Lords Sitting of 16 December 1992

Preamble
The House met at half-past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Guildford.): The LORD CHANCELLOR on the Woolsack.

Invalidity Benefit
Lord Clifford of Chudleigh Lord Clifford of Chudleigh asked Her Majesty's Government:
Whether they intend to tax invalidity benefits and whether they consider it justified to withdraw their undertaking to increase invalidity benefits in line with the retail prices index.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde): My Lords, it remains the Government's intention to bring invalidity benefit into taxation at a suitable opportunity. As for uprating, invalidity benefit is statutorily uprated each year in line with prices and we have no plans to change that.
Lord Clifford of Chudleigh: My Lords, I thank the Minister for that reply. However, is he aware that rumours, reports and leaks are as abstract as the source from which they emanate? That is a thought. Even though it may be described as long-term, Tory thought is commitment to the taxation of invalidity benefits. Does the Minister deny that Mr. Peter Lilley, from the other place, stated that it would be difficult to rule out the principle of taxing disabled people? Is the Minister aware of the Disabilities Act passed in 1990 in the United States and similar regulations introduced in Sweden? Will the Government remove this extraordinary, prejudicial barricade of exclusion from the 6.5 million disabled people in this country and discriminate fairly in their favour when thinking of their livelihood benefits?
Lord Strathclyde: My Lords, I entirely concur with my right honourable friend the Secretary of State for Social Security in not ruling out taxation. With regard to the other points concerning people who are disabled, the benefit is for incapacity and is not necessarily a benefit for those who are disabled. People with disabilities can continue to work and lead fulfilling lives.
Lord Ashley of Stoke: My Lords, the Minister seems confident of the case for taxing invalidity benefit. I presume therefore that he can repudiate the following figures: that in the past 10 years average earnings have increased by 20 per cent. in real terms but in the same period invalidity benefit has increased by only 1 per cent. If he cannot repudiate those figures, does he agree that to tax invalidity benefit now would be like kicking a person when he has already been knocked down?
Lord Strathclyde: My Lords, I certainly do not wish to repudiate those figures. They demonstrate that we have maintained our commitment to uprate invalidity
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benefit in line with inflation. As I said in my original Answer, we have no plans to change that. We do not want to make life increasingly difficult for people who claim invalidity benefit. We want people to continue claiming but believe that, as with people who claim sick pay, unemployment benefit, retirement pension or maternity benefit, it should be taxed.
Lord Ennals: My Lords, does the Minister accept that the benefit was introduced in order to offset the accepted additional expenses incurred by disabled people? Has the Minister some reason to believe that disabled people do not now have those additional expenses imposed upon them? Would it not be grossly unfair to an underprivileged section of our society to pick on them in that way?
Lord Strathclyde: My Lords, I wish to differentiate between people with disabilities who can continue to work and do so most ably throughout all sections of our society, and those who claim invalidity benefit. That is quite different and is often a top-up to other income. In the long term there is no reason that tax should not be introduced on that benefit.
Lord Richard: My Lords, will the Minister confirm that it is not a question of not ruling out the taxation of invalidity benefit; it is a question of actively wishing to bring in the policy? Will he also agree that in his letter Mr. Lilley said,
"The taxation of invalidity benefit has been a longstanding policy objective"?
Does the Minister agree that if that is the Government's long-term aim, it is inconsistent with the previous statements made by government Ministers that they want to reduce the overall burden of taxation, especially on lower income groups?
Lord Strathclyde: My Lords, none of that is incompatible. Of course we want to reduce taxation. That still remains our long-term aim. We have already reduced taxation for those on lowest pay and indeed reduced the lowest band of taxation to 20 per cent.
Lord Richard: My Lords, if that is the Government's aim, can the Minister say when they are going to try and do it?
Lord Strathclyde: No, my Lords. It has been an outstanding commitment since 1980. It has yet to be introduced and I can give neither the noble Lord nor the House guidance as to when that might be.
Lord Clifford of Chudleigh: My Lords, I am interested in the last reply. Is the Minister aware that there is still a rumour, which again is a thought which must have passed through the Government's mind, that the possibility of introducing such fiscal legislation will come into effect in 1994? Whether one is fully fit or mentally or physically enfeebled from birth or as a result of an accident, or suffering from any other kind of disease, the Minister must be aware that we must all budget.
Lord Strathclyde: My Lords, I cannot confirm the date of 1994.

Organo-phosphate Sheep Dip: Safety
2.37 p.m.
The Countess of Mar The Countess of Mar asked Her Majesty's Government:
Whether they are satisfied that the instructions for the use of organo-phosphate sheep dips and for the wearing of protective clothing during and after dipping have been adequate since their introduction in 1962.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, the instructions on product labels for the use of organo-phosphate sheep dips are controlled through the licences issued under the Medicines Act. The independent Veterinary Products Committee has since 1972 periodically reviewed the question of sheep dip labels. Whenever necessary, it has recommended revisions in the light of scientific knowledge. At its November meeting the Veterinary Products Committee recommended that a check be carried out to ensure that a consistent approach was being taken by manufacturers on labelling. That recommendation is now being followed up by the licensing authority.
The Countess of Mar: My Lords, I am grateful to the noble Earl for that helpful Answer. But can he explain why sheep dip, which comes with two containers, one with disinfectant and one with sheep dip itself, has on the disinfectant label a skull and crossbones and a warning that it is poisonous and corrosive, whereas on the sheep dip label, although the manufacturers acknowledge that it is harmful and poisonous to humans, there is no skull and crossbones? Also, the instructions are written in uniform print, with no clear outstanding warning to users.
Earl Howe: My Lords, disinfectants are subject to different labelling arrangements from veterinary medicines. However, hazard warnings are shown on some licensed sheep dip products. The check on labelling requested by the independent Veterinary Products Committee in November covers the inclusion of hazard warnings on all sheep dip products.
Baroness Strange: My Lords, can the Minister say what kind of sheep dips were employed before 1962 and what kind were employed on the sheep in Bethlehem over 2,000 years ago?
Earl Howe: My Lords, I am not aware of the precise chemical formulation in either of the periods mentioned by my noble friend.
Noble Lords: Disgraceful. Incompetent.
Earl Howe: My Lords, I understand that sheep dips containing organo-chloride compounds were quite common some years ago. Those have been phased out and organo-phosphates are now predominant in the formulation.
Lord Winstanley: My Lords, irrespective of the wearing of protective clothing, is the Minister aware
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that there have already been sufficient cases of dermatitis and related conditions arising from contact with sheep dip to justify those conditions being registered as an industrial disease?
Earl Howe: My Lords, the noble Lord is quite right in what he says. Sheep dip flu is a recognised condition arising from contact with organo-phosphate compounds. Advice on the protective clothing to be worn is given on the product label and the associated data sheet. General information is also available in a free leaflet from the Health and Safety Executive on protecting one's health. The key point is that the leaflet distinguishes the concentrated formula from the diluted liquid. It is very important to follow the instructions distinguishing the two.
Lord Carter: My Lords, is the Minister aware that in January of this year the Veterinary Products Committee stated that there was no clear evidence that sheep dips caused an unacceptable level of health risk when used properly? Can he explain why now, less than 12 months after that statement, sheep dips which contain phenols are to be withdrawn? Does that withdrawal apply to all dips which contain phenols or are there some still to be left on the market?
Earl Howe: My Lords, as part of the review of licensed products, companies have been asked to provide additional data on product formulations, including solvents and other chemicals present, as well as on the active ingredients. In the case of phenols, the companies concerned concluded that the cost of generating the required data is uneconomic. They therefore decided either to withdraw the products or to remove phenols from the formulation. I understand that that is a decision across the full spectrum of products.
Lord Carter: My Lords, is the Minister saying that the withdrawal is not because of a health risk but due only to the inconvenience of collecting the data?
Earl Howe: Yes, my Lords, the decision to withdraw phenols is an entirely commercial one taken by the companies involved. Details of the implementation of those commercial strategies are of course a matter for the companies concerned.
Lord Zuckerman: My Lords, before regulations were brought in in 1962 for the wearing of protective clothing when organo-phosphorous compounds were used in dips and for other purposes, is the Minister aware that there had been several fatalities? I was in fact chairman of a committee of inquiry set up to look into the matter before any regulations were introduced. Can he tell us whether there have been any other fatalities since regulations were introduced dealing with the use of organo-phosphorous compounds?
Earl Howe: My Lords, I am not aware of any fatalities. But the Government take these issues extremely seriously. It is important that anyone who suspects an adverse reaction to sheep dip should report it immediately to the Veterinary Medicines Directorate. We can only make decisions that are

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based on hard scientific evidence. The Government are trying to establish the scientific facts. If ultimately we find that the products are unsafe licences will be withdrawn.
Earl Baldwin of Bewdley: My Lords, does the Minister agree that it would be a good thing if the attention of GPs was drawn once again to the dangers of organo-phosphate in sheep dip? Does he further agree that in their initial training doctors should receive proper instruction in environmental medicine?
Earl Howe: My Lords, I said in an answer that I gave to the noble Countess the other day that steps have been taken to advise GPs of the issues involved and of the symptoms which occur with organophosphate poisoning. I take note of the noble Earl's comments.
The Countess of Mar: My Lords, does the noble Earl agree that there is a connection between the action of phenols on rubber and the porousness which they create? The particular data sheet which I have states that manufacturers recommend that rubber clothing is worn throughout. Can the Minister make sure that manufacturers recommend something other than rubber as protective clothing?
Earl Howe: My Lords, the type of clothing to be worn when handling these products is a matter for the manufacturers. Phenols are effective solvents and on their own they are capable of attacking rubber. However, when diluted with water they behave very differently and that action does not occur. There is no evidence that protective clothing is damaged by phenols in sheep dips when used in accordance with the manufacturer's instructions.
Lord Barnett: My Lords, can the Minister tell us whether the protective clothing in question is subject to the new subsidiarity ruling or whether we can decide for ourselves?
Earl Howe: My Lords, it is subject to the subsidiarity rule to this extent: it is up to every farmer to judge the conditions that pertain when dipping his or her sheep and to take measures accordingly.
Noble Lords: Good answer.

Homelessness
2.45 p.m.
Lord Stallard: My Lords, in the absence of my noble friend Lord Dean of Beswick and with his full permission, I beg leave to ask the Question standing in his name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what are the latest figures for the number of people registered as homeless, and what is the estimate of those sleeping rough who are not registered.
Lord Strathclyde: My Lords, the latest figures show that in the third quarter of 1992, 35,520 households were accepted for permanent rehousing by local authorities in England. This is a fall of 2 per cent. On
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the figures for the same quarter last year. The 1991 census found that on the night of 21st/22nd April 1991, 2,703 people were sleeping rough in England and Wales, of whom 1,275 were in London. The latest count of rough sleepers in November this year found 419 people sleeping rough in central London.
Lord Stallard: My Lords, we must all be concerned —not just at Christmas time, but throughout the year —about the ever-increasing problem of homelessness. Will the Minister accept that I am particularly concerned about the initiative announced by the Government in the Autumn Statement, which has carried on since, because of the limited period of time? I believe that it is limited to a period of three years and to London. Is the Minister aware that the problem outside London is increasing faster than in London? Does he not agree that it is time that we looked at the position nationally and that we adopted a strategy for housing generally to combat the situation which has now arisen where thousands of people are literally trapped in hostel accommodation because of the unavailability of "move-on" permanent accommodation? Is the Minister further aware that because they are trapped in hostel accommodation, that prevents homeless people being taken off the streets? Would the Minister care to comment on some of those immediate problems?
Lord Strathclyde: My Lords, the noble Lord is right in saying that it is a substantial problem. It is by no means unique to this country. All over the western world and in America we see similar problems in major conurbations of people becoming homeless. It is caused largely by the breakdown of family relationships, marriages and so on. In this country it is largely a problem in London. As the noble Lord recognised, we have introduced a new scheme specifically for London and the South East. But that is not to lose sight of the fact that there are problems in other parts of the country.
Lord Gisborough: My Lords, is my noble friend aware that Westminster Council provides a large number of free beds every night? Can he say to what extent that availability is publicised among those sleeping rough? Has he any idea why those beds are not taken up?
Lord Strathclyde: My Lords, a substantial amount of work is done in central London, particularly in Westminster, through the Government's rough sleeping initiative, which has been hugely successful. It has reduced by a substantial number those who sleep rough in London. Why people do not take up available places is not for me to say.
Lord Mellish: My Lords, is the Minister aware that in London—because it is primarily a London problem —there are hundreds of empty flats owned by local authorities and private enterprise? Can the Minister say why they are not made available?
Lord Strathclyde: My Lords, my honourable friend the Minister for Housing, Sir George Young, is well aware of the problem so neatly enunciated by the noble Lord, Lord Mellish. He has a programme of

