes to intervene. I give way.
Lord Clinton-Davis: My Lords, I am much obliged to the Minister. In the light of the view taken by the European Commission that the environmental impact assessment directive has not been properly transposed into our law—which the Government may or may not dispute—can he tell the House whether the Government, in connection with the environmental impact assessment to which he referred, feel that they have taken into account the Commission's objections? If they have not done so, does the Minister agree that there is a risk of the possibility of litigation in the European Court of Justice because the way in which that environmental impact assessment has been carried may be found to be defective? What advice is he giving in those circumstances?
Lord Brabazon of Tara: My Lords, I have no reason to believe that the way in which we have carried out the environmental impact assessment is at all in conflict with what the European directive requires. As I understand it, the possible dispute between the Commission and the Government regarding other schemes is a question of timing and whether or not they were brought into effect before the directive came into force. That of course comes after. We have produced the full environmental statement and also a handy guide, if I may call it that, both of which are now available.
The noble Lord will have a chance to make his own speech in a moment. If I may now proceed with mine, I shall obviously attempt to answer any further questions that he has at that time.
I hope that the House will find it helpful if I now turn to the Bill itself and provide a brief explanation of its structure and contents. The Bill is in three parts. Part I would provide the necessary powers for the construction of the new bridge and the connecting roads and other associated works. It would also empower the acquisition of the necessary land and permit the necessary alterations to the existing highway network.
Part II, which deals with the operation of both bridges, confirms the power of the Secretary of State to enter into a concession agreement with a private promoter for the provision of the new bridge and provides for the implementation of a new tolling regime for both bridges. That would take effect, initially only at the existing Severn Bridge, on the starting date for the concession period when the concessionaire would take over responsibility for the finances and operation of the existing bridge and begin construction of the new bridge.
The tolls to be levied under the Bill would be set on the same principles whether it is the Secretary of State or the concessionaire who is levying them. The tolls, which would normally be charged only on traffic heading in the westbound direction—which would

1041
reduce both operating costs and the disruption to traffic—would be fixed on the basis of the table in Clause 9, indexed in line with the retail prices index.
These tolls would represent a significant increase over existing levels. That is necessary to meet the costs of providing the new bridge, which amounts to some £300 million. In return, the new bridge will benefit road users by more than doubling the capacity of this vital road link and additionally providing the benefits of shorter journey times and the minimisation of disruption from bad weather.
Under the Bill, which provides for tolling to cover not only the cost of the new bridge but also the outstanding deficit of some £120 million on the existing bridge, the concessionaire is permitted a maximum of 30 years' tolling. That period would be reduced if he collects a certain amount of revenue from tolls before then. On current traffic forecasts, tolling by the concessionaire would not be necessary for more than about 21 or 22 years. If the concession were to start in 1992, it could therefore end by 2014 -only eight years after the end of the tolling period already permitted under the Severn Bridge Tolls Act 1965, which the Bill would repeal. The Bill also allows tolling by the Secretary of State for a further limited period.
Part II of the Bill also provides the necessary frame work for the arrangements under which the concessionaire is to be responsible for maintenance and operation of the bridges. It also provides a regime for regulating traffic on the bridges to prevent obstruction or damage. These provisions are needed because of the special circumstances of the bridges and the constraints on their operation; for instance, the absence of a hard shoulder on the existing bridge.
Part III of the Bill contains miscellaneous provisions, notably to regulate operations which would interfere with the navigation of the River Severn and to protect the bridge from damage from shipping. It also deals with matters such as rating and planning permission.
The examiners have determined that the Bill is hybrid and so, subject again to the outcome of this afternoon's debate, it would next be referred to a Select Committee to consider the petitions which have been made against the Bill. A total of 18 were deposited within the time ordered after First Reading, but I am confident that the number which the committee will have to consider will be significantly less than this in the light of the constructive negotiations which have taken place between officials and petitioners during the Summer Recess. I hope that a satisfactory solution to each of the remaining petitioners' causes for concern will be found.
At this stage in the parliamentary calendar it will be clear to the House that the Bill will not be able to complete its proceedings during the remainder of the current Session. If your Lordships decide today to give the Bill its Second Reading, we shall then seek to carry the Bill over to the next Session.
The Bill would enable the earliest practicable provision of the much needed second Severn crossing and thus improve communications on this vital link between England and Wales. It represents another
1042
major step in the Government's initiative to use to the full the skills of the private sector in the provision of transport infrastructure and clearly demonstrates the Government's commitment to that policy. Accordingly, I commend the Bill to the House.
Moved, That the Bill be now read a second time.
—(Lord Brabazon of Tara.)
5.50 p.m.
Lord Clinton-Davis: My Lords, I have thanked the Minister for his explanation of the Bill, but I have a number of questions. We agree with his view—subject of course to your Lordships' view that the Bill should receive a Second Reading—that it would be right to continue the proceedings during the course of the next Session. From that the House will appreciate that the Opposition support the proposal for the building of a new bridge across the Severn. The needs of the Principality require it, but of course it is of wider interest to the whole country, especially in terms of our economic and transport relationships with the Community; and in terms of the development of the internal market.
Clearly high quality transport links to the Community and the rest of the United Kingdom are vital in view of the fact that Gwent is geographically peripheral to the Community. The link is of crucial importance to the economy of Gwent, the whole Principality and beyond. The link is also of critical importance when viewed against the backcloth of the contracting steel, coal and other industries in Wales, and the burgeoning unemployment which prevails there.
The present bridge is badly designed. It is subject to delays caused by accidents, congestion and inclement weather. Alone it is clearly inadequate for the purposes that I have already outlined. I only wish that my welcome for the Bill could be unqualified, but regrettably that is not the case. I want to spell out our doubts in the hope that some of them will be assuaged during further consideration of the Bill in your Lordships' House in the way that the Minister has described.
Those anxieties have been strongly expressed, in the main in representations made by the Standing Conference on Regional Policy in Wales which represents Gwent, Mid-Glamorgan, West Glamorgan and South Glamorgan. Those anxieties were strongly expressed in amendments proposed in another place but which for the most part have gone unanswered. Let me state briefly those anxieties afresh. The standing conference feels that it is wrong in principle for increased tolls to be levied on the existing bridge before the new bridge comes into operation. It put it graphically when it said:
"Today's users should not have to pay for tomorrow's bridge".
The Minister must answer that point.
Another issue of principle which the standing conference raised is that while taxpayers are responsible for providing the access roads all the revenues which emerge from the construction of the bridge will be passed on to the builder and not to the nation. The Minister must also answer that point. It is

1043
also necessary to mention a number of factors relating to the proposed toll regime. First, the tolls represent what is tantamount to a local tax on residents and businesses in Gwent, although the bridges represent a national asset. Secondly, as the Minister conceded in another place, what we have here is a monopoly. There is no practical alternative to the existing or future bridge. It is unrealistic to regard a detour of 60 miles via Gloucester as a reasonable alternative.
The third point is that the tolling of estuarial crossings imposes a disproportionate and unfair burden locally. One of the consequences is the likely impairment of commercial and industrial development. That is a view most strongly pressed by the standing conference. In addition, it calculates that the combined benefits of assistance to Gwent through regional selective assistance grants, the regional enterprise grant and the European Regional Development Fund are almost negatived by the tolls burden, if calculated on an annual basis.
The fourth point under that head is that a remarkable disparity exists in relation to other crossings which are toll free: the Britannia Bridge; the M5 Avonmouth Bridge; and the new A55 crossing in North Wales. So one is compelled to ask the Minister: why the difference of approach?
When the then Secretary of State for Transport—I cannot remember how many the Government have had—announced in July 1986 that a second bridge was to be built across the Severn, he at that time gave no indication that the private sector would be involved. All that was changed in July 1988 —yet another somersault by the Government—but at no time since has it ever been suggested, so far as I am aware (the Minister can put me right on that point) that the new crossing was to be provided solely by the private sector. The Bill is not framed in that way, but that is effectively what the Minister has said. So what caused the change of mind?
The standing conference—this is my fifth point under this heading—has persistently, rightly, but so far unavailingly, argued that there should be the possibility of a local inquiry before any toll order is made pursuant to Clause 9(5) whereby tolls may be revised other than in accordance with the RPI. It has also asked that the Secretary of State for Wales should be instrumental in making the toll orders. That may or may not be right. I merely put it forward as part of its argument. However I believe—if I may say so with respect—that it is less significant than the other points it makes and that I make on its behalf.
There is then the question of the debt. It is a debt of about £120 million accruing to the present bridge. The standing conference argues that that debt should be written off. I shall return to that point in a moment. I want to enlarge upon the issue of the local inquiry. It would be wholly in accord with precedent, not least the Severn Bridge Tolls Act 1965, and even more recently if the Minister would look at Schedule 2 of the New Roads and Street Works Act, which he took skilfully through the House, which contains such a
1044
provision. So why the difference? Why is the Minister not prepared to make the concession for which the standing conference has pleaded?
It would be helpful to the Secretary of State if he were to become aware, as a result of a local inquiry and not through the inadequate consultations to which the Minister has alluded, of the local circumstances and the impact of the proposed toll changes on the local community. Moreover, local people should not feel divorced from decisions that affect them vitally, but that would be the consequence of his ignoring this plea.
The Bill specifically takes away Gwent's existing statutory rights to make objections to proposed toll increases. That is in marked contrast with the fact that new circumstances affecting the concessionaire are to be taken into account. So, circumstances affecting the concessionaire will be taken fully into account but not the views of the local community. Why the difference of approach?
I turn next to the proposed toll increases briefly referred to by the Minister. I note immediately that in another place the Minister, Mr. Freeman, on 14th January at col. 642 of the Official Report, said:
"We do not seek to hide the fact that these tolls would represent a significant increase over existing levels".
He can say that again! The standing conference asserts that at 1989 prices the charge for cars between now and 1995 will increase by no less than 42.5 per cent. The position of heavy goods vehicles is even worse because in their case it will increase by 114 per cent. From 1992 to 1995 the proposed increases in tolls will, according to the estimates of the standing conference—the Minister may care to dispute this—amount to in the region of £100 million, in actual prices, more than the tolls would bring if maintained at their current levels. If the Minister wishes to dispute the calculations he is at liberty to do so. However, it would be helpful if—possibly by his silence—he could confirm the assertions.
One has to ask: what benefits will present users obtain in consideration of those increased payments? That is the essential point which the Minister must answer. It amounts to yet another impost on the local economy during a deep recession. Moreover, how will inward investment be enhanced by this state of affairs?
I turn to the outstanding debt issue. My understanding is that this is of the order of £120 million or will be at the start of the concession. If we look back to 1966, the debt on the completion of the bridge then was £14.4 million. The debt has grown primarily as a result of largely unforeseen maintenance costs amounting to £90 million, plus interest.
The House of Commons Select Committee agreed—at least on this point—with the standing conference in concluding that the debts should be written off. Here again, there is a precedent: the Avon Bridge on the M.5. There was no requirement there for capital and maintenance costs to be recovered from the users. No requirement has ever been made that the costs incurred by the entire United Kingdom motorway network should be recouped. However, the Government insist that the outstanding debt should be transferred to the concessionaire, adding to the

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pain on businesses and residents of the substantial increases in tolls on the existing bridge. That is a situation which will persist over two decades.
A reduction of the 1995 levels of no less than 20 per cent. could be achieved, according to the standing conference, if such writing off took place. One is entitled to ask how this could adversely affect the viability of the new crossing.
I wish to say a word about policing. Here again, I may be wrong but the Government are able to confirm or deny the position. My understanding is that the Home Office is looking to the Gwent Police Authority to discharge the responsibility for policing the bridge. In another place, the Minister of State argued that the Avon and Somerset police would maintain the motorway leading up to the existing bridge as well as the new approach roads on the Avon side on behalf of the Department of Transport. However, the facts are that the constabulary will police a smaller bridge in an authority double the size of that in Gwent. I ask the Minister whether that is reasonable.
I wish to ask the Minister a number of questions concerning the relationship between the Bill and the New Roads and Street Works Act. They may all be susceptible of a simple answer which I did not immediately observe. I may be obtuse; the Minister may be able to enlighten the House.
I notice that in the Bill there is no provision comparable to that of Section 5 of the New Roads and Street Works Act which relates to the transfer or termination of a concession. Does that section apply to this Bill, and thus not require repetition? If not, what is the situation? Similarly, Clause 10 deals with the application of enactments relating to monopolies. Is that provision subsumed effectively in this Bill? The same applies to Clause 11 dealing with the variation or revocation of the toll order.
It may be that the Minister will say that all these matters are dealt with by the 1991 Act and the provisions do not have to be repeated. If that is the case, why does Clause 26 specifically repeat the provisions of Section 15 of the Act?
I turn to the environmental impact assessment position. The Minister says that he understands that the assessment is not complained of by the Commission. I wish to know whether or not there is any possibility that the Commission might take exception to it, as I understand it has taken exception in 12 other cases. If there is any doubt about it, surely it would be right to try to clear it up as soon as possible by discussion with the Commission, rather than to await further consideration of it by the Commission. That does not mean that the Commission is necessarily right, but litigation could be injurious to the scheme. One hopes that consideration of the matter could clarify the position beyond doubt. If the Minister states that it is already clarified beyond doubt, the House will be satisfied. However, if there is a lingering doubt, then because of the urgency and as the whole House wishes to see the Bill proceed, it is right that the matter should be pursued with the Commission at an early date, even if the Commission has not yet mentioned it—if there is a scintilla of doubt that it may pursue the matter later.
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In conclusion, one may ask why, in the light of these powerful arguments—not all coming from the standing conference, although many do—the standing conference does not propose, as I understand it in Gwent in particular, to submit any further petitions to your Lordships' House. I do not wish to say anything out of turn, but I understand that that may be the case. The truth is that in a way a pistol is being held to the Commission's head because its overriding concern is the need to prosecute the building of the bridge with urgency. Delay of any kind will be inimical to that purpose.
I hope that the Minister will not say that my speech of 17 minutes constitutes a delay that is inimical to the building of the bridge. He is capable of that, I know.
Lord Brabazon of Tara: My Lords, it goes a long way towards it!
Lord Clinton-Davis: My Lords, 18 minutes beyond the Government's due time is not an undue length. The Minister spoke for almost that time anyway. The appeal that the standing conference makes at this late stage is for the Government to listen to what it believes is a powerful case; to engage in further consultation with it to try to meet some, if not all, the points that I have made. That is a perfectly reasonable view. I hope that it will elicit a positive response from the Minister.
6.8 p.m.
Lord Brabazon of Tara: My Lords, I do not know whether or not to say I am grateful for the noble Lord's response to my moving the Second Reading of the Bill. He started in the right direction by saying that he supported the proposals for the new bridge. He then, so far as I can see, attempted to pick holes in practically every aspect of the Bill. One wonders how it was that the existing bridge was built as a toll bridge in 1966 by the then Labour Government. It did not cease being a toll bridge between 1974 and 1975 under that Labour Government when there was every opportunity for them to stop it. I think it is entirely reasonable that it should continue to be a toll bridge. It is right that we have involved the private sector in the building of the bridge. As I said in my opening remarks, it is part of the Government's policy that we should involve the private sector in the provision of transport infrastructure when and where we believe it right.
The noble Lord asked me many questions and I shall attempt to deal with each and every one of them. He asked why tolls should be raised before the new bridge opened. Under the terms of the concession agreement the Severn River Crossing is required not only to finance the construction of the new bridge—at an estimated cost of £300 million—but also to take over responsibility for the outstanding debt of £120 million on the existing bridge, as I explained in my opening remarks. Half of the debt is to be paid at the start of the concession and the remainder, on which interest will be payable, is to be paid at the end.
If toll increases were deferred until 1996, SRC would be unable to meet its existing financing commitments during the early years of the concession