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working with the private sector, with other government departments and with local authorities to see what can be done to bring empty homes into use and to allow people to move into them.
Lord Hailsham of Saint Marylebone: My Lords, is it not a fact that the relationship postulated in the Question between homelessness and people sleeping rough is, to a certain extent, misleading? The first is a housing problem—and very important. The other, which is also important, is a social problem. They are not necessarily identical.
Lord Strathclyde: My Lords, my noble and learned friend is absolutely right in his analysis of the problem. Sometimes there are difficulties of linguistics and in deciding who is a "homeless" person and who is a "rough sleeper".
Lord Ross of Newport: My Lords, may I please say to the Government that I recognise that they have—
Noble Lords: Question!
Lord Ross of Newport: My Lords, in recognising that the Government have done something in London towards increasing hostel accommodation—quite substantial sums have been provided—is it not time that the Government did something for places such as Bristol and Leeds, and for the North West and the North East, where, as has been illustrated on television and elsewhere, increasing numbers of people are now sleeping rough? When will the Government allocate adequate funds to deal with the situation in the provinces, and not just in London?
Lord Strathclyde: My Lords, I hope that I answered that point in my Answer to the noble Lord, Lord Stallard. We regard London as being the primary problem, but that does not mean that we ignore the needs of other parts of the country, particularly the cities which the noble Lord mentioned.
Lady Kinloss: My Lords, in the light of the report No Way Back by Centrepoint-Soho, the charity for young homeless, which shows that there has been an increase of 35 per cent. in the number of young homeless people-16 and 17 year-olds—that the centre has seen since 1987, may I ask the Minister what the Government intend to do about these young people?
Lord Strathclyde: My Lords, the noble Lady will be aware that the Government give substantial financial support to the Centrepoint organisation. However, we do not entirely agree with its figures. Of the 419 people sleeping rough in London in November—the figure I gave in my original Answer—only 20 were aged 18 or under.
Lord Murray of Epping Forest: My Lords, while the steps that have been taken by the Government to resolve these difficulties are very limited, they are nevertheless very welcome. However, does the Minister agree that much much more needs to be done to obviate what has become nothing less than a
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national scandal? Will he accept an invitation from the Open Christmas scheme in Caledonian Road to visit that scheme over Christmas and discuss the matter with those who are guests of the scheme? I do not suggest this in any attempt to attack the Government, but in the hope that by discussing things together we might find a solution to an appalling problem.
Lord Strathclyde: My Lords, I understand the noble Lord's sincerity, but I hope that he realises that we are not complacent. Nor do we underestimate the problem. An enormous amount has been achieved during the past three years. New initiatives and new programmes have been put into place. We are working with other departments to look at some of the problems that create homelessness in the first place so that perhaps in the long term we can eradicate what is clearly a difficult problem.
Baroness Hollis of Heigham: My Lords, is the Minister aware that last year 1 million people—that is, a population the size of that of Birmingham—presented themselves to local authorities as homeless? Do the Government accept that only homes can house the homeless? Do the Government therefore accept the advice of the National Audit Office that it costs twice as much to keep a family in bed-and-breakfast accommodation per year as to build them a new home? In the light of that will the Minister urge his colleagues in the other place to permit local authorities to spend all their capital receipts—not just the capital receipts incurred from November this year to December next, as announced in the Autumn Statement—to build the homes that this country needs?
Lord Strathclyde: My Lords, as I have already said, we are doing a great deal to help those who find themselves homeless. We have been very successful in reducing the number of people who are housed in bed-and-breakfast accommodation. That figure fell by 23 per cent. in the 12 months to 30th September. As for capital receipts, over the course of the next 13 months we believe that £1.75 billion will fall into the hands of local authorities—it is money they can spend on their capital operations—100 per cent. of which they can keep.
The Countess of Mar: My Lords, is the noble Lord aware of a recent report which indicates that homelessness in rural areas is accelerating at more than twice the speed of homelessness in urban areas? What is being done about that?
Lord Strathclyde: My Lords, I hope that I have indicated during the course of my answers that we are not complacent that this is just a London problem. We accept that there is a problem in other urban areas and in rural areas. Therefore, our policies are aimed at defeating homelessness wherever it may be found.

The Citizen's Charter and Disabled People
2.55 p.m.
Lord Ashley of Stoke Lord Ashley of Stoke asked Her Majesty's Government:
Whether they propose to amend the Citizen's Charter to include provisions dealing with discrimination against disabled people.
Earl Howe: My Lords, public services should be available equally to everyone who uses them. The Citizen's Charter calls on public sector organisations to take account of the needs of all their customers —including those with disabilities—when setting service standards. Singling out particular groups would undermine this important principle.
Lord Ashley of Stoke: My Lords, is the noble Earl aware that that is not the case? The Citizen's Charter is largely irrelevant to severely disabled people because they are excluded from many of its provisions. They cannot benefit from the improved interiors of agency offices if there is no access for their wheelchairs. Nor, if they are blind, can they benefit from improved concise communications if those communications are not in braille. Will the noble Earl consider asking the Government to scrutinise the Citizen's Charter line by line in company with the disability organisations to identify those areas where disabled people are excluded and to see what can be done to help them?
Earl Howe: My Lords, the Citizen's Charter already commits the providers of services to consult their users and potential users, and to take their views into account in setting service standards and in determining how best to meet their customers' needs. Individual organisations are responsible for ensuring that the needs of all their customers, including people with disabilities, are properly met.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the statement in the Question that there is discrimination against disabled people is not borne out by the facts? Will he make it clear that the Government have every intention of taking care of the needs of disabled people to the fullest extent possible?
Earl Howe: My Lords, I am grateful to my noble friend. Our view is that the best way to tackle such discrimination as does exist is to take practical measures to encourage the integration of disabled people into everyday life. Our record is a good one. It is practical measures that are likely to be effective in improving people's awareness of the issues and in promoting positive attitudes towards people with disabilities.
Lord Allen of Abbeydale: My Lords, is the Minister aware that not very far from this building there is a large block of flats where it is a condition of the tenancy that no one who is mentally disabled should be permitted to reside there? The Government have set their face against establishing a disablement commission on the lines of the commissions for sex
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and race discrimination to which complaints of discrimination can be made. According to what we have heard so far, the Citizen's Charter does not really seem to meet a situation of this kind. What remedy is there for the individual who is discriminated against —it is only one example among many—in the manner I have described?
Earl Howe: My Lords, it is the aim of all public sector organisations to cater for the needs of disabled people so far as is reasonable and practicable. The important thing to understand about the Citizen's Charter is that it is not a charter for specific groups; nor is it an anti-discrimination charter. The intention behind it is that high quality public services should be available to everyone.
Lord Ennals: My Lords, is the Minister aware that part of the concern is that there are certain groups, such as disabled people, who are positively discriminated against and who are not covered by the Citizen's Charter? Does the Minister recall the Bill that was sponsored by my noble friend Lady Lockwood which passed through all its stages in this House? What action has been taken following the passing of that Bill by your Lordships' House?
Earl Howe: My Lords, I cannot agree with the noble Lord's first statement. As I made clear, disabled people are included in the Citizen's Charter as much as any other private citizen. I believe that generalised anti-discrimination legislation would give rise to particular difficulties in its implementation, but we have introduced a number of measures in the fields of education, transport, access and benefits which, taken together, have enabled many more disabled people to get out and about, to become employed and to enjoy leisure activities.
Lord Renton: My Lords, while I fully appreciate all that my noble friend has said, is he aware that the greatest help that the Government could give to disabled people with regard to non-discrimination would be to commend to Members of another place a Bill dealing with the matter which recently passed through your Lordships' House?
Earl Howe: My Lords, I am grateful to my noble friend because I did not pick up that point from the noble Lord, Lord Ennals. The Bill which has passed through your Lordships' House deserves the most careful scrutiny, and of course the Government take full note of its provisions.
Lord Molloy: My Lords, is the noble Earl aware that many local authority buildings and national buildings run by the Government are designed to assist the disabled but that some are designed with little imagination? Some progressive local authorities and government departments do a great deal. Others should be made to follow their example on behalf of the disabled.
Earl Howe: My Lords, it may interest the noble Lord, Lord Molloy, to know—I am sure that he does —that building regulations of 1985, which were amended last year, require that all new public

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buildings should be wheelchair accessible and that provision should be introduced for those who are sensory impaired. That has been welcomed by people who are interested in disability issues.

Business
3.1 p.m.
Lord Hesketh: My Lords, it may be useful if I say a word about this afternoon's debates standing in the names of my noble friend Lord Onslow and the noble Lord, Lord Molloy. As the mover is allowed 15 minutes and the Minister should rise to reply not less than 20 minutes before the scheduled end of the debate, in the case of the debate in the name of my noble friend Lord Onslow it means that all other speeches should be limited to a maximum of 10 minutes. If any noble Lord should speak at greater length he would do so at the expense of subsequent speakers. In the case of the debate in the name of the noble Lord, Lord Molloy, the number of speakers is such that it is not necessary to propose a formal time limit, but I am sure that noble Lords will agree that it would conform with the spirit of these short debates if they would keep their speeches within the 15 minutes which apply to the mover of the Motion.

Business of the House
The Lord Privy Seal (Lord Wakeham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order 44 (No two stages of a Bill to be taken on one day) be dispensed with for the purpose of taking the remaining stages of the Consolidated Fund Bill tomorrow.—(Lord Wakeham.)
On Question, Motion agreed to.

Overseas Aid
3.2 p.m.
The Earl of Onslow The Earl of Onslow rose to call attention to overseas development aid; and to move for Papers.
The noble Earl said: My Lords, I can promise that I shall not keep your Lordships for up to 15 minutes, which will allow others to bang on a little longer than they had intended. I can also promise that I did not arrange for my noble friend Lord Archer to make his maiden speech in my debate solely so as to gain publicity for myself. But I am absolutely delighted that he is making his maiden speech on this important subject. Unlike him, I did not circulate my speech beforehand. I rather wish I had done. But I certainly look forward to listening to what he has to say.
I raise the matter again for debate today with some hesitation as we had an Unstarred Question on the subject on 11th November. The reason I come back to it is that the Unstarred Question of the noble Lord, Lord Judd, was not the Question that needed answering. He asked her Majesty's Government,
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"what level of resources they consider necessary to meet the growing global demands on Britain's overseas aid programme".
Of course the immediate satisfaction of any demand will inevitably lead to further demands which by their very nature cannot be satisfied. The question that has to be asked and thought about is how long development aid should continue. Does it work, or is it counter-productive? Does it support and encourage bad government and allow the continuation of policies of impoverishment?
After all, development aid was invented by the developed countries in 1948. They had gone from Stone-Age to atomic bomb without a single penny of development aid. As was recognised on 11th November last, both by the noble Lord, Lord Bonham-Carter, and by the noble Lord, Lord Desai, these questions come from my reading of the noble Lord, Lord Bauer. He pointed out in his book, Development Frontier, that aid only saves the interest costs of a project and furthermore is better described as government to government transfers. Described thus, it can be removed and discussed without the overtones of sentimentality, charity and guilt.
When we began to talk about the subject, the noble Lord and I, I reacted as I think most of us would: that aid was good for starving children and was equivalent to Christian charity; that it was our duty to help; and that we had benefited from Marshall Aid—all the standard answers that are given. The questions I am trying to raise now are not raised on the grounds that we cannot afford it or that we should not do it. I raise them because I am beginning to be convinced that overseas development aid is actively harmful and impoverishes the people whom it is meant to help.
Perhaps I may explain some of my thinking on the matter. In 1850 GDP per head in the United Kingdom was £25. By 1875 it had gone up to £75 per head. There was no development aid from the United Nations. It came from the Scots' hard work, Irish navvies and English labouring and finance. These things came from what was from our brains and from our ability to continue. Venice did not get development aid from Justinian or Theodoric. Why has a barren island off the South China coast, with no water or natural resources, become Hong Kong? It is interesting to note that when Karl Marx saw a screw made by Mr. Guest of Birmingham, he said, "Ah, but our German people could never make a piece of engineering as good as that". Apart from the fact that he was wrong on that, as he was on practically everything else, Essen did not get development aid or subventions from the United Nations Development Fund. Could it be that the poorer parts of the world remain poor because of culture, history, government, popular attitudes or just straightforward tyranny?
When I listened to the noble Baroness, Lady Chalker, answering the debate last November she gave no indication that it entered the minds of her department to query or question all these 40 year-old assumptions. We must think why countries develop. It is worth looking at the economic performance of various societies around the world. Tanzania, Uganda, Zambia, Ethiopia, Sudan and Somalia are all basket cases of the worst kind. They have all had large