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and would be forced to increase its borrowings simply to finance the interest payments to which it is already committed. Those additional financing costs would have to be recouped from tolls during the remaining part of the concession with the result that tolls would have to increase fairly substantially from the levels indicated in the Bill. The noble Lord has already criticised those levels.
The consequences of postponing any increase until the opening of the new bridge would be that from 1996 the level of tolls for the ordinary motorist would need to be in the order of £4.70 rather than £2.85 as specified in the Bill. We consider that the phased increase in tolls currently envisaged would be more acceptable than a sudden and disproportionately steep increase in 1996. That conclusion was accepted by the Select Committee in another place following its consideration of a petition which had been deposited against the Bill seeking a deferral such as the noble Lord suggested.
The noble Lord asked why approach roads were not financed through tolls. The Government's policy is and has long been that users of major estuarial crossings that provide exceptional travel benefits should contribute to their costs. The only practical way of defining such a crossing is generally to consider that element which goes across the estuary concerned. Otherwise, there is no clear-cut way of defining limits of roads to be financed through tolls. Thus, for example, tolls are levied on the existing Severn Bridge but not on the adjoining sections of the M.4 which for most users effectively lead only to the bridge. Similarly, the new Dartford-Thurrock crossing is tolled but not the adjoining roads.
I agree with the noble Lord that this is in effect a monopoly situation and that there is no alternative way of crossing the River Severn other than a very inconvenient one. That is why the Bill provides clearly for the tolls to be linked to a formula set out in the Bill and why the concessionaire would not be allowed to charge whatever tolls he may wish to levy. Nothing in our announcement in 1986 precluded the choice of private finance.
The noble Lord referred to a matter of which I am well aware when he referred to the possibility of local inquiries into toll increases. Implementation of the tolling proposals will depend on parliamentary approval of the Bill. The Bill sets out a detailed method for fixing the amounts of the tolls. If Parliament were to approve that method, there would then be no justification for a local inquiry into the tolls subsequently calculated in accordance with that method. I can give an assurance that the Secretary of State for Wales will be involved in that process.
Lord Clinton-Davis: My Lords, one appreciates that the Secretary of State will be involved; but as regards the development of transport policy, we need increasingly to involve the public and obtain their acquiescence. It is that factor which is missing.
Lord Brabazon of Tara: My Lords, these entire proposals are of course subject to parliamentary approval. If this Bill is passed, the formula I have
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referred to will be adopted. That is a perfectly reasonable and democratic way of going about this matter.
In my earlier remarks I did not hide the fact that there would be higher tolls. The increase in tolls over the present level which these proposals entail is a direct reflection of the additional cost of providing the new bridge over and above the continuing costs of financing and operating the present one. At current prices the construction cost of the new bridge is some £300 million. The sheer scale of the undertaking which the new bridge represents should not be underestimated. The proposals from the Severn River Crossing company which the Bill embodies offered overall the best value for money of all those proposals submitted to the Government, whether publicly or privately funded. We therefore consider that the tolls now set out in the Bill offer the best practicable deal for road users who rightly want to see the earliest possible provision of improved links across the country. That is particularly important in view of the European dimension.
The tolls for heavy goods vehicles will be higher but we do not believe that the tolls for heavier vehicles proposed in the Bill will cause any real difficulty in practice. Given the higher operating costs of such vehicles, their operators will see significant benefits from the shorter journey times and distances offered by the new bridge, from the reduction in delays arising from congestion and from the much reduced risk of diversions in bad weather. Overall business must benefit from the greatly improved communications between England and Wales which the new bridge will offer.
As regards the writing-off of the debt on the existing crossing, the Government believe there is no case for writing-off the debt on the Severn Bridge irrespective of the planned provision of the new bridge. The Government's policy, as stated in the Government's response to the second report of the Transport Committee of another place in 1985–86, is not to accept any general necessity to write-off or discharge debts of such crossings where they are or can be made viable.
The Severn Bridge Tolls Act 1965 provides for the costs of the bridge to be recouped over a period of 40 years. Under the present tolling regime there is no reason to suppose that this would be impractical. Under the proposals set out in this Bill responsibility for paying off the outstanding deficit on the bridge would fall to the concessionaire who could recoup that cost from tolls levied on both bridges. As we already let a concession on this basis, there is no shred of evidence to suggest that what is being proposed is unreasonable.
As regards the argument of the noble Lord on the possible adverse effects of tolling on the Welsh economy, I should say that successive public inquiries into the effects of toll increases at the existing Severn Bridge have concluded that there is no evidence to suggest any material effect of such toll increases on the South Wales economy. Tolling costs in practice represent a small proportion of industry's costs. As I

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have said, the new crossing will bring with it the potential for considerable savings in time as well as in distance for many journeys.
It is of course largely as a result of the economic developments in Wales over recent years that there has been traffic growth which has justified the second crossing we now intend to provide. It is self-evident that the new crossing will bring with it the potential for farther increased investment and economic growth, particularly in South Wales. As regards the environmental statement and the European Commission, we do not expect the Commission to take exception to the environmental statement for this project, not least because—as I understand it—such a statement is not required for projects promoted through primary legislation. However, the Government have felt it to be their duty to produce a statement for a project of this significance and have met the requirements of the directive fully.
I now turn to the relationship with the New Roads and Street Works Act which I referred to in my opening remarks. There is no provision in this Bill which replicates Section 5 of that Act although Clauses 19 and 20 make certain provision for termination. Section 5 allows a concession to be assigned with the consent of the Highway Authority to a new concessionaire. However, in this case the position is complicated by the transfer of some of the staff of Avon County Council to the concessionaire. If only to protect their interests we do not believe it would be right for the concession to be freely transferable to a new concessionaire. Sections 10 and 11 of the New Roads and Street Works Act refer to monopolies. As the noble Lord suspected, the provisions of this Bill make it unnecessary to repeat the terms of Sections 10 and 11 of the New Roads and Street Works Act. As I have already said, we recognise that the Severn crossing constitutes a monopoly and the Bill would control the tolls on the crossing to protect the interests of the road user.
Lori Clinton-Davis: My Lords, before the Minister sits down, can he explain why Clause 26 replicates Section 15 whereas the Minister resiles from that position in relation to other matters? I do not understand why it is necessary to replicate that in one particular case when it is not necessary in other cases.
Lord Brabazon of Tara: My Lords, I do not have the answer to that question. The noble Lord will have to wail until Committee stage when we shall no doubt deal with the Bill clause by clause. In the meantime I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Select Committee.
Lord Brabazon of Tara: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That if a Bill in the same terms as those in which the Severn Bridges Bill stood when it was brought to this House from the House of Commons in this Session of Parliament is brought to this House from that House in the next Session—
(a) the Bill shall be deemed to have been read the first and second time; (b) the Standing Orders of the House
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applicable to the Bill, so far as complied with in this Session, shall be deemed to have been complied with in the next Session; and (c) any petitions deposited against the Bill in accordance with the order of the House of 3rd July 1991 shall be taken to be deposited against the Bill in the next Session.—(Lord Brabazon of Tara.)
On Question, Motion agreed to, and it was ordered that a Message be sent to the Commons to acquaint them therewith.

Social Security Amendment (No.2) Regulations (1991)
6.20 p.m.
Earl Russell Earl Russell rose to move to resolve, That this House calls on Her Majesty's Government to withdraw the Social Security Amendment (No. 2) Regulations (1991) (1991 No. 1878, amended by No. 1950), and to reintroduce them with a commencement date which allows Parliament an opportunity to consider them.
The noble Earl said: My Lords, August is a bad month for governments. Indeed, one sometimes imagines that they experience a kind of rutting season—it becomes dangerous to go near them. What is done in August is particularly in need of parliamentary scrutiny. There is no scrutiny in this House during August. There is a great deal less scrutiny in the press than there usually is. By Parliament's wish, regulations may come into force without waiting for a parliamentary Session. In fact, in August we are not very far away from legislation by decree.
The regulations to which I draw the attention of the House were made on 19th August. That itself is ground for scrutiny. They were to come into effect on 11th September but on 30th August the Government suddenly announced that instead the regulations were to come into effect on 31st August—the next day. That is a fact to which the attention of this House must be drawn. I placed this Motion on the Order Paper in order to provide an opportunity for scrutiny.
This matter raises some highly complex issues with implications which go considerably beyond the regulations themselves. It has produced a very long and tangled story in which perhaps the only heroes are the Social Security Advisory Committee.
The rights and wrongs of the matter are by no means all on one side. In their present form the regulations are very much better than they were before they went before the Social Security Advisory Committee. I have brought the regulations before the House in the form of a Motion rather than of a Prayer for the sake of flexibility but it is not my present intention to push the matter to a Division.
I fear that I shall have to go back a little to explain the context of the issue because it is a long story and if I do not tell it I fear that I may be unfair. The story goes back to the Ministry of Social Security Act 1966 which created a duty, placed first on the Supplementary Benefit Commission and then transferred to the Secretary of State, to care for the welfare of a potential claimant. It said that they:

1051
"shall exercise the functions conferred on them by this Act in such manner as shall best promote the welfare of persons affected by the exercise thereof".
In fact, they were bound not merely to respond to claims but to find entitlement and to bring people's attention to their entitlements. That duty was brought to an end in 1988. We are arguing now about claims to arrears arising from the Secretary of State's alleged failure to discharge that duty before 1988.
At first, all such claims were caught by the rule that arrears were not paid beyond 52 weeks save only for the very cumbrous procedure of late appeal which is too cumbrous for many of the claimants concerned. In 1985 the Government were criticised on this subject by the Ombudsman and therefore in 1987 introduced Regulation 72, which the regulations before us today amend. The 1987 regulation introduced an unlimited right to arrears if those arrears were due to an error by the department or to a material fact which the claimant was not then in a position to cite—say, for example, the claimant was suffering from AIDS, which had not then been diagnosed.
That of course led to a good deal of work by welfare rights groups drawing people's attention to entitlements and asking them to put in claims. It was to be expected that that would be so. In their original submission to the Social Security Advisory Committee the Government described that as manipulation. It may perhaps have been so in some cases, but in general I prefer the description of the Social Security Advisory Committee itself:
"the number of applications for review, whilst it creates additional work for local offices, may simply be a measure of use rather than 'manipulation' of the provision".
In other words, it may have been used because it was needed.
The Government proposed to deal with the situation in which welfare rights groups were putting forward claims by cutting out past entitlement to national assistance and supplementary benefit altogether from the scope of the regulation. The Social Security Advisory Committee, in an excellent report, was very firmly and quietly critical of that proposal. In paragraph 23 of its report it said that:
"the numbers of reviews being sought is in itself not a valid reason for amending the regulation … this is likely to be an indication of the prevalence of such errors".
The Government retreated and offered us instead the regulations which are now before us. To summarise the effect of the regulations, in what I hope will be agreed words, I should like to use the words of the Secretary of State in his foreword and response to the Social Security Advisory Committee report. He said:
"The effect of this amendment is to spell out clearly the specific situations in which unlimited arrears of benefit are payable. These circumstances are—where, at the time of making the decision under review, the adjudicating authority had before it specific evidence relevant to a claim but failed to take it into account; or, where a member of staff of the department failed to submit a document or record containing evidence to the adjudicating authority which determined the question; or, where the evidence on which the adjudicating authority would have relied to review and revise the decision was not produced at the time of review because it did not exist but it was produced as soon as practicable thereafter".
That is a change in the position but not nearly as
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great a change as the original regulations which were put before us. In effect, what it does in relation to the Secretary of State's discharge of his duty is to change the burden of proof. It places the burden of proof on to the claimant to show that the Secretary of State failed to discharge a duty which he could have discharged. It restricts the right to unlimited arrears, in effect mainly to cases that result from an error on a matter already on file. It does not deal with what used to be the duty to make the potential claimant aware of what he was entitled to claim.
That is perhaps particularly significant in the case of one category about which there has been a great deal of discussion, the category of mental patients, who are not always in a good position to understand and claim their rights. The Government say that their next friend might have done so. That is so. I do not know how many Members of the House have been next friend to a mental patient; it can be a rather stressful situation involving a certain amount of living from hand to mouth. Not everyone in that position is able to shoulder the burden of reading through large numbers of social security regulations, so there is a problem here.
That is where the matter rested until on 16th August Strathclyde Regional Council placed an advertisement in the Daily Record submitting a standard form which it invited claimants to send into the department. By leave of the House I should like to quote this because I think that, if I do not, my noble kinsman will do so and I think that we should stipulate it. The form states:
"Please review the amount of Supplementary Benefit paid to me prior to 11 April 1988. Would you please review on the grounds that all additional requirements paid to me:- (i) Should have been paid at all times that I was in receipt of benefit, (ii) Should have been paid at higher rates. I also wish to be assessed for all additional requirements which could have been paid at all times".
And so it goes on. It is what Perry Mason would have described as a fishing expedition. It is a case of fairly extreme entitlement thinking, probably natural rights-based, without any specific attempt to show any specific claim. It runs rather as if to say, "I do not know what I am entitled to, but I am sure that I will fight for it anyway".
I can see why the Government were irritated, to put it no higher, by that advertisement. As I understand it, they said that there were 40,000 claims coming in under this. I do not know whether that is right or, if so, how that was known. I can see that this was a considerable burden on the local office, but whether Strathclyde's fault exonerates the Government from having brought the commencement date forward is another question. After all, "Give us back our 11 days" is a famous political slogan. It may perhaps be coming back.
It is a great number of claims, but it is no more than the number of people that present economic policies are putting out of work every two weeks. It is not enough to constitute a national emergency. Among those claims that were extinguished by the decision to bring forward the order, there may perfectly well have

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been some which were genuine and entitled to justice. So I do not defend Strathclyde Regional Council, but I do not defend the Government's response to it either.
We have here a clash between the irresponsible and the arbitrary. It is this area of the clash between the irresponsible and the arbitrary to which I want to draw the House's attention. There is a problem about how far the entitlement to arrears should go back. I noticed that the department stressed throughout that destruction of records was impeding payment of late arrears. I wonder whether this is a case of the tail wagging the dog. The preservation of records is a matter of considerable judicial importance. Although I appreciate that storage of records requires space and space costs money, if a policy of destruction of records interferes with the doing of justice it may need looking at.
I am also not entirely happy about the placing of the whole duty of putting forward a claim and discovering an entitlement on the claimant. It follows from the use of common law concepts in this field but, as the noble and learned Lord, Lord Scarman, argued in his Hamlyn lectures, it is a field in which it is difficult to use common law concepts. They do not always fit. I wonder how many of us here now are capable of advising accurately and off-the-cuff on everyone's entitlement to social security benefit. I am sure that I am not. Many of the people with whom we are dealing are not capable of undertaking that burden. I wonder whether there is a case for doing something about that.
By dealing with the matter in the framework of the claimant, the Government are going into a common law, adversarial framework—but then of course they are making themselves a party which makes it more unfortunate that they should be the sole judge. Welfare rights groups will inevitably have a role in this field. I wonder whether there is a case for something a little more bound by the concept of the officer of the court. Very tentatively, I ask us to think whether there is a case here for a figure perhaps on the lines of the Official Solicitor. There would be a good deal of work to be done. It might make justice easier to do.
I am also a good deal concerned by the question raised by Professor Ruth Lister in a letter to the Independent last Saturday; namely, by what constitutional principles the social security field is to be governed. It is difficult to introduce common law concepts. Because we depend almost entirely on statute and regulation, the powers of parliamentary sovereignty here are rather more unchecked than they are in many other places. In his Swinton lecture Mr. John Patten tells us that it is the duty of Parliament to control the Executive; but do we? I know that the Executive has made many concessions in this field. If you talk about control, you are talking about change following a government defeat. I can think of two in this field since 1987: the cost of residential homes and the Henry VIII clause in the Statutory Sick Pay Bill. It is not a glorious record. As my noble kinsman knows, I find Mr. Patten's view congenial. I have endeavoured to believe him, but that makes me feel like Matilda's aunt.
I wonder whether an adequate power of control exists here. If this power to bring forward the commencement date is improperly used in the middle of August, I do not see how Parliament is to control it. I appreciate that emergencies will happen in the middle of August and they must be reacted to. I should like to ask the House to consider whether, if the Government wish to bring in a regulation in August with less than the statutory 21 days' notice, the regulation should thereby automatically be made affirmative. The Government may have a case, in which case they would have to come here at the end of the Recess and tell us so. I beg to move.
Moved, That this House calls on Her Majesty's Government to withdraw the Social Security Amendment (No. 2) Regulations (1991) (1991 No. 1878, amended by No. 1950), and to reintroduce them with a commencement date which allows Parliament an opportunity to consider them.—(Earl Russell.)
6.37 p.m.
The Countess of Mar: My Lords, I thank the noble Earl, Lord Russell, for asking your Lordships to consider the effects of the Social Security Amendment (No. 2) Regulations. They have the effect of limiting a claimant's valid title to benefits to a period of 52 weeks in arrears instead of from the time when the title arose. That seems to be yet another example of penny-pinching which will affect most those individuals who need most.
Although I understand the Government's objections to the activities of those welfare rights workers trawling for clients who may or may not be entitled to particular social security benefits, many late claimants are found by social workers and others concerned with welfare work in the course of their normal duties. Some 95 per cent. of late claims for severe disability premium are from people with mental handicap who are unable to act for themselves. Their handicap will have been of long standing and they will have failed to claim additional requirements under supplementary benefit rules. Some will not even have claimed supplementary benefit. Unless they happen by chance to be found by someone who is conversant with the social security minefield and who is willing to represent them, they have no means of recovering the benefits to which any reasonable person would say they have a valid claim, or of knowing to which benefits they are entitled. In many cases social security officers have failed to ensure that such claimants or their representatives are made aware of the benefits to which they may have a claim. In other instances material facts will have been withheld unwittingly by potential claimants.
I know of a mentally handicapped man who is now aged 39. He lives with his widowed mother who is Polish, as was his father. There is a language problem and his mother is understandably fearful of authority and of the power of DSS officials. She sees the department as part of the state machine. He was awarded non-contributory invalidity benefit which became severe disability allowance when he was 16 in 1968. His mother asked whether or not he was entitled to any other benefit and was told "no" by the social

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security officer. She did not challenge it as she was afraid that his SDA would be taken away. Thus, he has never received supplementary benefit or income support. The situation came to light when a social worker was talking to him at an adult training centre. Because his claim for arrears did not become apparent before the magic date of 30th August 1991 he will be entitled to only 52 weeks' arrears. The effect of this order is to prevent the correction of an accumulation of errors over a long period. The man and his mother cannot be blamed for the failure, and it would be difficult to pin any blame on the original social security officer. A mistake has been made and should be rectified. Would it not be fair and sensible to allow mental handicap as a continuous cause for late claim?
Very soon after the rules for the receipt of attendance allowance were changed last year to enable children between the ages of six months and two years to receive it, the legal basis of the previous restriction was challenged. The commissioner ruled that the restriction was unlawful. As a result there will be a number of claims for attendance allowance to be backdated. Some of the children concerned are now 15 or 16 years old. Are their claims to be disallowed as out of time because of these regulations? Similarly, I understand that the law was wrongly interpreted for some claims for severe disability premium from 11th April 1988. Surely, if the law is wrong that should be a valid reason for a late claim. I suspect that if such a favourable decision was awarded to those who pay income tax the Government would not step in to time-limit it.
I have read the report of the Social Security Advisory Committee on these regulations. It is of the opinion that
"… the proposed amendment would needlessly complicate the proper access to arrears for genuine cases …"
While it accepts that Regulation 72 of the Social Security (Adjudication) Regulations is not precise, this is not the way to amend regulations; it is a matter of adjudication.
I hope that the noble Lord the Minister will make the Secretary of State aware of the feelings of your Lordships and try to withdraw the regulations.
6.42 p.m.
Lord Carter: My Lords, the House will be grateful to the noble Earl, Lord Russell, for bringing this important matter to the attention of the House, combining as it does concern about the welfare of claimants for social security benefits and concern about the constitutional propriety of the way in which the DSS and the Benefits Agency have behaved. The background has already been explained extremely well by the noble Earl.
I begin by recalling the words of the Prime Minister in March. The Prime Minister said that he wanted citizens to have support from within the state to ensure that users of public services received the rights and the quality of service to which they were entitled. That early glimpse of the Citizen's Charter did not last
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awfully long for the mentally handicapped and disabled people who have and will lose out because of these amended regulations.
I am thoroughly confused by the extraordinary business of the two press releases from the Department of Social Security, the first issued on 21st August. It was all very clear and straightforward. The heading was:
"New regulations on benefit backpayment after official error",
and the press release explained the matter extremely well. It said it was intended to,
"amend the provisions for the payment of unlimited arrears of social security benefits where there has been an official mistake".
It explained the circumstances in which this could happen—for example,
"where an adjudication officer has overlooked or misconstrued a provision in legislation or caselaw".
Does this mean that mentally handicapped and disabled claimants such as those in Durham and elsewhere who have been paid substantial arrears of benefit will still be able to apply and receive those arrears and, if so, can the Minister explain the current procedure for them to do so?
The second press release on 30th August (nine days after the first one) carried the heading:
"Minister acts to prevent abuse of overpayment regulations".
The Minister, Mr. Scott, said:
"We have decided to curtail the usual three weeks grace before the regulation becomes law to prevent widespread abuse of the system".
He went on to state:
"The department has a duty to ensure that the proper delivery of service to those in need is not impeded by such irresponsible campaigns".
Are the Government really saying that in nine days they have suddenly discovered the possibility of widespread abuse? Will the Minister in his reply be good enough to define that abuse—a kind of nine-day wonder—or was it perhaps invented for some other reason? It is a bit hard to follow.
In the Glasgow Herald of 29th August (only eight days after the first press release) it was reported:
"Strathclyde region's social work department has received the biggest response yet to a local authority welfare rights campaign in Britain … A spokesman for the DSS said that additional resources were being prepared to assist with the processing of the additional claims. He added, 'We generally welcome anything which assists our customers and there clearly is nothing wrong with what the region is doing'".
That was a reference to Strathclyde's social work department, which, after all, is part of the public sector. Who was right—the DSS spokesman on 29th August or the Minister on the 30th?
The reasons advanced by the DSS are pretty thin. Mention has been made of the so-called abuse, and perhaps the Minister can tell us about that when he replies. We are told that case records have been destroyed. Perhaps the Minister can tell us how long the Inland Revenue keeps case records. We are also told that there will be insufficient expertise within the department in dealing with national assistance and supplementary benefit. If that is so, how will the proposed appeal system work? That point was put extremely well by the Social Security Advisory Committee in paragraph 22 of their report:

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"We agree with the representations that if enough evidence and expertise exists to deal with a late appeal, it must also be capable of dealing with a review. We do not think it is acceptable that appellants should be faced with the difficulty of making an appeal in order to receive the arrears to which they are entitled. This would be a return to the pre-1987 situation about which the Parliamentary Commission for Administration had expressed concern".
One could also ask: if there is insufficient expertise to deal with these problems, what is the position of the people still receiving transitional protection under the 1986 Act? Presumably, the expertise exists—we hope it does—to deal with them.
The second and main point is the constitutional point about the Government's method of laying and amending the regulations. As we know, since March there have been consultations by the department. There was no need to delay the regulations in the recess, unless the department was thoroughly ashamed of them. There was certainly no need for the undignified scramble between 21st and 30th August. I fear that the scramble had one purpose only—to avoid the DSS being embarrassed by the revelation of its past mistakes. The effect was to prevent a substantial number of mentally handicapped and disabled people from obtaining the benefits to which they were entitled.
The other constitutional point is the role of the Benefits Agency. It now seems to be the practice of senior officials to make policy rather than interpret and administer it. We have the case of Mr. Michael Bichard of the Benefits Agency in his letter of 21st August and, more recently, the case of Mr. Duncan Nichol on the reform of the National Health Service. I should like to quote from the letter of 21st August from Mr. Bichard, chief executive of the Benefits Agency, because it seems to me to be a classic example of the bureaucratic mind at work. Referring to the change in the regulations, he writes:
"This is a major achievement for the Agency, working in co-operation with the Policy Group and the Office of the Chief Adjudication Officer, responding to the views of and pressures on local services faced with mounting requests for review following local take-up campaigns … I am sure that the news will be welcomed by all concerned within the Agency. I am especially pleased that the clear needs of local services have been met in such a way".
There is not a single word in that letter about the effect of the changes on claimants.
I referred earlier to the Citizen's Charter. It is interesting to see what it says about the Benefits Agency. The very first sentence reads:
"The Agency was set up to improve radically the delivery of social security benefits".
Do not tell that to the mentally handicapped and disabled people who will lose out because of this change in which the Benefits Agency rejoice.
I should also like to ask the Minister just how many people will be affected by these changes. Presumably the department has an estimate and it would be extremely helpful to the House to know it. I am afraid that this is yet another example of institutional meanness which now seems to be the departmental doctrine of the DSS.
The regulations and the change in the regulations are clearly intended to put the avoidance of inconvenience and embarrassment for the department before the needs of the mentally handicapped and
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people with disabilities. The Government have produced some tawdry and illogical reasons for the change. Welfare rights organisations and local authority and social services departments have been described as irresponsible for helping claimants to know their rights and exercise them. That is just one more reason why we so badly need a change of government.
6.50 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): My Lords, perhaps I may start by saying that it has been a very interesting debate, as debates always are in these very complicated social security matters. However, it might be helpful for me to go into some detail, as did my noble kinsman, and explain first how Regulation 72 of the adjudication regulations initially came to be enacted and also how it operates in the administration of social security benefits.
Regulation 72 was originally introduced in April 1987 to provide for the unlimited payment of arrears of benefits in cases where an error in the determination of entitlement to benefit had been made by a departmental official. Until that time the only statutory means by which payments of arrears in excess of the then statutory limit of 12 months could be made was by means of a late appeal to a social security appeal tribunal. In his annual report for 1985, the Parliamentary Commissioner for Administration had criticised that situation, whereby claimants had to go through the cumbersome late appeals procedure to obtain the full arrears of benefit to which they were rightfully entitled, where these exceeded the statutory 12 month limit. The then permanent Secretary to the department, in giving evidence to the Select Committee of the PCA, agreed that this was not a situation which could be defended, particularly where the only reason that benefit was not paid originally was maladministration on the part of the department.
Accordingly, the Government's intention in enacting Regulation 72 was to facilitate the unlimited payment of arrears of benefits in cases of clear official error to which the claimant had not contributed or where fresh evidence relating to a particular decision had come to light more than 12 months after a decision had been made and this evidence was produced to an adjudication officer as soon as reasonably practicable. From 6th April 1987 Regulation 72 effectively redressed the balance between the respective positions on overpayments and underpayments.
In April 1988, supplementary benefit was replaced by a new benefit, income support, which was designed to target help more effectively at specific client groups, such as the elderly, the disabled, families and lone parents. It had long been apparent that supplementary benefit had become almost impossible to administer properly, based as it was on a composition of entitlements to separate additional requirements for items such as heating, laundry, dietary costs, and so on. All those additions had to be raised individually and entitlement to each established upon the satisfaction of a variety of regulations. During the 12