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amounts of Western donatives, both multilaterally and unilaterally. They are all on the African continent, but are racially and culturally different. Egypt has received, and is receiving, large amounts of aid. Some of its economy works beautifully. The private sector, from Galabeer sellers in the souks to travel agents in Luxor hotels, is competent, keen and efficient. The service is so good that it makes Jeeves look like a galumphing heavyweight. They are, above all, charming. But the difference in attitude of state employees whose jobs are safe but who have no inclination to perform is quite marked.
Singapore, Taiwan and South Korea have all had development aid. Did that development aid help, hinder or have no effect on their progress? To bring our focus nearer home, in Italy, the Mezzogiorno has had large sums pumped into it but it is a Mafia-ridden, corrupt, if charming, sink. In the days of its Norman rulers Sicily was a prosperous, well-ordered and peaceful country. Spain and Portugal discovered large parts of the New World. Did Henry the Navigator get development aid from the Hanseatic ports to allow Albuquerque to become Captain General of the Atlantic, Indian and Pacific Oceans? Of course not. But the Hanseatic ports are now having to give large amounts of aid to Spain and Portugal under a provision in the Maastricht Treaty. Money and capital are generated by development. Neither Japan nor Hong Kong has raw materials. The region around Shanghai grows without aid. It grows by hard work and sound money. We must take account of this history and these developments and ask new questions.
Of course there are interests in the continuation of aid programmes. They range from the aidocrats of the UN to the civil servants in our own ODA. Swiss hankers, corrupt third world politicians and honourable men who have been pushing a policy all their working lives will find it hard to question their life's purpose and even harder to accept that it may not just have been unnecessary but actively harmful to the people whom they intended to help. It goes without saying that when someone else pays for something that is necessary, that releases money for other projects. As I have shown in the case of government-to-government transfers, the savings are only the interest payments; the addition to the GNP is marginal and tiny, but the addition to the tax revenues is large and the addition to foreign currency reserves considerable. So it can be seen that aid can be used, and undoubtedly has been, to make it easy for governments to carry out incompetent, tyrannical and economically counter-productive policies.
Sudan has been an enormous net receiver of aid. It persecutes its animist and Christian fellow citizens and its non-Arabic-speaking subjects in a way that brother Boer would never have dreamt of treating the South African blacks. It has pursued economic policies of criminal counter-productivity while being subsidised by English taxpayers.
Tanzania has not been so cruel, but it managed to halve clove production and consequential exports from Zanzibar. It reduced its agricultural output and has received vast sums of Western aid which has been
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of no benefit to its people. Julius Nyerere, despite his air of sanctimonious and holy socialism, managed to spend a large amount of rich countries' poor taxpayers' money while at the same time impoverishing his own country.
Unquestioning attitudes have led to silly anomalies. For instance, during the Falkland Islands conflict the British taxpayer was subsidising the Argentine Government through the UN development programme and so giving aid to the Argentine. That is the same Argentina which during the 19th century developed and expanded at more or less the same rate as that of the US and Canada and whose living standard in the early part of the century was what we would now call first world but who beggared itself by useless governments from the 1920s onwards. They confiscated assets and impoverished their citizens and their profligacy was rewarded by money from outside.
I do not know whether it is recognised that Iraq was in receipt of Western aid until at least 1987. It is unnecessary when someone can run a large army, buy large amounts of guns and have massive amounts of oil revenues for them to be in receipt of English taxpayers' money.
In the previous debate the noble Lord, Lord Desai, said that we should demand and insist on human rights standards by the aid recipients. What happens if no attention is paid to that? Either we then say that we will cut off the aid—and the consequences of that, according to the aid people who want to give aid, is that people become impoverished—or we have to enforce the demand. If we enforce it we are slap, bang back down the road of Peterson Sahib, protector of the poor, of government and imperium, again.
That has already begun in Somalia where US and French troops are beginning to become involved in law enforcement. Some of us might say that that is a jolly good thing and the Somali should be jolly pleased at having a French foreign legionnaire who was probably born somewhere east of the Carpathians and who speaks bad French but does at least stop them being shot at by some rogue Somalis. Mr. Boutros Boutros Ghali is pushing for a UN administration of Somalia. Without law and order and the means to enforce it, even humanitarian or ambulance aid can become harmful.
The thuggery and brutality of the Somali war lords has prospered and thrived upon the bravery, generosity and compassion of the Red Cross, the Save the Children Fund and other humanitarian agencies. Those people have been forced to pay over foreign exchange money to protectionist gangs. What do protectionist gangs do with foreign exchange money? They buy a new Toyota and stick another second-hand anti-tank rifle or a twin-mounted Browning on top of it. The consequences of that are more thuggery, more protection and more horror.
Aid to Bosnia, it could be argued, prolongs the agony by postponing the inevitable collapse, defeat and subsequent ceasefire. For humanitarian aid to work in Yugoslavia, the fighting has to be stopped. Sanctions are obviously not working and could be classed as fatuous. The Serbs do not seem to have broken the habit of a lifetime with their barbaric

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behaviour. We must face up to our choice, which is either to force a ceasefire and Serb withdrawal or to arrange a population transfer, as was done after the Balkan War of 1913. Aid is wasted at the moment.
Your Lordships have heard me previously wax irritated at subsidising Indian navies and atomic bomb programmes. You have listed in patience to my querying £75,000 of aid to Singapore. I hope that your Lordships agree with me that governments the world over—not just Her Majesty's Government—should have the political courage and intellectual vigour to challenge and rethink a 40 year-old dogma. I am not asking that out of a hard heart but out of a soft heart. I care about the state of the world. I do not like seeing the subsidising of rotten governments by Western taxpayers' money to enable them to continue forcing cruelty upon their own people.
I hope that the rethink will concentrate on the sound money maxim of free trade—free trade, above all, in agriculture. When we come to think about aid the answer should be not a penny more and, above all, no pennies less. I beg to move for Papers.
3.16 p.m.
Lord John-Mackie: My Lords, I have at the top of my notes the words, "to be sure to congratulate the noble Earl on raising the subject", but I did not appreciate the sophisticated attitude that he would take and that he would be almost asking us to stop aid altogether. I must admit that his researches were good, and I congratulate him upon that. I also had down in my notes to say what I have said many times before: that well over a billion people are starving. Although I agree with some of the points the noble Earl made about governments not being helpful, those people are still starving. Small children represent a huge percentage of those people. We must overcome the difficulties he has mentioned to get food and aid to those people. I cannot stress that point too strongly.
I believe that the idea that we have enough surplus food in the world to achieve that is wrong. I have been told that there is enough food, but I do not believe that for a moment. I am very much against the fact that we are taking a couple of million arable acres out of production in this country when the situation is as I have just described it.
The debate is about development aid. I am especially interested in development aid. We should first get food aid to the people and then help them so that they do not require it again. Those are long-term objectives. It is important to help people develop their own countries. The noble Earl mentioned the small island in the Pacific that turned out to be Hong Kong. But Hong Kong does not produce a great deal. It deals in a lot of money but it does not produce much wealth in the accepted sense of the word.
I should like to put in a word for the Intermediate Technology development group, which I have been supporting for many years. It does a tremendous job of work all over the world although it concentrates upon Latin America, Northern and Eastern Africa and some other places. The group has a tremendous job to do. It has 250 staff, and the total money received
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which it has available to spend is about £6.5 million. One-third of that is a grant from the Government, another third comes from various trusts and the final third is raised purely by charitable means. That is just over £2 million from each source.
I was talking to the chairman of the group, Mr. Frank Almond, who is quite worried about the money obtained from the Government. It is given every three years. Inflation has decreased, but he is worried as to whether there will be an increase to match inflation in the Government's grant for next year, because it is very much needed. The group relies on trusts and charities to do a little better as well.
Going to these countries is a big task. I have a friend who works for the group. He has been to Venezuela, Peru and other places in Latin America. He said—and I totally agree with the noble Earl, Lord Onslow, on this—that the tyranny of those governments is appalling. He blamed the USA who are taking food from the starving people in those countries and sending back arms to the governments to keep the people down. He thought that that was disgraceful.
I do not wish to say much more except to mention some of the group's activities. It is starting to teach or develop veterinary services and stock feeding in breeding areas of the countries where at the moment there are no veterinary services and many animals die for lack of them. That is one activity. The group assists in developing food production. It is time to find and to encourage people to start and develop new industries in those countries. It is amazing how many people, given a little encouragement and know-how, as well as grants, can develop industry.
I appeal to the Government to ensure that the Intermediate Technology development group receives more money next year.
3.22 p.m.
Lord Beaumont of Whitley: My Lords, we are all grateful to the noble Earl, Lord Onslow, for having raised this important matter today. We look forward to the maiden speech of the noble Lord, Lord Archer.
The noble Earl said that he was basing much of what he had to say—as became apparent—on the analysis of the noble Lord, Lord Bauer. Together with a number of your Lordships, I have devoted quite a lot of time to reading what the noble Lord, Lord Bauer, had to say on these matters. I usually find that his analysis is absolutely spot on. What he says is wrong is wrong, but he then goes on to deduce, as the noble Earl went on to deduce, that there should be virtually no aid at all. The proper solution is that there should be aid but that it should be applied in a different way. It is not that we should abandon helping the poor but that we should learn how to do it rather better than we do at the moment.
I shall attempt, in the few minutes at my disposal, to chart some of the new directions in which I think aid should be applied. I see that I occupy the third slot in the list of speakers and some of what I have to say will be Liberal Democratic policy. I hope that what I say which is not yet Liberal Democratic policy may prove to be so in the future.
The Earl of Onslow: My Lords, have we to guess which is which?
Lord Beaumont of Whitley: My Lords, the noble Lord, Lord Bonham-Carter, will no doubt correct what I have to say in his winding up speech.
The basic problem is summed up in the aphorism that aid is money taken from the taxation of the poor of the rich world and given to the rich of the poor world who then repay it to the rich of the rich world. We must try to see that that does not happen.
The first point I wish to raise is the subject of debt. We must take great pains to see that our aid does not pile up the debt of poor countries to the rich countries. That is clearly wrong and it has bad effects. The British Government have been good in putting forward the so-called Trinidad terms. These should be applied in full and there should be no more building up of debt. That means that although we can use the mechanism of loans to encourage efficiency, nevertheless all aid should be seen eventually as being a gift. The Good Samaritan did not ask the mugged man to repay with interest the money given to the innkeeper.
The second point I wish to make is that aid must be channelled to the poor. It must be channelled in such a way that it does not stick in the hands of the rich. That point was made by the noble Earl, Lord Onslow. It must not, for example, as in a certain well-known case, be used to buy flour for bread for the middle classes when the working classes of a country do not have enough of their staple, rice.
Non-governmental organisations can apply this kind of aid better than governments. I agree entirely with the noble Earl, Lord Onslow, about the trouble one runs into with aid from governments to governments. It should be furnished and channelled through NGOs and aimed at the poor. It is said that less than 10 per cent. of official aid can at the moment be said to be poverty-focused. But the need is great to help the poor. There has been a 25 per cent. decrease in the average standard of living in parts of Africa over the past few years. That is a 25 per cent. decrease from a standard which was not at all high to start with.
Above all, it is important that aid should encourage the trend to ecological economics—economics which are sustainable and which encourage sustainability. These are coming anyway, but if we start the transition early we shall spare both ourselves and the countries which we are trying to help much hardship on the way.
The aid will start by encouraging the growing of food for the native population and not cash crops for hard currency —growing food to feed the people of East Africa, for example, rather than growing carnations to fly out to the Riviera to earn hard currency for things which are probably needed for the middle classes. Aid should be aimed to encourage a drift back to the countryside from the cities and to tie together, both in developed and undeveloped countries, the population of the country and its basic food producing base. It should tie rural populations together. That is something which we in this country need to learn. Since the beginning of the agricultural revolution in this country, we have not had a countryside which is tied to its productive sources,
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unlike the countries of Europe which we often rather sneer at for their less efficient agricultural production, but which, because it is peasant, is rather more tied together.
Above all, there should be an emphasis on primary environmental care; meeting basic human needs; protecting the local environment (for the first class reason among others that we need to protect future production); defending non-renewable resources; and a determination to renew renewable resources. It is no use using renewable resources if one does not, in effect, renew them. There must also be an emphasis on empowering local communities to get together to work out their own salvation on a small scale. Diversity should be, and is, linked to social stability and environmental sustainability. We need to achieve those aims all over the world and particularly in those countries we help.
Finally, I come to a matter which is very controversial, not least among the members of my own party. We are all agreed that dumping should be discouraged, but in my view the whole of the agricultural side of GATT needs to be re-thought. Not only are the French farmers right but the tradition of my party, which was understandable in the days of classical economics, must be re-thought. Free trade like capitalism is only a good thing if carefully controlled. Unbridled, it will destroy the earth, and it will start by destroying the agricultural industries of the undeveloped countries which we are trying to help.
3.31 p.m.
Lord Thurlow: My Lords, I am grateful to the noble Earl, Lord Onslow, for giving us this opportunity to return to the subject of overseas aid. Your Lordships have discussed this matter on several occasions in the past. I would say with respect that the noble Earl is quite right to raise the fundamental questions which underlie the great structure of the administration of aid. He mentioned the seminal work of the noble Lord, Lord Bauer. Some 40 or 50 years ago I was much impressed by the arguments of the noble Lord, Lord Bauer. I was in India at the time and it seemed to me that the efforts of all those engaged in aid administration could be compared to Sisyphus rolling a stone up a hill—it just fell down—or trying to drain an ocean of poverty by dipping an occasional bucket into it. It seemed impossible to me at that time that the race between resources and population could be won.
Since then a long period of time has elapsed and things have changed very much. As the noble Earl, Lord Onslow, said, in many ways they have changed for the worse. There have been terrible examples of appalling government. However, I believe it is a mistake to confuse the economic aspects of aid with the political problems of bad government. To any of us who were involved in the process of the transfer of power from the old imperial days to independence it was inevitable that a great many mistakes would be made and a great deal of sheer villainous government would take the place of colonial administration. However, that does not mean that that is part of the horizon forever. There are grounds for hope, and I for