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months following the introduction of income support it was still possible for a claimant to establish entitlement to supplementary benefit additions under the normal review provisions. In some cases, this had the effect of increasing the amount of benefit due by way of transitional protection which was paid with income support. After that 12 month period had elapsed, any payment of arrears of supplementary benefit could only be made under the provisions of Regulation 72.
Some while after, it became apparent that welfare rights groups were being successful in convincing social security appeal tribunals to interpret Regulation 72 more widely than was originally intended, relying on the argument that it was the duty of the staff of the department, acting on behalf of my right honourable friend the Secretary of State—I shall return later to the question of the duty of the Secretary of State which my noble kinsman raised—to draw to a claimant's attention the possibility of entitlement to additional requirements to supplementary benefit. The Secretary of State discharged his responsibility in this respect by publicising in leaflets and handbooks the availability of benefit to potential customers.
Because this problem lay principally with supplementary benefit and its predecessor national assistance, it was decided originally that any amendment to the regulations should relate solely to those benefits. Therefore the draft amendment regulations which were put before the Social Security Advisory Committee—my noble kinsman's heroes in this saga—on 15th March 1991 proposed that supplementary benefit and national assistance be removed from the ambit of Regulation 72. The effect would have been effectively to preclude the payment of unlimited arrears for those two benefits—even in cases of official error, although such claimants could still receive full payment of arrears through the late appeals procedure.
Following consultation, the committee issued its report, in which it recommended that the amendment should not be proceeded with in its proposed format since it discriminated against genuine cases of official error and tipped the balance in favour of the department, which continued to be able to recover unlimited overpayments of benefit. Instead, the committee recommended that, if indeed an amendment were necessary, this could be better achieved by amending the wording of Regulation 72 to make it clearer which cases it was intended to cover.
The Government accepted those recommendations—my noble kinsman put it in a slightly less kind way and said that the Government retreated, but I would say accepted the recommendations, which the Government have every right to do—of the Social Security Advisory Committee and accordingly revised regulations were brought forward.
Those revised regulations were in somewhat different form from the original draft regulations sent to the Social Security Advisory Committee because they also addressed the question of whether or not Regulation 72 could operate retrospectively. Some doubt had been cast on this issue by several decisions
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of the social security commissioners who took the view that Regulation 72 could not provide for the payment of arrears of benefit relating to any decision made before the date on which the regulation itself became effective, that is, 6th April 1987. This was not the intention of Regulation 72 and would have prevented the department paying arrears in situations where it had originally intended that they should be paid. The revised amendment regulations were sent to the Social Security Advisory Committee who accepted that a further reference to them was unnecessary, since the revised amendment was a direct response to its earlier report and was not a proposal so different that it would have required a further reference.
The amendment regulations were therefore laid on 21st August together with the committee's report. They preserve the original policy intention of providing for unlimited payments of arrears of all benefits in cases of official error and they do not, as the noble Countess, Lady Mar, said, limit claims to 52 weeks. In addition, they make it clear that the new Regulation 64A is also wholly retrospective and applies all the way back to the first date on which an official error occurred. In simple terms, the regulation provides the facility for the department to correct official errors beyond the normal 12 month period to ensure that a claimant receives all the benefit that he should have received in the first place had an official error not been made.
In more specific terms, the new regulation provides for unlimited arrears to be payable in the following circumstances. Again, I hope that the House will bear with me if I quote the introduction of my right honourable friend the Secretary of State in his response to the Social Security Advisory Committee, as quoted by my noble kinsman. The circumstances are as follows: where, at the time of making the decision under review, the adjudicating authority had before it specific evidence relevant to a claim but failed to take it into account; or where a member of staff of the department failed to submit a document or record containing evidence to the adjudicating authority which determined the question; or where evidence on which the adjudicating authority would have relied to review and revise the decision was not produced at the time of the review because it did not exist but it was produced as soon as practicable thereafter; or where an adjudication officer has overlooked or misconstrued a provision in legislation or caselaw.
Lord Carter: My Lords, this point is central to the argument. If the officer at the time failed to tell the potential claimant that he was entitled to the additional payments for laundry, heating and so forth, is that an oversight or a misinterpretation and would the claimant therefore now be able to make the claim for arrears of benefit?
Lord Henley: My Lords, if the adjudication officer overlooked or misconstrued a provision in legislation or in case law, yes, that would be the case. But the noble Lord is trying to suggest that the duty on the officer at the time was to act in an inquisitorial manner in obtaining information. I shall refer to the duty of

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the Secretary of State to promote welfare. Obviously that duty is exercised by the Secretary of State's officers in the local offices.
Before I deal with that point I wish to say a little about the allegations by my noble kinsman that the regulations change the burden of proof. I do not believe that that is the case. Where a review is requested, the burden of proof always falls on the person seeking the review to show that the conditions for a review are satisfied. Even under the original Regulation 72 it was a requirement that neither the claimant nor anyone acting for him contributed in any way to the mistake or error.
I turn now to what will obviously be fundamental to my noble kinsman. It is the question of the Secretary of State's welfare role and his exact duties. My noble kinsman correctly referred to the obligation to act—I believe that he stated that it was in the 1966 Act; my advice is that it was in the 1976 Act—in such a manner as shall best promote the welfare of persons affected by the exercise of those functions. Our interpretation of that was that it requires the Secretary of State or his officers to provide a prompt, accurate, courteous and humane income maintenance service. That includes assisting a minority of claimants in the management of their finances and, wherever possible, offering to claimants who appear to have personal, social or health problems advice on an appropriate agency from which they might obtain help or to which referral might be made on their behalf, normally with their agreement.
I do not understand that—and that is why I used the word "inquisitorial"—as requiring the officers of the department to act in an inquisitorial manner. They were expected to relate to situations as presented to them and to the needs for prescribed additional requirement additions. I suspect that the noble Lord, Lord Carter, will not accept what I have said, but I do not understand the duty as going as far as he claims.
I have explained what we have done in bringing forward the existing provisions of the previous legislation, Regulation 72, in a more specific format. I believe that it makes the position on unlimited payment of arrears clearer for claimants and in particular for those adjudicating on requests for reviews of earlier claims.
I know that concern has been expressed about the comparative positions between arrears and overpayments. I believe—I am sure that even the noble Lord, Lord Carter, will accept this—that the amendment puts both issues on the same footing. An overpayment of benefit can be recovered only from the earliest date from which there is evidence to support the overpayment decision. Equally, the amendment provides that unlimited arrears of benefit shall be payable from the earliest date from which there is evidence to support there having been an official error which affected entitlement to benefit.
Finally—because there has been some feeling expressed on the matter—I must explain the circumstances about the regulations being laid in August. I do not take the point of my noble kinsman that possibly we should sit into August in order to prevent all governments ever issuing—
Earl Russell: My Lords, with the leave of the House, I did not make that point. I am a little more reasonable than that, I hope.
Lord Henley: My Lords, I accept that my noble kinsman has no desire whatever to sit into August. The reason that the amendment regulations were originally laid in August is that they were ready then. As your Lordships know we originally put some provisions to the Social Security Advisory Committee in March. Those were not acceptable to that committee and, as my noble kinsman put it, we retreated, or, as I put it, we reviewed our position and put forward a further set of regulations which were finally ready in August.
The original regulations that we laid on 21st August would have become operative on 11th September. As has been pointed out, they were revoked and relaid on 30th August to come into effect the following day. Even before the original amendment regulations were laid, the Benefits Agency had become aware of campaigns launched across the country, although mainly in Scotland and the North East. My noble kinsman mentioned an advertisement from Strathclyde Council. I am grateful for his quotations from what he described as a fishing expedition. Those campaigns encouraged claimants to submit general applications for review of their entitlement to supplementary benefit back to the first date of entitlement without specifying any grounds for review or details as to the nature of the purported official error.
Each application for review has to be considered in depth, which in itself is a time consuming process, in particular with the numbers involved. Furthermore, since supplementary benefit was a highly complex benefit with which, with the passage of time, few staff are now familiar, only the most experienced staff are properly equipped to determine whether people applying for a review of their entitlement to benefit have been underpaid and if so by how much.
The House should appreciate that the resources available to the Benefits Agency are finite. The large number of non-specific requests was already threatening managers' ability to provide an adequate service for all their customers in certain parts of the country. A further flood of applications would prove very difficult to handle. Accordingly, it was decided that, to ensure that the Benefits Agency continued to provide an acceptable service to all people on benefit, the step should be taken of revoking and relaying the amendment regulations on 30th August to come into effect from 31st August. I should point out that any requests for review which have arrived in local offices after 30th August would fall to be decided under the provisions of new Regulation 64A. However, I cannot stress enough that all genuine cases of official error, whether with regard to the mentally handicapped in Durham—as referred to by the noble Lord, Lord Carter—or wherever else, will still receive full payment of arrears under the new provisions as set out in Regulation 64A.
Lastly, I refer to the allegations made by the noble Lord, Lord Carter, that Mr. Michael Bichard, the chief executive of the Benefits Agency, was making

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policy and that it should properly have been Ministers making policy. I totally refute what the noble Lord said. Perhaps I may quote from a letter sent only yesterday, 14th October, to the noble Lord's honourable friend, Mr. Michael Meacher. It was sent by my right honourable friend the Secretary of State. The penultimate paragraph on the second page states:
"You refer to a letter from the Chief Executive of the Benefits Agency. The Agency and its Chief Executive do have a responsibility to draw the attention of DSS Headquarters and Ministers to operational problems which have policy implications. This responsibility is clearly set out in the Agency's Framework Document (paragraphs 4.7 and 4.8) and the Chief Executive behaved entirely properly. His subsequent letter to staff drew attention to the fact that the operational concerns of local offices had been heeded".
I can only stress that the decision to change the regulations and to bring them in on 30th August, having effect from 31st August, was made quite properly by Ministers. It is Ministers who take responsibility for that. Although my noble kinsman asked that such regulations should be affirmative, even under the negative resolution procedure he has found means by which we can debate them. We have had an interesting debate on that point and I hope that I have dealt with most of the matters raised.
There is little to be gained from revoking the amendment regulations. I hope I have made clear that we took full account of the recommendations—we did not retreat from them—of the Social Security Advisory Committee. Any official mistakes can still be made good where the evidence supports that. The treatment of underpayments is fully in line with that of overpayments. Accordingly, I hope that the noble Earl will not press the Motion.
Earl Russell: My Lords, I thank my noble kinsman for the care and thought which he put into that reply. This debate has been a search for a meeting of minds. We have gone a long way towards that. On a large proportion of the facts, we are able to stipulate, and I am encouraged by that.
However, there is still a significant difference in my noble kinsman's underlying outlook and approach and my own. That was demonstrated during the rather interesting and technical debate about the meaning of the original Regulation 72. My noble kinsman said it dealt only with clear official error and he did not see it as applying also to cases of neglect of duty. I do not wish to press my view on that because the point is complicated. As I understand it, commissioners' decisions have been on both sides.
I found interesting the difference of approach here. The noble and learned Lord, Lord Scarman, drew attention to that difference of approach in social security matters. He said that the administrator has an administrative purpose, the citizen, a legal objective. My noble kinsman has an administrative purpose which he attempted so far as possible to pursue with benevolence and reason. It is not quite the same thing. There is a real difficulty in securing a meeting of minds. For example, my noble kinsman mentioned finite resources, which is a real point. I do not often hear finite resources invoked as a reason for not doing
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justice. The fact that my noble kinsman invoked that illustrates that he sees what he is doing as administration rather than justice.
I said that I would not press the point about the meaning of Regulation No. 72. However, I am interested in the reactions when it comes into question. My noble kinsman said that the regulation had been interpreted more widely than was originally intended. Therefore it was proposed to alter that because that was not the Government's intention. That is not exactly a legal plea. It illustrates the extent to which we are moving away from legal thinking and the degree to which the department is insisting on its original intention rather than allowing a body of case law to be built up by which decisions may be controlled.
My noble kinsman had a transparent assumption that the Government's intention would prevail rather than a legal construction of the words of the regulation. Listening to my noble kinsman, I believe that Acton exaggerated. My noble kinsman is clearly not corrupted absolutely but I begin to wonder whether he has absolute power and whether that is good. Nevertheless, I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