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my part now firmly believe, that there is a distinct possibility, perhaps even a prospect, that the race between resources and population may be won.
Other noble Lords will speak on the enormous overshadowing problem of population which provides the parameters for the efforts that are being made. However, research, science and technology have in fact now identified the means by which the agricultural and forestry races can be won. They have ascertained that output can be increased far beyond even the appalling rate of increase of population that is predicted.
We are dealing, of course, with method and that brings us to the fact of the enormous gap in knowledge and skills between the developed world and the less developed world. It is surely clear that it is incumbent on the developed world to continue to do all it can to reduce the gap by the transfer of skills. That is the most important single sector of overseas aid. It is a sector that our own government have rightly always placed at the top of their priorities. It is not an easy process of transfer. Finding the right people and giving them the right opportunities is an arduous task which requires a greater input of effort than any of the other more spectacular areas of overseas aid. However, it is enormously worthwhile and it has the greatest long-term results.
As other noble Lords have said, the main question concerns the management of aid. Nothing is perfect but experience is continuously being obtained. The Overseas Development Administration in this country is to my mind the best practitioner of the kind of methods that have proved themselves. Those methods are not set for all time. They are continuously being reviewed and refined. We are fortunate in having the noble Baroness, Lady Chalker, in charge of that department as she has unrivalled experience and wisdom in this field.
I welcome the increased resources that are being given to non-governmental organisations as instruments of our own aid. The amount of money that has been given so far does not amount to a tremendous sum. I believe about £30 million is being given to the NGOs as ammunition. Their absorptive capacity is limited, but I hope and believe that the NGOs will increasingly be able to undertake more tasks as vehicles in the aid process.
The Commonwealth Development Corporation has carried out wonderful work at no cost at all to the taxpayer. The Government lend a certain amount of money for entirely economic projects. It all comes back to the Government and in the past it has done. It is recycled and the corporation gears up anything that is given as loans and multiplies the impact of it enormously. That is an important instrument of aid.
The British Council is, of course, the main instrument, the main agency, entrusted with the administration of our technical assistance. It does wonderful work. I congratulate the Government on succeeding, despite the very difficult budgetary circumstances, in maintaining the resources of the British Council and the Overseas Development Administration this year. Like other noble Lords, I
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hope that we shall get nearer to the target, which the Edinburgh declaration recapitulated, of 0.7 per cent. of GNP for our aid effort. We are a long way from that, and we have nothing to be proud of in this country in respect of the proportion of our resources which we devote to aid. I hope that it will be possible, despite budgetary stringencies, progressively to increase the figure.
One question which concerns me, in our efforts to help with the transfer of skills to eastern Europe and the CIS, is the impact that may have on the aid to developing countries. It is wrong that that new aid should be at the expense of the areas of the world which need aid most. I hope that some means may be found to separate those two quite distinct sectors, which involve totally different objectives.
In short, I hope that the efforts of this country in the field of overseas aid will be maintained and increased.
3.41 p.m.
Lord Archer of Weston-Super-Mare: My Lords, I begin by paying tribute to my noble friend Lord Onslow for initiating this short debate which enables me to address your Lordships on a subject which has been close to my heart since my university days. I wish also to express my thanks to your Lordships for the warmth of your welcome to me in this House and your kindness to my wife and family.
I should like to explain why I have attached the name of Weston-Super-Mare to my title. I spent the first 18 years of my life in that seaside resort. My mother, who was a local councillor, still lives there. Weston-Super-Mare has much to commend it. In particular, I bring to your Lordships' attention an extract from the Lancet of March 1886, which some of your Lordships may have missed:
"The climate in Weston-Super-Mare is equable, with a mean winter temperature above that of London. In fact it is only two degrees below that of Torquay, while it is decidedly more bracing and less humid than the latter place and therefore suits a different class of invalid".
The subject of this debate allows me the opportunity to pay tribute to my noble friend Lady Chalker. The work she does for overseas development is universally respected and her name has become synonymous with the achievements of the department over the past few years.
I believe that our responsibility as a nation to those in genuine need cannot be questioned. For, as every school child knows, at the beginning of this century we ruled almost half the land mass of the world. The cliché that the sun never set on the British Empire was accepted by politicians from Vancouver to Christchurch. I became aware of how that responsibility has changed during the last century when, some time ago, I met a Nigerian chief who told me with considerable pride that his grandfather had eaten an Englishman. He had himself been butler to our High Commissioner in Lagos and his grandson had gained a first-class honours degree from Imperial College.
We are aware that the United Nations has requested the leading industrial nations to invest— and I choose the word advisedly—0.7 per cent. of their gross national product in what is sometimes still

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ineptly referred to as the third world. Although we have not achieved that target we now have the fifth largest aid programme in the world and we shall be spending nearly £2 billion in 1993.
My noble friend Lord Onslow seems to doubt that the money is well spent, but I suggest to the noble Baroness, who is to reply on behalf of the Government, that even during a period of recession there can be no excuse for neglecting our responsibility to the developing world. For as we approach the end of a century we can be certain of one fact. There will continue to be cyclones, earthquakes, droughts and epidemics where aid in various forms will be desperately needed. There will be civil strife, rebellions and wars where our influence and authority will still be called upon, although I accept that however much money is spent and however much political influence we bring to bear we shall never be able to supplant the dedicated nurse who tends the wounded on the borders of Somalia, the surgeon who performs miracles in the shanty towns of Uganda, the Oxfam worker who drives through impossible terrain to ensure that food reaches a tiny village facing famine in Bosnia, and the Red Cross officer who injects new-born children in Ethiopia to protect them from the ravages of polio and tuberculosis.
That was brought home to me vividly by my elder son, who spent last summer working in Calcutta with the Missionaries of Charity under the direction of Mother Teresa, and this summer in the mountains of northern Iraq with Kurds who were still cut off from their villages which had been devastated by Saddam Hussein.
The young so often have the ability to confront us with something that is staring us in the face. My son returned from northern Iraq to tell me that all the Kurds really wanted was the chance to vote for those who ruled them and how they envied the British that simple privilege of democracy. It should not be a privilege. The Mother of Parliaments may be a casual phrase in the corridors of your Lordships' House, but it is appalling that democracy remains unattainable to the shopkeepers of Shanghai, the coffee growers of Kenya and the gauchos of Argentina.
At last, from Kazakhstan and Armenia to Moldavia, the once-enslaved peoples of the old Soviet Union are tasting the first fruits of democracy. Across South America, the small farmers of El Salvador are trying to build that democracy from the ravages of war, the Nicaraguans are groping forwards after a decade of Marxism, and the largest countries on that continent—Brazil and Argentina—are shaking off the legacies of dictatorship. Even in Africa the Nigerians are grappling with a new constitution, the Kenyans are poised for a multi-party election, while South Africans of all colours are edging hopefully towards a democratic state. In Asia the budding entrepreneurs of Shanghai and Canton are yearning to shed the communist yoke. Even the last grim trio of old-style pro-Soviet communist dictatorships—Cuba, Vietnam and North Korea—are beginning to buckle under the advance of freedom.
We are told that we live in a dull age. I shall have none of it. To have witnessed the collapse of
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communism in the Soviet Union, the dismantling of the Berlin wall in eastern Germany and the emergence of electoral reform in Hungary and Poland convinces me that the next generation will see democracy flourish in many countries that we must have considered beyond hope. Certainly, that is the belief of my elder son. On his bedroom wall is a photograph of a young Chinese student standing courageously in front of three tanks where, in my university days, there would have been a picture of Martin Luther King leading a civil rights march into Alabama.
Lest your Lordships should imagine that the Archers are a family dedicated only to service, I feel that I should point out that while my elder son spent the last two summers in Calcutta and Kurdistan my younger son spent the same holidays in Monte Carlo —with a blonde from California with very long legs.
I conclude on what I hope will not be considered a controversial note. I have been told that your Lordships' House prefers the more courteous and sedate approach when stating one's case. I shall attempt, however unnatural this may be for me, not to disappoint your Lordships. However, should I come across any cause that I believe warrants your Lordships' support, any injustice that demands your Lordships' redress, or any unfairness that requires your Lordships' wisdom, I will not hesitate to bring it to the attention of the whole House. I will at all times try to live up to the reputation of your Lordships' House as expressed so eloquently by the Scottish bard, Robbie Burns:
"Princes and Lords are but the breath of kings,
An honest man the noblest work of God".
3.51 p.m.
The Earl of Longford: My Lords, it is a genuine pleasure to follow the noble Lord, Lord Archer. When I was in publishing, I once asked a famous literary agent which author he would prefer on his books more than any other. He said he would prefer the noble Lord, Lord Archer. I said, "What has he got that most of our other authors haven't?" He said, "He makes you turn over the page." That is obviously a great asset in a writer. I look round the House, which has many writers. I believe that here the noble Lord will have the capacity to make people listen to him. It is a convention that no one should leave the Chamber during a maiden speech. I am sure no one would have wished to leave during the maiden speech of the noble Lord.
The noble Lord paid this House the great compliment, as reported in The Times, of making nine drafts of his speech. I do not know whether, had he made only eight drafts, the speech would have been shorter or longer. But it could not have been any better. Having been a student of his books, I realise that his aim is to be the first among equals. He will understand the allusion. But he will no doubt be well aware of the instruction in the Gospels: if you want to be first, you have to be like him who serves. I am sure he will serve this House most effectively in the years to come.
The noble Earl, Lord Onslow, is the kind of Peer of whom we need more in this House. In a sense, if he

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had not existed, it would have been necessary to invent him. It is what people imagine the House of Lords to be made up of. His views are undoubtedly those which the popular press associates with your Lordships' House. He takes the view, as I understand it, that if you hand out money to a poor man you almost certainly do him harm. It is a convenient doctrine. We all know how difficult it is, when you see someone in the street and he wants your money, to say frankly, "In your own interest, my dear fellow, I'm afraid I must keep my wallet in my pocket." The noble Lord has a philosophy about all this which is quite profound and needs stating. Most of us are so shocked compared with the noble Lord. I am afraid I do not agree with him.
The Earl of Onslow: I did not say that at all. I asked: is it a good idea to give money to the rich man who is oppressing the poor man, because none of it is going to get to the poor man? That is where the noble Earl, Lord Longford, has totally misunderstood what I was saying.
The Earl of Longford: The noble Earl can interpret his own speech in his own way. I have heard him twice and I am afraid I regard him as standing for a point of view that went out in the 19th century. We need more of that kind of thing here if only to make us think a little harder about why we believe what we believe.
If we take the noble Earl's point of view about aid, I do not know, but probably he is very pleased with the record of the Government. He is not the only one who is perhaps pleased. I am sorry that the noble Baroness, Lady Chalker, is not here—although in a sense I am not sorry that we are to be addressed by her much admired substitute, the noble Baroness, Lady Trumpington—because I wanted to quote something that she said on a previous occasion. She would not say anything that she did not believe, and she said, at col. 309 on 11th November, "Our record is sound." That is the record on overseas aid. I do not know whether it goes back to 1979, or to 1991.
Does any Christian in this audience really believe that the record of the Government has been a Christian record since 1979? I shall not bother noble Lords with facts quoted at the time. The proportion of overseas aid has fallen since 1979 from 0.51 per cent. to 0.32 per cent. Is anyone proud of that? Is that a sound record? I am ready to give way to anyone who rises and says, "That is a good show. That is just the way we want it. Bring it down a bit further, if we can set about it along the principles of the noble Earl, Lord Onslow." I say it is a disgrace.
The record since 1979 is a disgrace. That is my point of view, and one which I think is widely shared now. In the last debate all sorts of grave forebodings were uttered about the cuts to come. On the whole, I suppose, a sigh of relief has gone up, as it might from a man who has been condemned to be hanged and is then told that his sentence has been commuted to life. It is that sort of relief. It is difficult to know, but the noble Baroness, Lady Trumpington, will tell us whether it is true that in the next two or three years
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real development aid will be cut. It would appear to be so, but everybody can play about with the figures. That would appear to be the case. It is not so bad as it might have been, but it is very bad. That is the way I would approach the subject.
I have had most of my time already, so I shall say just a few more words.
Noble Lords: You have 10 minutes.
The Earl of Longford: I have had half of that. The longer we go on talking, the less remains. I shall just say one word from the point of view of CAFOD. The Church of England is not speaking here today, I am sorry to say, as it is very strongly represented in all these areas. Perhaps some Roman Catholic dissident, or some Anglican defector for about 50 years can say just a word about CAFOD. I realise that CAFOD works in relief with all the Christian bodies.
I am not clear whether the noble Earl, Lord Onslow, will refuse to admit the full implication of his words but the general implication is that overseas aid does more harm than good. That is his general implication. I say only that no one can prove that in a few minutes. I take just one particular example from CAFOD; there are many other examples. The conservation based rural development project for the Adami Tulu district in Ethiopia commenced in January 1988. The situation there was absolutely hopeless. It suffered five years of failed harvest and everything went wrong; now it is exporting food. Perhaps we may take just that one example. Of course it does not prove that all aid is being well spent. But I think the noble Earl, Lord Onslow, has done his bit. He has outraged us; he has outraged everybody with any conscience. But he has done a good job in making us think for ourselves. Let us thank him and go on with the Christian task of increasing overseas aid.
4 p.m.
Lord Selsdon: My Lords, the debate has not gone quite the way I thought that it would. In a provocative way my noble friend Lord Onslow advised us that the title of the debate was unjustified. Other noble Lords made comments which made me think again about what I should say today.
This morning I had the privilege of being in Westminster Abbey at a service for the children of courage, who came later to the Palace of Westminster. They were received by Miss McWilliam at a grand children's party downstairs. During the service there were a few prayers and we thought of the afflicted children present. The prayers were for people with even greater afflictions in other countries. I tried to recall an old psalm:
"Hungry and thirsty their soul fainted in them and they cried unto the Lord in their trouble and he delivered them from their distress".
That psalm is for distress at sea. It is the origin of the cry for aid in distress—"mayday, mayday, mayday" —adopted as the international call. In almost every newspaper, almost every day, one sees a picture of a thin impoverished child threatened in whichever country. To say that there is no need for aid is almost as bad as saying that there is no need for man.

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My noble friend Lord Archer has great power with the written word and today he demonstrated that he has even greater power with the spoken word. He and his speech have something in common. We expected him a long time before he arrived and we were advised that his speech would be made long before today. But in 10 brief minutes he encompassed the world and reminded us that there are several kinds of aid. One refers most frequently to humanitarian or genuine aid. Why is such aid necessary? Whether derived from the sea, or not, it is based historically on natural disaster; for instance, flood, famine and pestilence. They have recently been replaced by a new form of disaster which one might call simply "political disaster".
The changes in politics around the world have caused a great deal of disruption to many countries, some of which had historic stable positions. However, today incitement, internal distress and internal war leads one to ask what has happened in the aid world. When we had East facing West and a Cold War we were faced with examples of another type of aid called "military aid". For whatever reason East and West reinforced countries in the second and third worlds with arms. That military aid was suddenly switched to humanitarian aid in a way that I find difficult to absorb or to understand. It seems that today we spend more money on sending troops to ensure that aid gets through than we do on the aid itself. Perhaps, therefore, the distribution of aid has caused the greatest problem.
I believe that in future we need to rethink the situation. Humanitarian aid, or aid for distress, can never he forgotten and must always be needed with regret. However, thereafter we are talking of a new kind of aid—indeed, I would drop the word "aid" and use the phrase "development assistance". In that respect the United Kingdom appears to be taking a lead based on its past and on its recent rethinking. One of our first aims and ambitions is to try to eliminate political disaster by assisting, through our own know-how and the strength of our institutions, those countries which are in distressed and disturbed situations to regain stability and productivity.
That calls not so much for humanitarian aid but for development assistance. First, it calls for assistance in the organisation and structure of institutions that within the framework of democracy, however defined, will permit a nation to develop its own national resources, whether mineral, agricultural or human. Thereafter it can generate foreign exchange and reserves, which is easy once that productivity is put in place.
I refer now to the Know-How Fund which was created in 1989 in order to assist Poland as it moved towards democracy. Some £25 million was first committed to the fund and that was increased to £50 million. It was then extended to cover all eastern and central Europe and more recently Albania. That fund is not lively reported upon but I draw your Lordships' attention to its recent annual report, which comes under the Foreign Office. The fund has done a great deal of good in a relatively short period of time. It has made available large amounts of money and in terms of investment studies and so forth its budget has
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supported some 250 applications from British companies, mostly in the private sector, to start new ventures in those countries. Investment, together with political stability, will help to reduce the need for aid world wide.
Another instrument, which has been referred to in previous debates, is the Commonwealth Development Corporation. That body was set up originally for the Commonwealth. Indeed, some 70 per cent of UK aid still goes to Commonwealth countries. Without any real drain on the public purse that corporation accounts for an expenditure which is equivalent to 20 per cent. of the total bilateral aid budget. Your Lordships may not realise that it pays interest to the tune of some £25 million per year and corporation tax of some £15 million per year. The Commonwealth Development Corporation and the Know-How Fund could, if they were allowed to operate in broader fields, be instrumental in encouraging increased development and investment world wide. Will my noble friend consider broadening the concept of the Know-How Fund to include countries outside eastern Europe? At the same time, will she consider broadening the brief and the mandate of the Commonwealth Development Corporation in order that it may operate in a wider range of countries?
With those two suggestions comes the possibility of private sector investment. That is a real possibility because we are not talking about the third world; we are talking about the second world and countries with enormous natural resources. They have a real demand for manufactures and the ability, with trained and potentially trainable labour, to make a real contribution to the redevelopment of world trade.
One of the Government's policies—indeed, it is that of any government—is to say that trade will encourage development almost more than anything else; hence the importance of GATT. But trade without the investment which follows it will create a weak base because development through investment is vital.
I return to a situation that we face at home. We have a recession yet there is a demand for our goods and manufactures in many parts of the world. There are instruments of government which can encourage the development of that trade. There is the Export Credits Guarantee Department, which needs reinforcing and strengthening. I understand that approximately £100 million is to be committed to the aid trade provision about which my noble friend may comment. I should like to know where and why. At the same time, our contributions to multilateral agencies have been growing. We are still short of the perceived target of 0.7 per cent. I commend to your Lordships a document which I tried to obtain earlier and which should have been available in this House a week ago. It is a copy of the latest British aid statistics and is worth while thumbing through. It demonstrates the breadth of our aid programme world wide.
I tried to find a quotation which was appropriate to more than distress. I found a verse by a Mr. Banks which reads:

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"For the cause that lacks assistance,
For the wrong that needs resistance,
For the future in the distance
And the good that we can do".
4.9 p.m.
Lord Alport: My Lords, I thank my noble friend Lord Onslow for initiating the debate. Perhaps your Lordships will forgive me if I recall that the motive of the United Kingdom in providing overseas aid derived originally from our sense of responsibility for our colonial empire. As colonies became independent and as their need for development increased, so our aid effort was extended.
Aid was originally the responsibility of two departments of state: the Commonwealth Relations Office on the one hand and the Colonial Office on the other. At the same time the CDC—the Commonwealth Development Corporation—to which reference has been made in previous speeches, was set up to initiate and invest in projects which would contribute to improving the standard of living and economic viability of newly-independent, undeveloped countries of the Commonwealth. Great care was taken in those days to ensure that aid and investment had no political strings attached, and was seen by the recipient countries for what it was intended to be, only a direct contribution to their development and improved standards of living.
It was to give added emphasis to this that the Department of Overseas Development was set up in the late 1950s, separate from the Foreign Office, the Commonwealth Relations Office, and the Colonial Office. In recent years, however, the fact that overseas development has become part of the Foreign and Commonwealth Office has meant that the provision of aid has become increasingly a means for supporting British foreign policy overseas. Aid is given, or perhaps tends to be withheld, partly to the extent to which Her Majesty's Government approve or disapprove of the policies of the recipient governments, as opposed to the extent to which the aid is needed to improve the lives of the people over whom they rule. Partly it is given in order to support British commercial interests in the country concerned.
Aid is no longer directed solely towards the development of the under-developed countries of the Commonwealth, and so we find that the Commonwealth Development Corporation cheerfully invests, for instance, in the prawn industry in Thailand and in the telecommunications system in Ecuador. I totally disagree with my noble friend Lord Selsdon, who wished that process to be extended.
It is worth drawing your Lordships' attention to the extent to which British overseas aid policy has changed, because it has two results. First, it weakens an important element in the relations between the United Kingdom and the third world countries of the Commonwealth. Secondly, by linking aid to political influence it will increasingly be seen by those who receive it as a new form of colonialism.
As we know, the road to Hell is paved with good intentions, and there is today a very good example of the connection between aid and politics in Somalia.
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Thousands are dying of starvation. To help them to get the food they need 30,000 American troops have been sent to take control of the country and in the hope of enabling food to get to the starving, to disarm the gunmen, to restore some sort of law and order. It is clear from what the Secretary General of the United Nations has said that it is hoped that thereafter Somalia will have established indigenous representative institutions acceptable to the world—that is, of course, to Western opinion—as seen through the eyes of the United Nations.
Anyone who knows the clan system and character of the Somalis knows that unless Somalia becomes a sort of United States or United Nations mandate, to use an unfashionable term, if the American troops withdraw in a month or even in six months' time the warlords will be back in business and the gunmen back on the streets in a matter of days. I am not in any way decrying the American effort. It is the sort of thing we might have done in the last century. After all, British penetration of East and West Africa was largely the result of a great humanitarian effort to end the slave trade.
If, as some noble Lords have argued, aid should be used to promote human rights in a country—that is, the release of political prisoners, or the institution of political forms along lines acceptable to foreign eyes —then, to insecure and suspicious governments in the third world, and particularly in Africa, a new form of colonialism will seem to be starting. The United Kingdom should be extremely careful how far it allows itself to become involved in using aid as a means of achieving political objectives, whether under the auspices of the United Nations or of the European Community. After all, we have had a long and successful experience of being an imperial and colonial power, but the world today is not the world in which our empire was created. We can still try to provide aid where it is needed. We can still use our very real influence through diplomatic means to ensure human rights and ordered government. We can stop the supply of arms. But if we allow our aid effort to drag us into situations which require military action and the assumption of political responsibilities in overseas countries, our whole aid policy will become discredited. If there is to be a new era of humanitarian colonialism, I believe strongly that Great Britain of all countries should ensure that it does not become involved.
4.16 p.m.
Lord Reay: My Lords, like other noble Lords I feel and regret the absence of my noble friend Lord Bauer from this debate. As my noble friend Lord Onslow acknowledged in his audacious and provocative speech, he derives the core of his ideas from the brilliant and illuminating writings of my noble friend Lord Bauer. I have often wanted to ask my noble friend Lord Bauer why he thought it was that a radical Conservative Prime Minister like Mrs. Thatcher, as she then was, should have sent him here yet never sought to put into practice the only possible policy that could have followed an acceptance of his ideas; namely, the abolition of the aid programme.