South Africa: Sanctions Policy
7.15 p.m.
Lord Hatch of Lusby Lord Hatch of Lusby rose to ask Her Majesty's Government whether they agree that sanctions would influence the South African Government to make progress towards a non-racist and democratic society.
The noble Lord said: My Lords, as some of your Lordships will know, I spent two months in South Africa this summer for the first time since 1959. What then were the major changes that I saw? There were no pass laws, the Immorality Act and Mixed Marriages Act had been repealed; the Group Areas Act was repealed; the Land Act was repealed; and the Population Registration Act was repealed. There was decided progress. However, without doubt there was a clear indication that apartheid is not dead, and one wonders how long it will take until it is finally killed off.
I talked with Nelson Mandela, Walter Sisulu, Oliver Tambo and Cyril Ramaphosa. Although distinguished international figures, not one has a vote in South Africa, in his own land. The Land Act has been repealed. Those Africans who were pushed off the land and whose land was occupied by the whites are still off the land and there are no plans for them to return to the land of their ancestors.
Wealth distribution is, if anything, growing worse. The gap between white and black as regards the provision of social services, disposable income, infrastructure and the quality of life is very much the same as I saw it to be 40 years ago. One hears that the Bantu Education Act no longer exists and that there is now equality in education. Mixed schools, colleges and universities are permitted. When I was in Cape Town two months ago a little eight year-old coloured girl was denied access to three schools because her skin

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was too dark. In fact, only when a large majority—85 per cent. of the white parents in a school—approve of desegregation can non-Europeans be admitted to those schools.
As I have insisted in this House before, certain apartheid laws and the legalisation of long-standing social discriminatory practices have been repealed; and we welcome that. However, let us not delude ourselves because it it not simply apartheid—a word only invented in 1948—that the majority of the South African population is determined to extirpate. The people are not going back to the conditions of 1948. They are looking for and demanding a truly non-racial nation.
The African National Congress is totally pledged to negotiations leading to a new, non-racial, non-sexist and democratic constitution. For those who deal in the field of demonology, I quote Chris Hani, who is not only a member of the Communist Party and a member of the National Working Committee of the ANC but is also one of the chief leaders of Umkhontowe Sizwe, the military arm of the ANC. Before the ANC national congress in Durban last July, he said publicly and categorically that however many ANC leaders were killed, that must not divert the party from the path towards negotiation.
The ANC stands, as it always has done, for negotiations and for discussions to bring in an agreed new non-racial democratic constitution. Where do the de Klerk Government stand? First, because of the intrepid work of journalists —here, in particular within the Guardian, David Beresford, and in South Africa within the organisation of the Weekly Mail under the leadership of its courageous editor Anton Harbor—the scandal of the Government's funding of the organisation known as Inkatha was exposed. I have mentioned that in previous debates and have always been challenged regarding the whereabouts of my documentation. I now possess that documentation. Although in a short debate such as this I cannot go into the details, should any noble Lord question any of the statements I make, I shall be happy to provide him with full documentation of every assertion.
I heard three Ministers—Adriaan Volk, Minister for law and order, Pik Botha, the Foreign Minister and the President, F.W. de Klerk—publicly admit that, despite previous denials, they had been funding the organisation of Inkatha. Moreover, not only had they funded but they had created the opposition union to the Congress of South African Trade Unions, COSATU, known as the United Workers Union of South Africa, again an arm of Inkatha.
While in South Africa I took the opportunity to go to Ulundi, in Natal, to hear Chief Buthelezi in his defence of Inkatha. Only a few days before the revelations were made public, Chief Buthelezi assured me that the funds of Inkatha came solely from the subscriptions of its members. That was a few days before leading members of the government admitted publicly that they had been funding Inkatha. Not only had they been funding it, but since then it has been revealed that official security forces of the South African state had been training the Impis—warriors of
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the Inkatha movement —in the terrorist methods they had been using throughout Natal and in the Transvaal townships.
What is more, quite extraordinarily, in listening to the press conference given by both Pik Botha and President de Klerk, they voluntarily offered us the information that they had been secretly funding opposition parties to SWAPO in Namibia during the elections, despite the agreement that they had made in New York before the elections.
Secondly, we come to the subject of violence. Violence is a terrible scourge in South Africa today. I took part in a march in Kavelitsha outside Cape Town demanding that the police should take action against the murder of the local ANC leader whose wife had been murdered six months earlier. As we reached the police station where the petition was to be handed in, what is known in South Africa as a "combi" or "minibus" in a service station opposite the police station was suddenly surrounded by police. There were no demonstrators anywhere near that combi and it went up in smoke. I could not have had a more personal experience of deliberate provocation.
Over the past few weeks the slaughter on the commuter trains from Johannesburg to the townships has continued and increased. It is continuing today and no doubt tonight people are losing their lives on those commuter trains. It has been shown again that security forces are involved in those murderous activities. Only a few days ago at Thokoza outside Johannesburg, at the funeral of Sam Ntuli, one of the divisional leaders of the ANC, armed men gunned down 18 members of the mourning procession. During the past weekend in Soweto another 21 were gunned down by the same unknown assassins—no arrests; no prosecutions. Without doubt it is now fully established that certain members—I do not say all—of the security forces are deliberately indulging in violence to protect those engaged in violence, and inevitably provoking a certain degree of counter-violence.
Thirdly, since I left South Africa President de Klerk has tabled his constitutional proposals. In the 1950s and early 1960s we spoke of the fancy franchises that our colonial office devised for emerging colonial territories. There has been nothing as fancy as the constitution proposed by the National Party led by President de Klerk. As a nice sop to the international community he begins with a universal franchise for the Lower House. The Upper House will then have absolute veto on any legislation passed by the Lower House. The Upper House will be elected through nine new regions in each one of which any party, however small, which secures 10 per cent. of the vote will be entitled to an equal number of seats as any other party. For example, if the African National Congress pulls 70 per cent. of the votes and three other parties each pull 10 per cent., the African National Congress will take only one quarter of the seats in the Upper House. Added to that, the cabinet must be drawn from the major parties.
There could be no clearer indication that there is a determined effort to prevent the ANC from gaining governmental powers and therefore that there is a

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clearly directed effort against the principle of majority rule. That has been the objective of the de Klerk Government, however many votes and however much support the ANC obtains. When I was in South Africa a reputable independent opinion poll showed that the ANC would obtain around 70 per cent. of the votes of blacks in the urban areas and Inkatha would obtain 3 per cent.
I heard President de Klerk quite categorically admit in his press conference that the change within the apartheid system, the repeal of the major apartheid laws—which had been debated and were still being passed in 1950—had been caused, first, because of the impact of international economic sanctions and, secondly, because of the combined effort, with international sanctions, of the revolt of Africans within that country. That was the cause of the change within the apartheid regime. I date it from 1985 when the Chase Manhattan Bank withdrew from South Africa and other financial institutions followed in their lemming-like ways. That is an important admission by President de Klerk.
I hope that nobody will argue tonight that the only way towards the abolition of apartheid and the building up of a democratic state is to support economic prosperity in South Africa. It was most economically prosperous during the 1960s. That enabled the then governments with people like Dr. Verwoerd to impose apartheid in the strictest possible sense. The two went along together. As I have just outlined, we have seen what a white South African Government will do with economic prosperity and how they will use it to undermine the democratic parties such as the ANC and anything which is going to weaken white power.
Therefore it seems that the case is quite clear. We have a situation in which certain of the apartheid laws have been repealed. Discrimination and racialism continue. The government have shown that they are determined to use every effort to prevent majority rule resulting in governmental power. The only way in which the South African Government can be led to agree to a genuine democratic constitution is to continue with the economic sanctions which have already caused them to change tack to some extent.
Until an interim government replaces the present all white government; until such a government is formed which can share power—in the interim the ANC is prepared to share power—over the political system, the security forces and government revenues and public money, economic sanctions must remain or we are betraying the cause of majority rule in South Africa. I asked Nelson Mandela whether he still believes President de Klerk to be a man of integrity. He said that he did not know and that either he cannot control his own government and the security forces under that government, and the police forces who have been providing funds for organisations such as Inkatha, or it is a deliberate policy. We should leave it like that for none of us knows what is the truth.
I suggest that if President de Klerk is innocent and it is elements within his forces who want to prevent the majority rule being attained, then let us offer him the
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prospect of a carrot that when democracy is established, even if only in the interim period, then sanctions will be removed. If he is innocent that will surely strengthen him against his own dissidents. However, if he is guilty and it is a deliberate policy to de-stabilise the ANC and prevent majority rule coming on the South African scene, then economic sanctions are the only lever apart from internal revolt. Therefore, to the extent that international economic sanctions are retained, so there will be less need for internal revolt and less danger of internal violence.
Sanctions have been shown to change the path of South African Governments. Sanctions have to be retained until that fact achieves the objective which I believe we all share and which is the only objective—that is to say, a genuine, non-racial, non-sexist, democratic South Africa.
7.35 p.m.
Lord Gridley: My Lords, it is customary to say something about the noble Lord or the speaker who has preceded one when one rises to speak. Tonight I have heard from the noble Lord a long criticism of the way in which the South African Government carries out their duty at the present time. I wonder whether the noble Lord had the courtesy to leave with, say, the president of the Government of South Africa any of the comments which he has made today to noble Lords in one of the Chambers of Her Majesty's Government. If he has not done that, then it would be quite wrong for me at the moment to try to answer, with some justification, all of the criticisms that he has made.
The criticisms that he has made of the South African Government are a very serious matter. For example, he said that there had been difficulties because certain of the laws have been withdrawn which, in his opinion, would have helped the government of that country. There is still the problem of the whites and settlement out there. It would have been helpful for the noble Lord to have given us some idea of how he suggests that there may be some co-operation between the whites and the Africans of that country.
In addition to that, he has not said one word about sanctions which would give me confidence that worse things would not happen if sanctions were introduced. The noble Lord has asked Her Majesty's Government:
"whether they agree that sanctions would influence the South African Government to make progress towards a non-racist and democratic society".
My answer to that is no. I do not consider that the imposition of sanctions would be a contributory cause in bringing about the state of affairs in South Africa which the noble Lord wishes to see. In saying that, I speak with some authority as a former member of Her Majesty's Overseas Civil Service. Therefore, I can speak with some knowledge of the policies of Her Majesty's Government both before and after 1945 when the African empire started to be dismantled. A British policy existed at the time of the hand over which placed upon those who were responsible, with the British Government, a paramount duty to see that it was achieved peacefully and that, above all, there

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should be no betrayal of the indigenous people and the millions who had been left behind in independence to live under some government to be established at that time.
That would have been the kind of speech that we would have liked to have heard from the noble Lord. When there is unrest in South Africa, as at the present time, and when it is tribal (I shall illustrate this later) it would be quite wrong to impose sanctions. I do not believe that they would help progress towards the establishment of a non-racist and democratic society. If sanctions were imposed, there would be an escalation of unrest and betrayal of the people to whom we still have some responsibility. It is not as though, as the noble Lord implies, everything has been bad in South Africa with the present South African Government.
On 29th September 1989 the office of the state president was established and President de Klerk took up his position in that system. I may be wrong, but I believe that the state president has recently invited Nelson Mandela of the ANC to join him, or at least help him, in governing the country in the present difficult circumstances.
What else is there in South Africa at present? We have heard something about the government out there. However, if sanctions were to be introduced, what on earth would happen? The situation would be very much worse. At the present moment I understand there is a cabinet of eight. There exist Ministers of defence, foreign affairs, constitutional development, finance, manpower, and law and order. There is a House of Assembly, which the noble Lord touched on, where, in the general election of 1989, the National Party won 93 seats, the Conservatives 39 seats, the Democrats 33, and there was one vacant seat. That is a total of 166 seats. I am of the opinion that even if these people have not governed in the way that the noble Lord has illustrated that he would like to see them govern, it would not be wise to upset the situation which exists in that respect and which would be much worse if sanctions were imposed. Has the noble Lord considered what are some of the difficulties facing President de Klerk and Nelson Mandela? We should not increase those difficulties by the imposition of sanctions.
I do not know whether the noble Lord is aware that in South Africa there are, including the ANC, 29 registered political organisations which have to receive the consideration of the president. That is not easy.
I turn again to the existence of African tribal unrest, which I mentioned earlier, where various tribal factions are now having a go at each other. That is resulting in a number of Africans being shot and murdered in the outbreak of violence. That has nothing to do with apartheid or dissatisfaction with President de Klerk. No, my Lords; it is motivated by various Africans jockeying for power when independence arrives. It makes difficulties far worse for President de Klerk and Nelson Mandela when allegations are made about the security forces and it is reported in the press that when murders occur the forces stand by and watch the atrocities when—it is stated—they should intervene and prevent them. If
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that story is true, it is a damaging statement to make; if it is not a true statement, it should be corrected as soon as possible.
In either case, and for all the reasons I have given, it would be extremely dangerous to impose sanctions. Sanctions would bring about a serious breakdown of law and order in South Africa and would finally contribute towards an increase in the difficulties of the government of that country and for President de Klerk. I am therefore totally against the imposition of sanctions.
7.43 p.m.
The Lord Bishop of Manchester: My Lords, we should all be grateful to the noble Lord, Lord Hatch, for giving us an opportunity at this point to think about the tragic situation in South Africa and what might be done from this country in order to help.
I wish to speak about the opinion of the Churches in South Africa as can be judged from statements of Church leaders. But first a brief word about the Churches in Britain. We have had a very long history of involvement in the South African issue. In fact no international cause has taken up more time in discussion, in meetings, in producing documents and, of course, in prayer.
On the subject of sanctions, the Church of England General Synod has debated the issue a number of times over the years. It has moved from a position of constructive engagement in the economy of South Africa to a firm position in support of progressive disengagement. That means sanctions by all member countries of the United Nations, including Britain. A resolution to this effect was passed on 7th July 1986 almost unanimously in our General Synod. I quote:
"This Synod urges Her Majesty's Government, in the light of the failure of the mission of the Eminent Persons' Group, to deploy effective economic sanctions against South Africa, requests banking and financial institutions, trans-national corporations, and all bodies with significant links in South Africa to take whatever steps are in their power—including acts of disengagement—to increase the pressure on that economy".
It is significant that at that time a few years ago, the resolution also urged the financial bodies of the Church to give a clear lead in that direction.
Noble Lords may have read in the newspapers of the action being undertaken at the moment in the courts to obtain a legal opinion on the duties of the Church Commissioners. This has been initiated by the Bishop of Oxford and some others. The origins of this go back to the strong feeling on the part of many in the Churches that the Church Commissioners were not sufficiently following the advice of that General Synod resolution to use the Church's financial pressure for a greater disengagement from South Africa; that is, sanctions and economic pressure. That stand was taken after careful consideration of what the Churches in South Africa were asking us to do—that is, Churches with an overwhelming majority of black members. They were asking at that time for that pressure to be increased.
The question is whether the situation in South Africa has now changed so much that sanctions should be lifted and all pressure from this country for sanctions should now disappear. Has apartheid really