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Perhaps the answer lies in politics. We want to give aid like we want to give to charity. We feel it our duty. It clears our consciences. We do not want to achieve anything by it. So when my noble friend Lord Bauer, or my noble friend Lord Onslow, can demonstrate that we achieve nothing, or that what we achieve is actually harmful, we are perhaps not as concerned as we might be. If that is the case, then the Government should assume, as rightly they have assumed, responsibility for doing all they can to ensure that the money spent on aid is well spent.
Speaking for myself, I was delighted and relieved that the overseas aid budget was left intact in the recent public expenditure round. I would congratulate my noble friend the Minister on that. The modest financial saving that might have been made would surely not have been worth the outcry that would have followed. The record of this Government on aid, I would suggest, has been excellent. Although the aid budget had, of necessity, to suffer when across-the-board cuts in government expenditure were made in the early 1980s, subsequently it was allowed to resume its increase, adding 8 per cent. in real terms since 1987–88. Today, our aid programme runs at well over £2 billion a year. We can be proud of the fact that it is the fifth largest programme in the world. It is also widely praised for its quality, for being well targeted, and its expenditure well controlled.
We are lucky that we have, or the developing countries are lucky that we have, outstandingly efficient voluntary organisations. The Government have done well to introduce considerable conditionality into the distribution of aid, and here I cannot follow my noble friend Lord Alport. Pressure is now put on aid recipients with unimpressive records to open up their countries to foreign investment, to liberalise their trade, and to clean up their administrations. Indeed, an increasing part of our aid rightly goes on helping countries in those areas.
The idea of attaching political conditions to aid was once indignantly rejected as imperialist by most developing countries. But with the collapse of the Soviet Union has collapsed also any credible alternative to the capitalist system in the eyes of developing countries. The ways of the West are not repudiated as they once were. Many elements in developing countries approve of the fact that conditions should be attached to aid, seeing it as a means to help them secure better government.
In pursuing this line the Government have been in tune with the development of opinion within the European Community and OECD. Indeed, I believe they have given a lead.
Nevertheless we must remain clear in our minds about which of our policies bring the most benefit to the developing countries. It is the expansion of trade which brings the greatest benefit to developing countries and indeed it is they which, above all, benefit most from the growth of trade. To take an example from United Nations figures, world trade in manufactures multiplied by a factor of seven in the years between 1970 and 1986. At the same time the share of the developing countries in that rapidly expanding trade grew from 3½ per cent. to 13 per cent.
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It was that phenomenon which produced the NICs in Asia; in our lifetime they have been low-income developing countries. It is the observation of that phenomenon which has helped to make developing countries more favourable to the process of trade liberalisation.
The story of the liberalisation of trade will not end with the Uruguay Round, whenever that is completed. Plenty of trade barriers will still remain on agricultural products and textiles, for example, although progress is being made. The fight for free trade—of such crucial importance for the countries of central and eastern Europe—must be maintained. I know the Government will maintain it, and I hope they will continue to enjoy the support of the parties opposite. In my view, however, little service is done for developing countries by harping on the degree to which donor countries have failed to reach the United Nations target of 0.7 per cent. of GNP. Personally, I regret that we ever subscribed to that target. It simply encourages an attitude of dependency in developing countries and gives currency to the belief that our generosity, and not their efforts, holds the key to their future development. It is also a particularly misleading target, since a country could progress towards it by shrinking its economy, without of course any benefit to the developing countries.
Our appearance in this league table, however meretricious it is, on a level with Switzerland, Japan and way above the United States, nevertheless seems to me eminently respectable and generous. Our aid programme began as a post-colonial phenomenon, as money which we spent largely, to the tune of 70 per cent. or so, on Commonwealth countries because we were loath to say goodbye altogether to empire and its obligations and ties. Today our feelings towards the Commonwealth have changed, they are less intense. But meanwhile, as the world has integrated and the spread of information has been revolutionised, the British public is daily reminded of the extent of suffering in aid-receiving countries. I doubt whether the public would welcome—certainly it does not seem to demand—a major cut in our aid budget.
Meanwhile, a new horizon is rapidly opening up closer to our own doorstep. The needs of the countries of eastern Europe and of the former Soviet Union are pressing themselves ever more urgently on our attention. We cannot ignore them. We must do everything we possibly can to give them access to open markets and help with the building of those institutions, skills and habits which are necessary for the proper operation of a democratic capitalist system.
They, the countries of central and eastern Europe, must come to play a more important role in, and receive a greater share of, our total overseas assistance programme. We must help them help themselves. We cannot do it for them—a lesson which to this day we probably have not fully learnt so far as Commonwealth countries are concerned. But in the future they too, and we in our relationship with them, will have to take aboard that truth.
4.24 p.m.
Viscount Craigavon: My Lords, obviously I am grateful to the noble Earl, Lord Onslow, for introducing this debate. If I may say so, I think he was slightly ambitious in introducing such a controversial thesis—almost a philosophical thesis—into such a short debate. I had the chance, some years ago, of taking part in a debate with the noble Lord, Lord Bauer, on population. That is the subject I am mainly going to speak about today. The noble Lord, Lord Bauer, decided that he had not got the better of the debate on the Floor of the House and he continued a correspondence with the Minister for the following six months, which the Minister then circulated to the speakers. So I had a very good idea of how controversial is the thesis which the noble Earl, Lord Onslow, is now advancing.
As the noble Lord, Lord Beaumont, has pointed out, I think there are definitely two sides to this argument. However, I certainly would not criticise him for raising it in this way although the actual circumstances do not give the chance for a proper debate on this subject. I should like particularly to focus on one area, which is the responsibility of the ODA: that is its Health and Population Division. I believe that area underpins much of the work of the ODA generally, especially for the long term. I should like to advocate to the House in general and to the noble Earl, Lord Onslow, in particular, that money spent in this area is money well spent. I believe progress can be made on this. The noble Lord, Lord Thurlow, used a rather graphic phrase referring to the overshadowing problem of population. I do not personally think of it like that, but there is a considerable problem to be addressed and I believe that the ODA is attempting to do so.
May I first express a welcome to the noble Lord, Lord Rea, on the Opposition Front Bench. He has been a very considerable and well-informed supporter of population in the area in which I have been involved over the last few years. I know that he is not an uncritical supporter, but it is very welcome to see him on Labour's Front Bench.
I should like to refer to a quotation from a United Nations agency, to be found in the excellent and highly readable booklet produced by the ODA last September, entitled Action on Health and Population. Significantly, the quotation does not come from the United Nations Population Fund but from UNICEF and it says:
"The responsible planning of births is one of the most effective and least expensive ways of improving the quality of life on earth".
The commitment of the Minister, the noble Baroness, Lady Chalker, in this field is widely acknowledged. To me she seemed to be taking the lead in Europe, both in the preparations for the Rio Summit and in the recent excellent resolution under her chairmanship of the EC Development Council on Family Planning in population policies in developing countries. This resolution was a considerable achievement in focusing the thoughts and maybe the actions of our European partners in this particular area.
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In this resolution it is useful to see that while recording the progress that has been made in making family planning more widely available, it has been noted and accepted by our European partners that:
"It has been estimated that 300 million women and men worldwide would like but do not have access to the means freely to plan the number and spacing of their children".
That is reflected in the frequently used but nevertheless effective slogan of the ODA: "Children by choice, not chance."
The second part of this Development Council resolution is entitled "Framework for Action" and it acknowledges the pressing need for increased activity in this field. It says:
"Resources are relatively scarce in relation to needs".
The various initiatives and priorities mentioned will be followed up both before and during the next Development Council meeting under Danish chairmanship. It is reasonable to hope that this resolution will help in galvanising at least some of our European partners in this field.
In trying to set an example, how do we and the ODA fare? Our level of funding for population activities has recently improved slightly and is now just over 1 per cent. of the ODA budget. It would be difficult at this time to ask for more new money, but I would hope that within the existing ODA budget a significantly greater proportion could be directed to population activities.
I welcome the considerably increased support for the United Nations Population Fund, UNFPA. The increase has been of about 50 per cent. over the past two years. It is very likely that both the UNFPA and the IPPF, which is the International Planned Parenthood Federation, will benefit significantly from the change of American attitude following the change in American leadership. The prospect of the re-entry of the United States wholeheartedly into this field gives some small grounds for optimism. I say that not just because of the prospect of further dollars being devoted to this field but because the United States have considerable influence in certain parts of the world, and their guidance and moral leadership in this area—to the extent people agree with that phrase—is needed at the world population conference to be held in Egypt in 1994.
In this country some significant figures can be seen in the Answer to my Question for Written Answer on 26th November asking about the level of ODA grants to United Kingdom NGOs in the past three years. The ODA has rightly given encouragement to the excellent work of Marie Stopes International with a substantially increased grant. The ODA has also tried to encourage some of the larger development NGOs to consider the incorporation of population elements in their existing and future programmes. That practice is becoming much more common and acceptable. One of the major international development agencies of which I have particular knowledge is CARE. That body is currently making population one of its priority areas. The increasing importance of the role of NGOs, which was touched on by the noble Lords, Lord Beaumont and Lord Thurlow, was stressed by the move of the Prime Minister at the Rio Summit to call a follow-up international meeting of NGOs next year

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in Manchester. It is recognised that the commitment and involvement of all the independent sectors is critical to the effective implementation of the agreement signed at the Rio Earth Summit.
Despite the considerable efforts and plain speaking of the Minister, the noble Baroness, Lady Chalker, at Rio the role of population was unfortunately downgraded. I know that the lead ministry in the follow-up conference as at Rio is the Department of the Environment, but I hope that the Minister will convey to her colleagues the very strong feeling of just about everyone involved with population organisations that it is essential that population is put back firmly and formally onto the agenda at the Manchester conference.
As my earlier UNICEF quotation implied, those of us who talk about the urgency of population are not just talking about numbers but about quality of life —for example the spacing of wanted children with a chance of proper nutrition and care. To those who were prepared to listen at Rio that message and its connection with the environment got through. The enormous unmet need for family planning has been agreed. The existing money allocated to this area by the ODA is well spent. We are most fortunate in our Minister. I hope that she will be able to keep up the recent momentum by allocating a higher proportion of the existing ODA budget to population activities. Population aid necessarily has its main benefits in the long term, and in this particular field we cannot afford the short-term option.
4.33 p.m.
Lord Bonham-Carter: My Lords, I should like to join others in thanking the noble Earl, Lord Onslow, for introducing the debate, even though I find myself in disagreement with almost every sentiment he uttered. Equally, I have great pleasure in following the noble Viscount, Lord Craigavon, with whom I find myself in very general agreement.
One thing the debate demonstrates is that debates change nobody's opinion whatsoever. We debated this subject on 11th November and a large number of the people who are speaking today spoke then. They all spoke in exactly the same spirit and used the same arguments that have been used this evening. I propose to follow in those admirable footsteps.
I must admit it is a very odd time to be discussing the theoretical pros and cons of aid, for however seriously one may take the arguments developed by the noble Lord, Lord Bauer, in the 1970s it was in the 1970s that he developed them. As I tried to point out at the last debate—with which I think the noble Earl, Lord Onslow, agreed at that time—emergency aid is different from long-term development aid; it falls into a different category from long-term development aid. Thus, the Bauer doctrine does not apply to it.
What seemed to me to be wrong about the speech of the noble Earl, Lord Onslow, was that he failed to establish the link between aid and the evils which he deplored. Aid may have been given to governments guilty of many sins of commission and omission, but it does not follow that aid caused those sins to be committed. The fact that Britain got rich in the 1850s
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without overseas aid does not mean that the absence of overseas aid made Britain rich. The fact that people survive without doctors and medicine—as I am sure the noble Lord, Lord Rea, will agree—does not mean that doctors and medicine have not helped some people to survive. The fact that many people under medical care die does not mean that doctors are always responsible for their deaths. It was that logical gap in the noble Earl's speech which made me find his arguments intellectually unconvincing, even if they might also have been emotionally unconvincing—as they were.
To be discussing this matter is very peculiar when the world is awash with areas that require overseas emergency aid quickly and on a massive scale. The three main areas in question are: Somalia, Bosnia and Southern Africa. In the case of Somalia and Bosnia the situation has deteriorated in the past year. In the case of Southern Africa there has been rain, but whether it is enough nobody knows. Even if the rain is enough Southern Africa still suffers from the consequences of the most appalling drought in living memory, the conflicts that have wracked that region of the world, AIDS and the impact of world recession. For all those reasons we must look at aid to Southern Africa with great care because it remains very high on the agenda. We must ask whether government policy measures up to the very serious demands which have been made by those three areas—not to speak of Bosnia and eastern Europe—all of which require substantial investment from this country, much of which goes under the name of aid.
The plans revealed in the Statement in November show a nominal increase in overseas development aid to the south in 1993–94 but a freeze in 1994–95 and 1995–96. I do not think that those concerned deserve the praise which the noble Lord, Lord Reay, gave them. The freeze means that there will be a fall in real terms by the amount of inflation and because of the consequences of devaluation, as explained vividly and compellingly by the noble Lord, Lord Bridges, in the last debate. I conclude that it cannot be right to freeze aid in 1994–95 and 1995–96 but that at the very minimum the level of aid should be maintained in real terms, not only for humanitarian reasons.
Here we come to the very interesting point made by the noble Lord, Lord Alport. It is undoubtedly the case that the aid we are giving now and have given for the past few years is not only for humanitarian purposes but for political purposes. The fact of the matter is that in many countries of Africa there are signs of moves towards more open and democratic government, which I think all of us applaud.
It is true also that to introduce the political reforms which those countries are trying to do, is an extremely difficult operation—perhaps one of the most difficult upon which society can embark. What is certain is that it is almost impossible to make those changes at a time of economic crisis with standards of living falling and enormous economic pressures present. Therefore it seems to me to be right and proper that at such a time we should be aware of the strains and pressures with which the leaders of those African countries are faced. We should give aid to ameliorate them.