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been dismantled? What is the view of majority black opinion on the matter, and especially the opinion of responsible Christian bodies?
We may note that the Churches in South Africa are much more important in this context on the political and social scene than the Churches in Britain. I know there is some fuss from time to time about the statements which the Archbishop of Canterbury makes, or about the Faith in the City Report and that kind of thing, but that does not compare with the importance of the Churches on the South African scene. One only needs to notice the outstanding leadership of people such as Archbishop Desmond Tutu, the Reverend Alan Boesak and the Reverend Frank Chikane, who is the general secretary of the South African Council of Churches, over the years to have proof of that. It is no surprise that the Churches are the ones who organised the national peace initiative that brought together the parties in conflict —the South African Government, the ANC and Inkatha to produce the recent peace agreement which was signed by all three.
I have three important statements on the sanctions issue which have recently come from the Christian bodies in South Africa. In date order, they are from the Southern African Catholic Bishops' Conference of 19th August; from the South African Council of Churches, signed by the Reverend Frank Chikane on 30th August; and from the South African Anglican Bishops, signed by Archbishop Desmond Tutu on 8th September. I shall be pleased to make copies available to any noble Lords who may wish to see them.
The Churches are not wholly united in their advice to us, their international partners, on the sanctions issue. However, one must say that none of the Churches is calling for all sanctions to be lifted now. The South African Council of Churches says:
"This is not the time to lift economic sanctions. We would urge our international partners to maintain the sanctions position until the change in South Africa is irreversible and profound, as declared in United Nations and OAU resolutions".
The SACC is further very critical of the American decision to lift sanctions. I quote:
"We were alarmed that President Bush chose this sensitive time to sign off the Comprehensive Anti-Apartheid Act of 1988. Whilst we have always considered the US Government's conditions for lifting sanctions as falling short of our call for the maintenance of comprehensive sanctions until apartheid is constitutionally eliminated, we were surprised that the US lifted sanctions before even their limited conditions were met, and facilitated this through an unjustifiable redefinition of political offences".
That is the SACC statement—which is the one which is most outspoken—that sanctions should remain.
The statement of the Southern African Catholic Bishops' conference is different in emphasis. It agrees that apartheid is not ended but it acknowledges the success of sanctions in bringing about a situation in which they are no longer necessary. On the point about the success of sanctions, perhaps I may say that all the Church statements agree that there has been a remarkable impact of sanctions over the years. I was a little puzzled when the noble Lord, Lord Gridley, said that he did not believe that sanctions had contributed anything to improving the situation in
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South Africa. I was puzzled about that because even President de Klerk and members of his government have declared quite forcefully that sanctions have produced the changes which we have seen, which I am sure we all welcome, towards the elimination of apartheid. The Churches welcome those moves as well.
Lord Gridley: My Lords, my reference was to the unrest in South Africa caused by people who, I have been informed, are jockeying for position in readiness for the granting of full independence. Every one of them is interested in that. The security forces have a bounden duty to support the government in power. I do not know whether they have committed excesses, but it is a dangerous thing in a country to criticise people who are trying to maintain law and order.
The Lord Bishop of Manchester: My Lords, the noble Lord forgets that all the evidence now shows quite clearly the heavy involvement of the security forces, or elements of them, in some of the things that have been taking place.
I shall say a few words about violence in South Africa before I conclude my remarks. I wish to quote from the statement of the Southern African Catholic Bishops. They say:
"We conclude that what is now required is a united political, social and economic effort in pursuit of the vision of the future … Attention should be concentrated on the social dimensions of new investment and the promotion of massive projects to improve the social fabric and multiply employment opportunities".
The Catholic Bishops believe that the time has come for lifting some economic sanctions and bringing in investment but they believe that that investment should be carefully controlled and should not be the kind of investment which we have seen in South Africa in the past at the time of its greatest prosperity.
The Anglican Bishops emphasise that sanctions have been a success, pointing to the admission by ministers, especially the Minister of Justice, Mr. Coetzee, that they have forced change. More cautiously than the Catholic Bishops, they state:
"We should like to explore the feasibility of linking the lifting of specific sanctions to the achievement of clearly defined objectives".
They say that new ways should be found to channel investments. They continue:
"In past periods of prosperity, the allocation of incoming investment has been controlled by business and government interests dominated by white South Africans, and the main beneficiaries of growth have been whites".
That is a sharp warning against the kind of free market economics now being advocated for the South African situation by people in this country. It is the theory of trickle down growth—if one makes an economy grow, a lot of people become very wealthy and in the end the wealth trickles down to the poorest. It has never happened like that in South Africa in the past under apartheid. It is unlikely to happen in that way in the future.
May we note from these statements that all those informed on the situation agree that economic sanctions have been a success. I do not believe for a moment that South Africa would have withdrawn from Angola or given Namibia independence without the effect of sanctions. All these statements welcome

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the changes that have taken place. They are some degree of progress. All are deeply worried about the violence and are convinced of the involvement of security forces and the failure of the government to care about black lives. All are concerned about the trickery and lies which have characterised the de Klerk government in some aspects in recent months. That is put most strikingly in the Catholic Bishops' statement:
"Sadly, over the years we have grown accustomed to finding out that, all too frequently, denials by those in authority in our land stand for little. South Africa's involvement in Angola was denied only for us to find out later that we were heavily involved. Cross-border destabilisation was denied and later found out to be true. Funding of organisations within and outside South Africa was denied and then, on production of irrefutable evidence, grudgingly admitted. Time and time again truth has been the victim of political expediency on the part of those who rule our land".
There is also a deep longing that the de Klerk government should acknowledge the iniquities of the past. I quote again from the Catholic Bishops' statement:
"We consider that the process of change would be greatly helped if the government of the day publicly acknowledged the iniquity of the past and made immediate and honourable amends, for example, in the case of land expropriated under the apartheid system".
All are agreed that apartheid is not ended. There are no votes for blacks and the violence makes democracy meaningless. I say to the noble Lord, Lord Gridley, that the violence is not simply tribal. It has partly been produced by an apartheid situation in which people have been deliberately separated from each other over the years.
I conclude by saying that in the South African situation one sometimes sees immensely moving examples of people who are maintaining faith and hope despite tragedy and difficulty. Very often they are put in Biblical terms. One black South African said recently, using a direct Biblical image: "We have left the slavery of the land of Egypt. Now we are in the wilderness and this is still a terrible time for us". We must make sure that in that wilderness they are not left without friends.
7.56 p.m.
The Earl of Lindsey and Abingdon: My Lords, I shall not be drawn today into the question of apartheid or one man one vote. I have an interest to declare in that I have in the past, through my insurance interests, done business in South Africa. I happened to be talking to a South African friend and business associate on the telephone the other day. When I asked how things were these days in South Africa, back came the answer, "Boring, everyone wants to talk to us and be nice". My reply was, "Don't be too certain. There is a Question down for debate in the House of Lords asking Her Majesty's Government whether they would consider imposing sanctions in order to speed up the democratic process". It was suggested that I should support that idea as it might make life more exciting again in what he described as "this boring country run by silly people".
I have always been interested in what the noble Lord, Lord Hatch of Lusby, has had to say in the past on the subject of South Africa. I have quite often agreed with his assessment of certain aspects of the
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situation as seen from outside that unhappy country. For instance, I am still to be convinced about the role of the South African police and security services in regard to law and order. However, on this occasion I am more sad than cross with the noble Lord in his decision to put down the Unstarred Question at this particular moment in time. The whole process of change in South Africa has reached a very difficult and sensitive stage. I therefore think that the timing of asking this Question is most inappropriate.
We must all agree that tribal violence in the townships is to be deplored, but imposing sanctions at this time is not the answer. It will be met by the laager mentality of the hard Right who will do all in their power to undermine the democratic process now under way. It will not solve or bring to an end the township violence. Sanctions will only give the edge to our main trading competitors, who will take no notice of any actions we might take.
Finally, the change that is going on in South Africa does not all come as a result of pressure from without but more so from within, with people like Nadine Gordimer, the new Nobel Laureate for literature. I trust that my noble friend the Minister will therefore reject any question of sanctions being imposed at this time.
8 p.m.
Lord St. John of Bletso: My Lords, I am grateful to the noble Lord, Lord Hatch of Lusby, for initiating today's debate and I am obviously pleased that after so many years he has been able to visit South Africa and see at first hand the situation unfolding in that country. As your Lordships may be aware, I spent 28 years living there and have been out there five times this year. There are, unfortunately, a number of matters on which I should like to take issue with the noble Lord, Lord Hatch of Lusby.
It is perhaps opportune that today's debate is taking place on the eve of the Commonwealth Summit in Zimbabwe. I find some of the views of the noble Lord, Lord Hatch of Lusby, on sanctions to be quite confusing. Yes, certainly it was right and proper to have sanctions when legislative apartheid was in place and while the opposition parties were banned. But now that all apartheid laws—and I say "all" apartheid laws because the noble Lord referred to the "partial" repeal of apartheid laws—have been repealed from the statute books and now that all political parties have been unbanned, political prisoners released and the Government have clearly committed themselves to an irreversible reform programme, why should we still bang away at this issue of sanctions? Surely we should be forward looking? Moreover, surely it is the case that the political and economic health of South Africa are symbiotically related? The odds are overwhelmingly in favour of the current negotiation process which seeks to draw a new non-racial constitution. I see that the noble Lord, Lord Hatch, wishes to intervene. I gladly give way.
Lord Hatch of Lusby: My Lords, I am much obliged to the noble Lord. On the point that he just mentioned, I can give him 27 laws under the apartheid system which are still on the statute book.
Lord St. John of Bletso: My Lords, the basic vestiges of all the apartheid laws—the Group Areas Act, the pass laws and the land Act—have all been repealed. Yes, there may be regional statutes which are still in place. I intend to take issue with the noble Lord on the education system where certainly apartheid is still in place.
However, there is no denying the fact—and I agree with the right reverend Prelate the Bishop of Manchester—that sanctions have had a profound impact on South Africa. Yes, they have had a psychological and an economic impact on the South African Government. But surely the immediate challenges of any current or, for that matter, any future government is to raise economic growth thereby creating jobs, allowing better housing, education, health care and generally higher standards of living. The Governor of the Reserve Bank, Chris Stals, said recently:
"South Africa would become ungovernable within five years if political uncertainty and social unrest continue to blight economic growth".
Against that, I wish to quote a recent statement by Nelson Mandela. He said:
"It is clear to us that any political settlement cannot survive unless we can turn the economy round so that it generates the jobs and the wealth which will make a rapid and visible impact on the standard of living of especially the black people".
In debating the subject of South Africa it is important to identify the key dynamics of the South African economy. We have a country of 38 million people of which 74 per cent. are blacks, 14 per cent. are whites and the residue are Indians and Asians. It has a population growth rate of just in excess 2.5 per cent. and an urbanization rate well in excess of 1 million per annum. On top of that, 60 per cent. of the population are under the age of 23 and, of the workforce, almost 45 per cent. are unemployed—that is, excluding the informal sector. Economic sanctions have led to a pyramid structure of complex holding companies controlling the bulk of the corporate sector. I refer to such companies as the Anglo American Corporation, Barlows, Liberty Life, and GENCOR.
While it is understandable, as the noble Lord mentioned, that there are calls by the ANC for an equitable redistribution of wealth, I rather feel that the expectations of the "emancipated" for better living standards may be in excess of what any government can possibly achieve, unless of course there is a dramatic increase in economic growth. The ANC needs to nurture investor confidence. Recent statements on nationalisation and the renegotiation of international loans are counter productive and, in my view, short-term thinking.
I thought that the following quote made by Peter Wrighton, the chairman of one of South Africa's largest food manufacturing companies, at a recent presentation in London sums up the current state of play between the ANC and the South African Government. He said:
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"It is important to bear the underlying dynamic of mutual dependence between the ANC and the Nationalist Party in mind when watching the negotiation process unfold. There will be hiccups and there will be bluster, but these should not distract one from the compelling reasons why the process should proceed.
"The bluster will come particularly from the ANC: they have to placate a fairly militant constituency and have not got any real power over resources with which to do this. Without access to the economic tools of Government and with future policies very much at an embryonic stage, sloganeering becomes a major option. The reality, however, is that their bottom line is considerably more pragmatic than their rhetoric suggests. Observers should not make the mistake of reading published statements at face-value, as this often gives the impression of differences with the Government being much larger than in reality they are".
Under the current constitution the Government must call another election by September 1994. There is a large convergence of views from both the ANC and the Nationalist Party on the aims and content of the forthcoming multi-party conference. With the recent news that both AZAPO and the PAC have intimated their willingness to come to the negotiating table, there is a real opportunity of consensus being reached on the underlying principles for a new constitution in South Africa.
All parties agree on the need for a multi-party democracy, an independent judiciary and a rule of law. However, to date the timing of the multi-party conference is uncertain, and to a large degree that is because of the ANC's unwillingness to come to the negotiating table. President de Klerk has indicated his keenness to proceed in haste: first, by outlining the Nationalist Party's constitutional proposals—and I agree with the noble Lord, Lord Hatch, that there is scope for considerable compromise on those proposals—and, secondly, by recently signing the peace accord with Nelson Mandela and Chief Gatsha Buthelezi. I notice that the noble Lord, Lord Hatch, made mention of the violence in South Africa, but he made no mention of the peace accord. It is a very important part of South Africa's future. It is the first time that Nelson Mandela, Chief Buthelezi and President F. W. de Klerk have put their signatures to a document. Thirdly, in meeting the demands of the ANC on the return of exiles, the Government recently agreed to the United Nations High Commission for Refugees setting up offices in South Africa to oversee and co-ordinate the return of exiles.
Perhaps I may touch very briefly on the Graeme Rudman amendments. When those restrictions are lifted—and I think that it is only a matter of time—and South Africa has open access to IMF loans, it is unlikely that it will seek many loans from the IMF. What it requires is access to World Bank funding. As your Lordships may be aware, the World Bank only funds projects when it has carried out extensive feasibility studies. Those studies invariably take up to two or three years to complete. It is my contention that in two or three years' time we will have a black government in South Africa.
Unless and until an enduring constitutional settlement is achieved which secures the future of a market economy free from undue political interference, domestic and international business confidence in South Africa will remain fragile. Clearly there is

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enormous interest and potential for the region. It has been enhanced recently by the peace accord in Angola. Of late there has been a non-stop stream of international government and business delegations going to South Africa.
Finally, I should like to refer to the education issue raised by the noble Lord, Lord Hatch of Lusby. Yes, indeed, it is tragic to hear the story of a black girl who has been refused by three schools in Capetown. However, he must agree with me that all universities and private schools are now integrated and that the government have left the integration of public schools in the hands of the parent-teacher organisations dependent on 75 per cent. agreement. The noble Lord mentioned 85 per cent. That figure, I believe, is incorrect.
I agree with the criticisms as regards the Inkathagate allegations against the security forces. They must be condemned, but the irony is that the matter has turned out positively for South Africa: gone is General Magnus Malan, the Minister of Defence; and gone is Adriaan Volk—
Lord Hatch of Lusby: My Lords, he is in the cabinet!
Lord St. John of Bletso: My Lords, the noble Lord says that he is in the cabinet: he is the Minister for Forestry and Water Affairs. It has brought to the top of the agenda the whole issue of accountability. That is imperative in South Africa today.
Democracy does not flourish in the midst of poverty. Clearly, P.W. Botha's Rubicon has been crossed and change in South Africa is now irreversible. I commend the Government's stand on the lifting of sanctions and the promotion of economic growth in South Africa. That is the only sensible way forward.
8.12 p.m.
The Earl of Clanwilliam: My Lords, I thank your Lords hips for allowing me to speak at this time. I also thank the noble Lord, Lord Hatch, for his interesting diatripe on the errors of the South African Government, of which there are no doubt many as there are with many other governments. That they are changing is perhaps due more to diplomacy than sanctions. He also described the terrible internecine warfare occurring between the black tribes of South Africa. That hardly augurs well for democracy in that benighted country.
President de Klerk's first move towards democracy came about as a direct result of the change of regime in the Soviet Union. He saw a window of opportunity after years of diplomatic pressure imposed upon him by many people in this country. He took it. That is not evidence of the success of sanctions. The noble Lord, Lord St.John of Bletso, said everything that needs to be sad about conditions in South Africa and fully answered remarks made by other noble Lords.
I shall discuss the history of sanctions. We should remember the Rhodesian UDI. It lasted for 13 years. Sanctions did not stop UDI. Zimbabwe was created by diPlomacy. UDI survived longer than Napoleon. He suffered a serious naval blockade throughout his
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life and was beaten only by battles on sea and land. We should consider Iraq and Mr. Hussein. There he is living happily under sanctions with no problems. He is murdering his compatriots —the Shias and the Kurds. Whatever one may think of the result of the Iraq war, sanctions had no effect.
Before the Iraq war the United Nations had one option only. Its sole tooth was the imposition of sanctions. That was the only way it could show its displeasure or try to coerce governments. If South Africa's neighbours call for sanctions to implement democracy, we should perhaps ask them to look at the large beam in their own governments' eye. Their regimes have no pretence of democracy. For them to call for sanctions is pure hypocrisy.
As for South Africa, let me quote the recent poll held in March this year. Polls may or may not be to one's taste. In that poll, the voting against sanctions was: 67 per cent. of black respondents; 90 per cent. of white respondents; 76 per cent. of coloured respondents; and 81 per cent. of Asian respondents. In the light of that poll there seems to be little chance of promoting democracy in South Africa through sanctions. We should send a clear message to the world that sanctions are a specious waste of time.
8.16 p.m.
Lord Pitt of Hampstead: My Lords, I apologise for not having put down my name to speak, but there is a point that I need to make. The suggestion that the imposition of sanctions on South Africa would create a great deal of disorder presupposes that no sanctions are being imposed in South Africa at the moment, but they are. This country has been slow to impose sanctions and has been anxious to remove the sanctions that have been imposed.
International sanctions still exist. The South African Government would like to have them removed. The people in South Africa who have no vote, of whom my noble friend Lord Hatch spoke, would like those sanctions maintained because they want to be certain that apartheid and the disadvantages that they now suffer will be removed. As I have said before, we have an opportunity to use sanctions as both a stick and a carrot. We should say that sanctions will not be removed until the groups who have to negotiate a new constitution for South Africa ask to have them removed. I made that suggestion in a speech last year and I still believe that that is the approach that should be taken. Both groups need to have sanctions removed.
The noble Lord, Lord St. John of Bletso, is right. There would be no point in a black government taking over a country that was in a terrible economic state. They will not want to take over South Africa in a terrible state any more than the present government want South Africa to deteriorate further. Both sides have a strong reason for wanting sanctions removed. The South African Government believe that they are moving in a direction which warrants the removal of sanctions. If I read their attitude aright, the ANC, the Churches and others are not sure whether they can support the removal of sanctions at this stage. It strikes me that, when the conference starts and they

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come together to try to iron out a constitution acceptable to all, that will be the moment for making a decision. Frankly, the carrot of sanctions being removed once agreement is reached will be a strong incentive for people to get together and try to iron out a constitution which will be of value to South Africa.
8.20 p.m.
Lord Richard: My Lords, I start by congratulating my noble friend Lord Hatch of Lusby on initiating the debate. It has been useful for a number of reasons. One is that it has exposed yet again the gulf that occasionally divides the two parties. I find some of the speeches tonight frankly surprising. I hope that the debate also indicates that the gulf between the two Front Benches is not as wide as the gulf to which I referred. I await with great interest what the Minister has to say.
Perhaps I may sum up the position of my party on the issue with a short sentence: so far so good, but not enough yet. We hope that matters are going in the right direction. In a moment I shall examine where we have reached and how far we have to go. At this stage, it has been made perfectly clear by the spokesmen for the Labour Party that we would not be in favour of the total removal of sanctions.
Where have we got to in the process of political change in South Africa? It is undeniable that over the past two years considerable progress has been made. I give the South African Government credit for that. It is true that the legal framework for the maintenance of apartheid no longer exists in South Africa. I do not, however, share the view of the noble Lord, Lord St. John of Bletso, when he says that the only object of sanctions was to make sure that the legal framework of apartheid was removed. I never regarded the imposition of sanctions as being merely confined to the removal of certain Acts of the South African Parliament from its statute book.
Lord St. John of Bletso: My Lords, does the noble Lord agree that I said that the object was not just to remove the remaining vestiges of apartheid but also so that all political parties would be unbanned and political refugees and prisoners would be released?
Lord Richard: My Lords, the terrible thing about sitting in one's seat while someone else is on his feet is that there is a tendency, which I try to resist, to take notes of what is said. My note of what the noble Lord said is, "Yes, it was right to have sanctions while legislative apartheid was on the books. But why are we still banging on"—that is the effect of it—"about sanctions now that the legislative framework has been removed?" I merely say to the noble Lord that I and my party did not see sanctions as being merely a method of re-drawing the legislative basis upon which apartheid was imposed.
I give credit because credit is due to the South African Government and President de Klerk for those steps that they have taken. In that context and given the political background of South Africa, those steps took a considerable amount of political courage.
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There has been progress: Nelson Mandela was released, which was another major step forward. Other political prisoners were released; there was the unbanning of the ANC and the repeal of key portions of legislation. All this we should take into account in considering how far we have gone down the road towards a democratic unitary political system in South Africa and how far we still have to go. An agreement has been signed by the United Nations High Commissioner for Refugees and the South African Government culminating in the return of the South African political exiles. It is interesting that the major aspects of this agreement are an amnesty for political offences, the formalisation of the presence of the UN High Commissioner for Refugees in South Africa and freedom of movement for returnees. If one went back 10 years and asked how long it would take for this to be introduced in South Africa given the political background and climate then, one might have thought that it would have taken a great deal longer.
The UN High Commissioner herself said that the signing of the agreement marked the,
"beginning of the end of a 30 year old human tragedy".
The chair of the United Nations Special Committee against Apartheid expressed the hope that the agreement improved prospects for a negotiated settlement. Again, so far so good.
However, despite this progress, apartheid remains in existence and in force. Moreover, there has been an escalation of violence in recent months in clashes between Inkatha and ANC supporters. Whatever noble Lords on the other side say, there is significant evidence which I do not think we can easily ignore of collusion by the security forces with Inkatha in the precipitation of some of that violence.
Against this background a national peace accord to end the violence was signed by the Government, the ANC and Inkatha. As the noble Lord, Lord St. John, said, again we should give credit to the South African Government for that, which is a major step and we must accept it as such. It set out a code of conduct for political parties and made arrangements for the monitoring of the security forces. Once again, so far so good. It is interesting that these trends are referred to in the second progress report of the United Nations Secretary General on the implementation of the declaration on apartheid which was adopted this autumn by the General Assembly.
In the report the Secretary General states:
"The progress towards the end of apartheid in South Africa, although halting, remained on course".
The report also highlights the fact that, despite the passing of certain laws to end apartheid, socio-economic inequalities persist and threaten the peace process, which will probably be lengthy and vulnerable. The Secretary General emphasised that the violence was a "serious obstacle to the evolving political dialogue". He questioned the impartiality of the security forces but expressed hopes that recent initiatives would boost this process. That seems to me to be a sensible, moderate, indeed modest, analysis of the position which we seem to have reached.
What about the existing sanctions? What has happened to them? In April 1991 the European Community agreed in principle to lift its 1986 ban on

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the import of South African iron, steel and gold coins. This follows last year's EC decision to lift the voluntary ban on new investment. In July the United States lifted sanctions against South Africa, a move condemned by the United Nations, which remains in favour of maintaining sanctions. This week the Commonwealth will consider the issue.
I have no special knowledge but I anticipate that sanctions restricting cultural and sporting ties will almost certainly be lifted. As a Welshman in a very painful position at the moment, perhaps I may say what a great pleasure it would be for me to see someone beating the Australians and New Zealanders. If those sanctions are lifted, I suspect that economic sanctions and the arms embargo are expected to remain in place until further progress is made towards democracy in South Africa.
The recent upsurge in violence, the evidence of government collusion with Inkatha and the fact that democracy still remains an aim rather than a reality in South Africa seem to me to highlight the need for the international community to maintain sanctions at least at present.
Perhaps I may turn for a moment to constitutional developments about which some noble Lords spoke, notably my noble friend Lord Hatch. President de Klerk outlined the National Party's proposals for constitutional reform at a special congress of that party on 4th September. The main ones are universal adult suffrage for voting to a lower house which would be subject to the veto powers of an upper chamber and a collective presidency. This has been criticised as sustaining minority white rule. The ANC has specifically criticised it on the basis that it would exclude the ANC from any power. This was reflected in an article published recently in the New Statesman in which my noble friend Lord Hatch of Lusby interviewed Nelson Mandela. Nelson Mandela said that he thought the constitutional proposals were:
"an attempt to introduce more apartheid through the backdoor. They are the proposals of a government which wants to bring about some changes in the country but which cannot totally reject the influence of apartheid. The second house—its composition and its powers—show clearly that these proposals are intended to make it impossible for majority rule to operate. I am not aware of anywhere else in the world where parliament can be vetoed by a minority".
Whatever else one can say about the constitutional proposals and the process leading from the present position to an eventual constitutional settlement, one must acknowledge that the process will be long and difficult. It will require a great deal of patient and painstaking negotiation.
Despite those misgivings Mr. Mandela emphasised the ANC's willingness to negotiate with the government. He has called on members of the clergy and the business community to convene an all-party congress to discuss the establishment of a democratic government, a new constitution and a non-racist society. However, the cycle of violence has plunged relations between the government and the ANC down to an all time low. It might therefore take some time to get negotiations back on track. It is against that background of the progress that has been made and the current position in South Africa that we have to
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consider whether this is the right time to take further steps to remove the economic and financial sanctions that are imposed by the international community.
I hope the House will give me credit for not approaching this matter in a confrontational state of mind. South Africa is a part of the world that I have been interested in and partially involved with for a long time. I have tried to think through the problems of South Africa in a sensible way. I do not believe this is the right time for us to remove sanctions totally. Our policy should be framed and implemented in conjunction with the international community as a whole. We should abide by the policies agreed by the Commonwealth and the United Nations. At the Labour Party Conference this year my right honourable friend Mr Kaufman stated:
"Relaxing sanctions must not be seen as an incentive to action that might or might not take place. Before easing sanctions can be considered irreversible action to dismantle apartheid must indubitably be seen to take place".
As I said at the outset, I am not sure whether we are at that stage yet. We may be there and I hope we are. I hope that by his actions in the near future President de Klerk will be able to convince people like me, and others who think like me, that he is firmly set upon this course. If I become convinced of that I shall be happy to return to this House and make another speech about sanctions but at the moment I am not totally convinced of the case for removing sanctions. Therefore in the present circumstances I fear that sanctions must remain.
Finally, I wish to refer to economic development in Southern Africa generally. There is a growing concern that the West will concentrate new investment and trade on Angola and post-apartheid South Africa. Southern Africa does not merely consist of those two countries. I hope that while encouraging trade with and investment in a post-apartheid South Africa, the Government here will be sensitive to the needs of the region as a whole and will promote economic ties accordingly and not at the expense of other African states. However, there is no doubt that a post-apartheid South Africa will need massive investment, assistance and help from the West. The economic problems of that country are formidable. Greater economic equality for all the people of South Africa will require a massive effort not only by the South African Government but by the international community as a whole and particularly by those countries which are favourably inclined to these developments and which have helped to urge South Africa in the right direction. I hope that when that moment arrives Her Majesty's Government will be generous.
8.35 p.m.
Lord Cavendish of Furness: My Lords, I join other noble Lords in thanking the noble Lord, Lord Hatch, for giving us an opportunity once again to discuss South Africa this evening. Many noble Lords spoke from a basis of personal experience which has left me at a disadvantage in this matter. As one would expect, noble Lords spoke with feeling.
The previous occasion on which your Lordships' House addressed this topic was in February. Since