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That does not seem unwise, even though it may be called neo-colonial. We are pursuing precisely the same policy in central and eastern Europe. The reason we are giving large sums of money through the Know-How Fund—substantial amounts, though perhaps not enough—is precisely because we want to support the changes that they are making to their political and economic arrangements. We recognise that that is difficult and believe that those changes are more likely to be made if we help to alleviate some of the economic pressures which confront them.
I support that policy and believe that we should be open about it. We should not pretend that we are doing it for different reasons. It is valuable that that point was brought out in the debate by the noble Lord, Lord Alport. What is true also is that we are increasing the aid we are giving to central and eastern Europe and decreasing our aid to Southern Africa. The Government assert that there is no link between the two. I agree with the noble Lord, Lord Thurlow, that it is difficult to argue that increasing aid to central Europe and decreasing aid to Southern Africa are not linked. The aid is political and should not be decreased at this juncture for the reasons given.
There is a clear distinction between long-term political development aid and the emergency aid we are sending to, say, Bosnia or Somalia. The argument for long-term development aid is more difficult. It can only be justified if it is seen as an investment. If it is seen in that light there is no doubt that it is justified. In the last debate we held on this subject I pointed out that the building of roads throughout Europe by the Roman Empire significantly diminished starvation through famine, simply by making the distribution of food more easy. Similarly, the building of railways and roads in India in the 19th century by the British Empire had the same effect. That was aid that demonstrably paid off.
That kind of aid may be called investment. Every government —except, oddly enough, this Government—believe in investing in the infrastructure. Infrastructural aid which cannot be financed from within poor countries is something in which one should invest. A second form of aid which is undeniably valuable is education. Again I agree with the noble Lord, Lord Thurlow, that the most effective aid is the transfer of skills. That is what aid in education and literacy brings, and it also has an effect in helping to control the populations, for reasons we discussed in the last debate.
The case put forward by the noble Earl, Lord Onslow, has not been made out. The connection between aid and the evils which we and he deplore is not one that can be established. For that reason and other reasons put forward in the debate I feel that the aid we give now is justified. The aid we give to the South should at least be maintained at the level it has been in the past (and if possible increased) and the aid to central and eastern Europe is given for political reasons, about which the noble Lord, Lord Alport, has reservations, which I understand but do not share.
4.45 p.m.
Lord Rea: My Lords, this physician has failed to heal himself and I am afraid therefore that your Lordships will have to tolerate my rather husky voice.
I was delighted when the noble Earl, Lord Onslow, won the ballot for this debate, although we discussed the topic only last month. Any discussion on improving the lot of the poor majority of this world is important—it is probably the most important of all issues. If we get it wrong, in the end we shall be dragged down through environmental degradation, migratory pressure and war. If we get it right the result could be steadily increasing trade, wellbeing and peace for both the South and the North.
My noble friend Lord Judd set out the need for overseas development in the last debate. He put it under eight headings. In seven of those this country would actually benefit directly as well as the less developed countries concerned. It was only the eighth heading which emphasised the moral imperative of redressing the gross imbalance between our wealth and their poverty.
The noble Earl often surprises the House. He is rather like a spin bowler. One is never quite sure where the ball is going to come from. But just as a googly can take wickets, so does the noble Earl from time to time. He certainly made some valid points, although I do not follow his whole thesis. Of course it is right to monitor the effect of aid carefully, especially when it is given to governments of developing countries. Too many projects, especially those channelled through multilateral agencies such as the World Bank and the International Monetary Fund, have only benefited the ruling elite—in Africa sometimes called the "Wabenzi" because of their taste in expensive German motorcars—and failed to help the majority of ordinary, poor people.
I do not need to convince most of your Lordships that well-targeted aid is useful; many examples have been given this afternoon. But I should like to point to the subject on the Order Paper, which mentions "development aid". That is not emergency aid. As was pointed out by the noble Lord, Lord Bonham-Carter, they are not the same thing. I much enjoyed the maiden speech of the noble Lord, Lord Archer, but he seemed to confuse the two. Well-targeted development aid will tend to reduce the number of disasters in the future which require emergency aid.
I should like to point out to the noble Earl that most developing countries would rather not need to accept aid. They would prefer to pay their own way in the world and heave themselves up through trade and hard work, as we did in the last century, though we took a lot longer than is necessary now. Unfortunately, the cards are stacked against developing countries, as has been pointed out by a number of noble Lords—and here I mix a metaphor: the playing field on which they have to trade is pitched so far against them that it is almost like a football pitch on the north face of the Eiger with a howling gale blowing down it. Prices for traditional commodities have hit rock bottom; international debt is an onerous burden and merely servicing it absorbs most, if not all, of the earnings of some of the poorer countries, let

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alone allowing them to pay the debt back. The value of allowing aid to flow back to developing countries is critical to allow many of them to remain solvent and keep going existing essential institutions such as education. Even that is not enough for many poorer countries, especially in Africa, whose standards of living are falling dangerously at the moment.
To make matters worse, the less-developed countries have difficulty selling their own products which are value added —that is manufactured or semi-manufactured products—because of the import tariffs imposed by the industrial countries. The noble Earl gave a marvellous example of that last month; namely, the Bengali jeans manufacturer whose business went bust because of the raising of tariffs in North America. The World Bank has calculated that sub-Saharan Africa will need development aid to increase at 4 per cent. per annum during the 1990s to meet modest development targets. But the best aid that we can give would be to get an economic bulldozer to level out that precipitously adverse playing field in trade.
When I spoke to the noble Baroness, Lady Chalker, last week she spoke enthusiastically about the benefits which will come to the developing world from GATT when the final arrangements are agreed. She did not seem to realise that GATT is very much a double-edged weapon for the nations of the South and probably for us as well. When the noble Baroness replies (I have given her notice) can she say whether tariffs in the industrial countries really will come tumbling down and, if so, how soon after the new GATT regime starts? Equally important for food production in the less developed countries will be the GATT position on the export of subsidised food by the countries of the North. Will the subsidies be reduced or completely eliminated? The impact of imported subsidised food is highly damaging to small farmers in the South who cannot compete and who may thus give up and migrate to the already overcrowded cities of the third world. One recent study has estimated that a million of Mexico's 3 million peasants will be displaced by US big farming undercutting maize production as part of the North American Free Trade Agreement. I keep wanting to refer to the noble Lord, Lord Bonham-Carter, because I so much agreed with all his speech. As he said, free trade has a very damaging effect on food production.
The Earl of Onslow: My Lords, I am grateful to the noble Lord for giving way. I so agree with what he says. When he reached the point about United States maize production, it is damaging because it is so subsidised. That is the evil of it.
Baroness Trumpington: My Lords, my noble friend may speak at the end.
The Earl of Onslow: My Lords, enough said. I fully agree with the noble Lord.
Lord Bonham-Carter: My Lords, I am very grateful to the noble Lord for giving way. The sentiment about free trade with which he agreed was in fact expressed by my noble friend Lord Beaumont.
Lord Rea: My Lords, what is worrying about GATT to all the major NGOs operating in developing countries is the proposed multilateral trade organisation (MTO) proposed in the final draft to run the GATT arrangement. That will be a new bureaucratic world power alongside the World Bank and the IMF, with very little democratic control apart from a biennial meeting of heads of state. It is necessary that the aims, structure and control of that body be subject to parliamentary scrutiny. I hope that sometime in the new year we shall have an opportunity of debating the whole GATT agreement in full because there are some very important issues which affect us and the developing world.
Perhaps I may now ask the noble Baroness to answer some detailed questions about our overseas aid budget. Again, I have given her some notice of this matter. What proportion of the budget of approximately £2 billion will go to bilateral aid; how much to multilateral agencies; how much is going to NGOs to assist with their work and how much is going in the coming year to the population-related activities referred to by the noble Viscount, Lord Craigavon? I appreciate very much his kind words. How do all the different proportions of aid relate to the figures for previous years? As regards the multilateral agencies, can the noble Baroness tell us the result of the recent replenishment, last month, of the International Development Association, which is part of the World Bank? How does that relate to previous replenishments, and what influence have we had in the decisions about how the money should be disbursed? It has been the subject of major criticism in the past, particularly concerning the possible damage which the World Bank's projects may have on the environment.
Can the noble Baroness also say what is the current status of the International Fund for Agriculture Development? In the minds of many of us it is a very effective United Nations agency in relieving poverty through its assistance to small farmers in the poorest countries. What will the actual effect be of the devaluation last September on our aid budget? That is a matter which has been mentioned by other speakers.
I turn briefly to debt. Can the noble Baroness say how near the Trinidad terms are to achievement? I have two very brief final points. We have discussed the "conditionality" of aid in Question Time in recent weeks. The noble Lord, Lord Alport, has raised the matter, as have other speakers, as to how we might influence the type of regimes to which we give aid. As regards Indonesia and other countries, the Government stand accused of selling arms to repressive regimes. In answer they claim that these countries have a legitimate right to defend themselves. Those countries buy arms while receiving a great deal of aid from us. As we know, Iraq used the arms which were sold to it while we were giving it aid against its own people and eventually against us.
The Government claim that selling arms to these countries is legitimate because they have a right to defend themselves. Perhaps I may here quote from General Hartono, of the East Java military command. After a recent army exercise in Java he said:

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"Present threats are different from 20 years ago. From our analysis of events and incoming information, the most likely scenario in the next 5 - 10 years will be domestic security disturbances".
I need not say anymore after that.
Finally, as regards the points made by the noble Viscount, Lord Craigavon, I can only add to his remarks that a small expenditure now will pay big dividends in helping the world's population to level off in the next century at a lower level.
Our efforts in the field of overseas development aid are woefully inadequate. We are tantalisingly close to being able to achieve the target of 0.7 per cent. when we consider the peace dividend—which is still there and actually growing. Only then will we be starting to make a serious impact on the world's most pressing problem, which is the gross and intolerable discrepancy between the health and wealth of the nations of the North and the nations of the South.
4.58 p.m.
Baroness Trumpington: My Lords, here I stand before you conscious that I am very much in my usual role as second-hand Rose in the absence of my noble friend Lady Chalker. I am sure that we all listened attentively to the initiator of this debate, my noble friend Lord Onslow, with his quaint speech, to which I shall return. Beyond reasonable doubt the maiden speech of my noble friend Lord Archer was as original in concept as we expected from his fertile brain. I add my congratulations to those which he has already received.
When my noble friend Lady Chalker of Wallasey spoke to this House on 11th November on the eve of the Chancellor's Autumn Statement, she was unable to reveal the Government's plans for aid spending. Despite some of the gloomy speculation, the aid budget is to continue to grow. The noble Earl, Lord Longford, may be heartened to hear that our external assistance programmes, as a whole, are set to rise in cash terms by more than £200 million to £2,362 million by 1995–96 over this financial year. Planned provision for aid to developing countries for next year will rise by 3.5 per cent. in cash terms—an increase of 1 per cent. in real terms—to £1,900 million. These sums are a clear demonstration of the Government's commitment to a substantial and effective aid programme for developing countries.
The noble Earl, Lord Longford, quoted my noble friend Lady Chalker when she said, "our record is sound". In fact, he repeated that once or twice. Perhaps I may continue the quote. After saying that our record is sound my noble friend said:
"Since 1987–88, the Government have increased their aid to developing countries substantially—by 8 per cent. in real terms. Our expenditure last year—1991–92—at nearly £1,800 million, was 3 per cent. higher in real terms than the previous year".—[Official Report, 11/12/92; col. 309.]
Again, I submit that my noble friend had every reason to state that our record is sound.
The Earl of Longford: My Lords, may I intervene?
Baroness Trumpington: My Lords, I have only a limited time; let us have a little chat afterwards.
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I return to my noble friend Lord Onslow. He is quite right to remind us to question the basis on which we give aid. Only by a continuous process of questioning and adjustment will we ensure that our aid is used most effectively to meet the needs of the world's poorest people. But he is quite wrong to imply, as he has in the past, that aid is a force for harm.
In the minds of many, aid has become associated with crisis and despair. Images of suffering fill our television screens. But we should not let those images —vitally important though they are—obscure the progress there has been.
The Earl of Longford: My Lords, will the noble Lady allow me to intervene now, or is she not accepting any interventions at all?
Baroness Trumpington: My Lords, no.
Developing countries as a whole have significantly improved their living standards over the past three decades. Between 1965 and 1990, low and middle income countries saw an unprecedented rise of 85 per cent.
Baroness Seear: My Lords, why the hurry? Cannot this debate continue until half past five? Is the Minister really proposing to go on, uninterrupted, for another half an hour?
Baroness Trumpington: My Lords, that is very probable if I am to answer, I hope sufficiently, all of your Lordships' questions and leave time for the instigator of this debate to reply.
I have lost my place, so I shall repeat that between 1965 and 1990, low and middle income countries saw an unprecedented rise of 85 per cent.—that is, 2.5 per cent. a year—in per capita incomes. Over those years life expectancy rose from 51 years to 63, and the rate of adult literacy from 42 per cent. to 64 per cent. Those represent substantial and very real changes for the better for millions of people in developing countries.
The countries of east and south-east Asia have taken the lead. Their rate of economic growth over the past 25 years has approached 8 per cent. a year. But they were not the only countries to do well. The poor countries of south Asia —including Bangladesh and India—and Latin America increased their per capita incomes by almost 2 per cent.
The other side of the coin is, of course, less encouraging. Sub-Saharan Africa is a particular cause for concern, with its rapid population growth and frequent affliction of natural and man made disasters. The development hopes of many African countries have not been realised. But, even here, there is progress.
Many countries are pressing ahead with political and economic reform. In the debate in this House on 14th December my noble friend Lady Chalker described the encouraging changes in a number of countries in Southern Africa. Elsewhere, Mauritius, which undertook difficult economic reforms in the early 1980s, has performed well in recent years; and Ghana has transformed its policies and managed a 5 per cent. per annum growth rate.
The right domestic policies are vital. But other factors also contribute to successful development.