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then South Africa has made further remarkable progress towards building a new nation. I have listened to the whole debate with great interest. I hope that I shall reply to the matters raised in the debate. I am glad to be able to describe briefly how we may most effectively encourage South Africa to continue on the road towards a non-racial democracy.
This year has seen no slackening of momentum in President de Klerk's programme of reform. His government repealed the main measures which enforced statutory racial discrimination in South Africa. These have been rehearsed this evening. The Land Acts dating from 1913 and 1936 are no more. Everyone, regardless of race, now has the right to possess land anywhere in South Africa. The Group Areas Act of 1950 has also gone. Therefore, as regards the law, anyone can live anywhere in South Africa.
Finally, the Population Registration Act of 1950 was abolished. There is no longer an official system for classifying the people of South Africa according to race. A temporary exception is that existing electoral rolls have been retained for the purpose, inter alia of allowing parliamentary by-elections to be held while the new, non-racial constitution is being negotiated.
In the context of South African history, these repeals are a remarkable achievement. I am grateful to all noble Lords who have acknowledged that fact. But nobody should pretend that, as a result, all traces of apartheid have vanished. I am not pretending that that is the case. Its legacy—the ingrained attitudes born of years of conflict and the wide inequalities between the haves and the have nots—remains. This inheritance of a pitiless and ultimately pointless period in South African history will remain as a challenge to successive governments in South Africa for many years to come. We hope that all parties and other groups in South Africa will soon be able to agree on ambitious measures to begin removing the vestiges of past injustice. To this end, it will be essential for South Africa to resume economic growth as soon as possible.
Its population is growing at an annual rate of about 2.8 per cent. Therefore, even in the years when South Africa achieved some modest increases in output, the income of its people continued to drop. Per capita gross domestic product has fallen in real terms by 12 per cent. since 1982. The lack of growth may undermine the political process. South Africa will find it much harder to make the transition to a non-racial democracy.
Unless its people perceive the economic benefits of the transition to them, they may lose patience with the process of negotiation which now at last is in prospect. Nelson Mandela has himself argued that peace and stability in South Africa will depend on social and economic progress. This progress will depend in part on foreign investment and on South Africa's renewed access to the international financial institutions.
The Government's aim continues to be the encouragement of a peaceful transition to a peaceful, democratic and prosperous South Africa. We believe that the continuance of economic and financial sanctions by some countries is working against this aim. They must go as soon as possible to help rebuild
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the confidence of investors in South Africa. The time for putting the financial screws on South Africa is long past, as my noble friend Lord Lindsey and Abingdon has stressed.
As we have seen this year, the process of reform is now unstoppable. President de Klerk and Mr. Mandela are both committed to a negotiated solution to South Africa's problems, but their aims are endangered by South Africa's poor economic performance.
Our European partners share our view. That is why the European Community lifted its ban on new investment in South Africa at the end of last year. The European Community Foreign Ministers further responded to the tabling of Bills to repeal the apartheid laws by deciding, in April, to lift bans on the import from South Africa of iron and steel and of gold coins, a point raised by the noble Lord, Lord Richard. That decision is still held up by a parliamentary scrutiny reserve entered by Denmark. We shall continue to discuss with Denmark how that reserve may be lifted. We shall work to lift other European Community measures to help bring growth and jobs to South Africa.
We welcome the decision of the United States Government in July to abolish all the restrictive measures imposed by the comprehensive Anti-Apartheid Act. But other US legislation still blocks South Africa's access to the International Monetary Fund. So we are now in close touch with the United States Government on the need for South Africa to return to a normal financial environment and, in particular, to regain access to the International Monetary Fund.
We applaud the preparatory work already done on South Africa by the other main international financial institution, the World Bank, which has worked with the African National Congress for that purpose.
My right honourable friends the Prime Minister and the Secretary of State for Foreign and Commonwealth Affairs are today in Harare, where Commonwealth Heads of Government will consider the progress which South Africa has made since they last met in 1989. Our aim there will be to achieve a more realistic and businesslike atmosphere in which the Commonwealth devotes more time to discussing its own objectives and its future and less time to sticking pins into South Africa. I am sure that our Commonwealth friends will acknowledge President de Klerk's historic achievements. We should like them to lift all trade and financial sanctions now. However, if they do not do so the disagreement between us will be about the pace of lifting sanctions and not about the real changes which the South African Government have achieved. In any event, we shall support the principle of positive Commonwealth measures to help the new South Africa emerge.
It is not true that the Government are pressing for the immediate lifting of all sanctions against South Africa. The arms embargo and associated military sanctions should remain until South Africa has a democratic constitution. I hope that that answers the point raised by the noble Lord, Lord Pitt of Hampstead. However, retaining financial sanctions

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until the new South Africa is born would be potentially disastrous. The population is growing at approximately one million a year; 320,000 extra school places are needed each year; nearly 1,000 new job seekers arrive on the labour market each day, but unemployment remains stubbornly high at around 40 per cent. in most black areas. To deny South Africa opportunities for economic growth would leave any future government with a hopeless task. Those facts, and more, were eloquently put forward by the noble Lord, Lord St. John of Bletso—and I hope that I have pronounced his name correctly.
Here perhaps I may deal with some of the specific points, raised in the course of the debate. I shall start with the remarks of the noble Lord, Lord Hatch, whose debate it is. He referred, as did other noble Lords, to the Inkathagate episode. It is fair to say that President de Klerk responded firmly to the revelations in July of secret funding to Inkatha and other organisations. We have consistently called on the South African Government to re-establish confidence in the impartiality of the security forces. That is an enormous task, but President de Klerk and his new Ministers responsible for the security forces are, I am assured and believe, tackling the problem.
President de Klerk worked with the ANC, Inkatha, Church and business leaders to produce the national peace accord on 14th September. I am very glad to take this opportunity to salute the skill and diligence of Church leaders in helping to bring that accord about. The Government of South Africa have the prime responsibility for upholding law and order but all signatories to the peace accord must work to see that it is firmly implemented. The peace accord shows what the South Africa parties can do together.
We welcome the consistent calls of President de Klerk and the ANC for early multi-party negotiations within which it should be possible to discuss measures to restore confidence in the security forces. I do not underestimate the importance of that. The violence has had a tragic human cost, delaying the political process and economic regeneration, but it is not a reason for holding up political progress. We hope that the international community will respond, for example, as we have by offering to help South Africa with community policing.
The noble Lord, Lord Hatch, alleged that President de Klerk's constitutional proposals are undemocratic. President de Klerk issued the National Party's constitutional model on 4th September. Like the noble Lord, we welcome its commitment to one person one vote and to a parliamentary system of government involving the participation of all. The proposal for a Bill of Rights and a new independent judiciary to uphold it are also welcome. I do not believe that it would be right for us to comment on all the aspects of the proposals. It is, after all, for South Africans to reach a negotiated agreement on the precise shape of their new constitution.
The noble Lord sought to discredit the sincerity of Mr. de Klerk. He asked whether he would go back on his word. President de Klerk has consistently delivered his promises. Sometimes he has gone further—for example, by deciding to repeal the Population
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Registration Act at once. We believe that the process of political reform has developed its own momentum and cannot be put into reverse.
If I understood him correctly the noble Lord, Lord Hatch, concluded that no sanctions should be lifted.
"As specific moves are achieved, and specific rungs of the ladder are stepped upon, it may be felt that sanctions can progressively be reduced".
Those are not my words or the words of Her Majesty's Government. They are the words of the noble Lord, Lord Hatch, at column 386 of the Official Report of 18th February. It is a little unfair to read from the Official Report out of context and, in fairness, I must say that those remarks are qualified. However, they emphasise that we must be drawing closer in our ideas of how the process should develop.
My noble friend Lord Gridley questioned whether sanctions would achieve what we all want, as did my noble friend Lord Clanwilliam. It is pointless to revive the old controversy about the effectiveness of sanctions. If they had any influence, it was among other factors, including the massive changes in South Africa and in the world order which contributed to a change of heart among South Africa's leaders. The fact is that economic and financial sanctions are now harming South Africa. Our main preoccupation should be to carry on, helping to build a new nation there.
I was grateful to the right reverend Prelate the Bishop of Manchester for his thorough account of Church opinion in South Africa, which I shall need to study. In my view it would be a mistake to delay lifting sanctions until irreversible progress is made. Here I am mindful of the remarks of the noble Lord, Lord Richard. Political progress in South Africa has already developed a momentum of its own, as I have said. We do not believe that sanctions will significantly affect it. The ANC and other black groups in South Africa support South Africa's re-entry into international sport and the lifting of other sanctions preventing travel and other forms of personal contact with South Africa. Everyone agrees that the end of sanctions is now in sight. The residual controversy over the timing of their abolition is important for South Africa's economic future, but it is not an epic battle between entrenched political positions.
Finally, perhaps I may say how grateful I was to the noble Lord, Lord Richard, for outlining so succinctly the Opposition's attitude. I am grateful to him for his welcome, albeit partial, for the policy. I am also grateful for his interesting analysis and for his not quibbling, as Oppositions can do, on a matter which is of such national importance and in respect of which messages are picked up around the world. I hope that the noble Lord will accept my thanks for that. He acknowledged that the legal framework of sanctions had been removed.
Lord Richard: My Lords, I referred to the legal framework of apartheid.
Lord Cavendish of Furness: I beg your pardon, my Lords. I thank the noble Lord for his correction. I accept from him that it is not everything, but it certainly goes a long way.

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I am glad to join the noble Lord, Lord Richard, in welcoming the agreement reached on 16th August between the South African Government and the United Nations High Commissioner for Refugees on procedures for the return of political exiles to South Africa. That agreement could end months of uncertainty about the indemnity of exiles, of whom about 1,000 have already returned. We are already giving practical help with the resettlement of exiles without discriminating between political groups. My right honourable friend the Secretary of State for Foreign and Commonwealth Affairs has in addition offered £500,000 to be spent through the UNHCR. In all, we shall spend at least £1 million to help bring exiles home.
Before I conclude, I should say a word about sporting links with South Africa. We welcome the consensus within the Commonwealth—and in the Olympic movement—that, where sport is integrated in South Africa, it no longer makes sense to discourage our sportsmen and women from competing with their South African counterparts. South Africa's re-entry into the International Cricket Council and into the Olympic movement in July were remarkable testimony of how much and how profoundly things have changed in South Africa, and in international attitudes towards it.
In the past, South Africa has tended to turn our thoughts to the question of sanctions and how best to eliminate the immoral and ineffectual policy of apartheid. But I hope that I may end on a positive note today. Britain has long led the way in the European Community and the Commonwealth with constructive measures to combat apartheid. Most of these measures involve various types of training to encourage the emergence of skilled workers and entrepreneurs in South Africa.
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On 16th September my right honourable friend the Minister of State for Foreign and Commonwealth Affairs and the Minister for Overseas Development announced three new initiatives aiming, first, to train a new generation of black public administrators in South Africa; secondly, to assist the South African police to develop ways of meeting the needs of each community; and, thirdly, when the time is right, to familiarise black political leaders with British democratic institutions.
For all those purposes, the value of our bilateral aid programme will be over £10 million annually from 1992. We contribute a further £4 million a year to European Community programmes for the black communities in South Africa. We shall, as I have said, seek to support the positive measures being discussed by Commonwealth Heads of Government this week. Our forward-looking response to South Africa's development remains a key element in helping it to move towards a negotiated settlement. We hope that the parties in South Africa can begin talks this year towards a new constitution which will bring democracy and freedom to all its people.

Greater Manchester (Light Rapid Transit System) (No. 5) Bill [H.L.]
Returned from the Commons agreed to with amendments; the amendments considered and agreed to.

Birmingham City Council Bill
Returned from the Commons with the amendments agreed to.
House adjourned at seven minutes before nine o'clock.