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Trade and market access have been key ingredients. That is why the breakthrough in the GATT negotiations on agriculture is so heartening. Poorer countries could gain up to 90 million dollars from a successful GATT agreement: the livelihoods of hundreds of millions of people in developing countries could benefit. I am most grateful to the noble Lord, Lord Rea, for giving me advance notice of his questions. If I may, I shall return to GATT later.
Aid has also made an important contribution. The key to a country's success is its people. Long-term development aid has helped developing countries improve their health and education services so that people are better equipped to contribute to development. In addition, aid has helped produce the right climate for development and economic growth by providing the incentive and support for reform.
Close targeting of aid is a key to its effectiveness. That is why our aid is focused on areas central to promoting sustainable development. These include the promotion of economic reform, of better standards of government, the reduction of poverty, better education and health, improving the status of women, and help with tackling environmental problems.
Our aid is effective, but we are most certainly not complacent. We strive continually to ensure that taxpayers' money is used for the purposes intended. I fully share your Lordships' concern that aid should not be used to keep corrupt regimes in power. That is why our aid programmes put such a high priority on good government. Good government means more efficient and effective administration, ensuring respect for human rights, popular participation in the decision-making process, upholding the rule of law and curbing excessive military expenditure. Those are all vital in themselves, but they are also prerequisites for sustainable development and for the effective use of aid funds. Where countries flout the principles of good government we act accordingly, as we showed, for example, in suspending bilateral aid to Sudan, Somalia and Burma.
In reply to a point raised by my noble friend Lord Onslow, there have been numerous conflicting reports of how much aid is being looted. However, it is important to understand that the risk of looting is inherent in the delivery of humanitarian aid in any crisis situation. We need to weigh the amount which may be lost against that which will reach those in extreme need.
On the subject of corruption, which, again, was mentioned by my noble friend Lord Onslow, I can advise him that the Government and other donors have a duty to ensure that aid goes only to those in real need and not to corrupt or unethical political elites. We owe this duty both to our own taxpayers, who have a right to know that their money is being well spent, and to the people of the countries to which we give aid, who have the right to know that our aid will help the poorest and not line the pockets of the well-off. Given the sums involved in the international aid effort, there is inevitably a risk that money will end up in the wrong hands or be used for the wrong purposes.
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We take this risk seriously. Our attack on potential corruption is two-pronged. The first prong is the emphasis that we put on good government. Central to good government is accountability: financial accountability, so that people can clearly see and understand how funds are allocated; and electoral accountability, so that that country's people have a real say in who forms their government. Good administration and respect for human rights are also crucial. By focusing our aid programme on those countries which practice good government we significantly reduce the risks of corruption and, by helping to promote good government elsewhere, we are helping to develop better-run administrations which will be less prone to corruption.
The second prong of our attack on corruption is our procedural safeguards. The Overseas Development Administration has rigorous criteria—economical, technical and environmental—to ensure the quality of its projects. Projects are subject to detailed and extensive financial reporting. We check that the money is being spent on what it is supposed to be spent on. We also check that what is bought is still what is needed. When British firms supply equipment for a project, we pay the firm direct. We monitor the implementation of our projects on the ground to guard against any misuse of aid funds.
Britain's humanitarian assistance has no political strings attached. Nowhere is this more seriously tested than in Sudan, and we had a moving debate on that this week. Our emergency aid is channelled to the needy through UN agencies and NGOs regardless of religious or political affiliations. Indeed, 80 per cent. of our aid is targeted on the poorest countries of the world; not to the rich, as implied by my noble friend Lord Onslow. A strongly worded resolution on human rights, in which we played a major role, was passed in the UN Third Committee recently. It attracted significant African support, an indication that concern is not confined to donors.
The noble Lord, Lord Alport, spoke about Somalia. The key problem in bringing relief to the suffering in Somalia has not been the availability of food and medicine but ensuring the security of supplies. Recent attacks on food convoys and the shelling of the UN ship as it approached Mogadishu port clearly demonstrated that the security situation was worsening. This could not be allowed to continue. We therefore fully accepted the recommendation of the UN Secretary General to the Security Council that new measures would be needed to secure the relief operation. That is why we co-sponsored SCR 794, adopted on 3rd December, authorising UN member states to establish as soon as possible a secure environment for humanitarian relief. We are contributing RAF transport planes to the operation. The operation is proceeding well with the airport and port in Mogadishu made secure and bases established at Mogadishu and Gailalassi. United States and French troops today reached Baidoa. Overall, the operation has encountered minimal opposition and the Secretary General will report on the progress of the operation on 18th December. We hope that its objectives will be achieved quickly.

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The noble Lord, Lord John-Mackie, spoke about the Intermediate Technology development group. This is a very effective organisation which delivers aid precisely where it is needed. The noble Lord may have seen a television programme on 23rd May which featured ITDG's project on Kenya, part funded by the ODA, through which the technology to make fuel-efficient stoves is passed on to women's marketing organisations. This stimulates the rural private sector directly as well as saving scarce fuel.
The noble Lord, Lord Thurlow, referred to aid targeting. The Government accept internationally agreed targets but, in common with many other donors, we are not in a position to set down a timetable for reaching them. Future levels of our aid will continue to depend on our economic circumstances and on other calls on public expenditure. Our average aid/GNP ratio over the past five years is 0.30 per cent. It is significant that we have maintained this average during a period when our programme has grown substantially in real terms. It is important, too, to look at not only how much we have spent but how we have spent it. The OECD has commended us for the effectiveness of our aid programme, including our poverty focus.
Government aid is not Britain's only contribution to the international development effort. I specifically mention the many British voluntary agencies which do excellent work in developing countries, both in providing humanitarian relief and in long-term development work. I should like to tell my noble friend Lord Selsdon that less than 10 per cent. of our aid to developing countries consists of humanitarian aid. The overwhelming majority of our aid is for long-term development aid.
My noble friend Lord Selsdon referred to extending the Know-How Fund outside Eastern Europe. The transfer of skills and technology fundamental to the Know-How Fund is also at the heart of our aid to developing countries. British experts employed by the ODA, British NGOs and British consultants are all part of the progress. What we call the Know-How Fund in Eastern Europe does extend throughout our aid programme. It is called technical co-operation.
The noble Lord, Lord Alport, implied that commitments to the Commonwealth in our aid programme had diminished. That is not so. Around 70 per cent. of our bilateral aid goes to Commonwealth countries.
The noble Viscount, Lord Craigavon, spoke about population. Population planning was one of the key sectors identified by the Prime Minister at Rio on which we would concentrate our activities and resources. The Department of the Environment recently issued a consultation paper on the NGO conference to be held in Manchester next September. Its theme will be sustainable development, in which population has a crucial role. The Government warmly welcome responses to the consultation paper from CARE and others on all aspects of sustainable development.
I now arrive at the points raised by the noble Lord, Lord Rea, of which he gave me notice. The noble
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Lord, Lord Beaumont of Whitley, will not be surprised that I cannot at all agree with his words concerning the French farmers and GATT. With regard to GATT, existing provisions for tariff-free or reduced tariff entry into developed countries for developed country manufactured goods will continue to apply under the general system of preferences. Exports to developing countries of subsidised agricultural produce will continue but the Uruguay Round will introduce the first restrictions on subsidies. This will be a major step forward for which the UK fought hard. Subsidised exports would be reduced by 36 per cent. in budget terms and by 21 per cent. in volume terms. Domestic subsidies will be cut by 20 per cent. Food aid is not covered by the Uruguay Round. There is no intention to restrict the ability to deliver food aid. Reduction in agriculture subsidies in developed countries should promote food production in developing countries. As at present, developing countries will be able to raise tariffs to protect infant industries or as temporary safeguard measures.
With regard to the breakdown of the type of aid, Ministers are now looking at aid priorities in the light of new planning figures. It is too early to say what the breakdown will be. I should like to point out to the noble Lord, Lord Bonham-Carter, that exchange rates move up as well as down. It is not possible at this time to say what precise impact the change in the value of sterling will have. But, in any event, spending under the aid programme is very largely in sterling.
The noble Lord, Lord Rea, asked whether developing country debt is increasing. Developing country debt is continuing to increase slowly but debt to commercial creditors has been decreasing. A growing share of the overall debt burden is made up of official debt, which is often on highly concessional terms. As a result of this and several other factors, including continued debt rescheduling, OECD figures show that the amount developing countries have been paying to service their debts has been decreasing since 1989.
With regard to government policy on debt conversions, the Government believe that it is generally more effective to use aid directly to support development activities than for financing debt swaps. But we welcome debt conversion schemes which benefit debtors by reducing the resources needed for debt servicing. In September ECGD announced that it would offer a portion of its developing country debt for sale. Sales will normally involve cancelling the debtor's foreign currency obligation with the purchaser acquiring the right to local currency. The local currency can then be used by purchasers to fund debt equity swaps. For example, sales will benefit debtor countries by facilitating investment and reducing the amount of foreign currency needed for debt servicing.
We live in difficult and turbulent times. The scene appears to change with frightening rapidity. The increases in wealth in developing countries are not just a set of statistics. They mean that people live longer and in better health, are better educated, have increasing opportunities to improve their livelihoods.

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Aid helps to improve the quality of life for millions of people in the poorest countries. That is a goal worth striving for, and that is why I am glad to assure my noble friend Lord Archer that the Government are dedicated to continuing that vital work.
5.20 p.m.
The Earl of Onslow: My Lords, I thank all noble Lords for taking part in the debate. It is quite fun being in a minority of one. Some of the questions I posed were brushed aside and not answered. I found it interesting that the noble Lord, Lord Bonham-Carter, said that in the Roman Empire, the construction of roads put down famine and that in the Indian Empire the railways produced more trade. That is the point I am making. Sensible development does not need outside aid. It generates its own tax base. The Aswan dam in Egypt was built without one penny of outside aid. It increased the Egyptian Government's revenues by double the amount of money—
Baroness Seear: My Lords, the noble Earl is not suggesting that it was the Britons who financed the Roman roads, is he?
The Earl of Onslow: My Lords, that is what I do not suggest. It was the Roman government. It was a unitary state with a unitary currency, all minted at Lyon, if I am not wrong. They were built by legions, although that is neither here nor there.
The point I am making is that development produces its own wealth creation. If that development does not produce wealth creation, it is a waste of money. The other important point is the realisation that dumped agricultural produce is a menace. That was mentioned by the noble Lord, Lord Rea. The noble Lord, Lord John-Mackie, said the opposite. He said that it was an awful pity to have set-aside. We have set-aside because we have a distorted CAP. It produces seriously cheap food that we dump on the world market, and that impoverishes third world countries. No one thinks that that is anything other than crassly idiotic.
It is impossible to differentiate between the economy and politics. They are one and the same thing. The point raised on ambulance aid is important. It sometimes gets out of hand. I do not know what the answer is. I wish I did. The dilemma is posed brutally in Somalia. Do we drag in people? Do we allow the money raised by honest and good people and distributed by brave people to be diverted from its target? I should not like to be unarmed in the middle of Baidoa, surrounded by a collection of warring Somali gangsters in Toyotas with anti-tank guns mounted on them, thank you very much! They then have to pay for protection, and we know what protection does. I am merely posing the questions. The noble Earl, Lord Longford, failed totally to understand that. I want to emphasise strongly that I am not saying that we should not give to the poor. I am saying that if we are not careful we shall give to the poor in such a way that it impoverishes them. What we must do is buy anything they can produce. Buy, buy, buy and—
Baroness Trumpington: Is my noble friend winding up?
The Earl of Onslow: Yes, I am winding up. We must buy anything they produce. With that I submit myself to the glare of my noble friend Lady Trumpington. I thank your Lordships for taking part in the debate. I hope that it has been a valuable debate. Before I sit down, I must congratulate my noble friend Lord Archer for keeping his speech so uncontroversial. He concentrated on Californian blondes, Weston-Super-Mare and his children and managed to avoid most of the subject. I must congratulate him. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Unemployment and Housing
5.24 p.m.
Lord Molloy Lord Molloy rose to call attention to the link between unemployment and the provision of housing; and to move for Papers.
The noble Lord said: My Lords, a good job and a decent home are fundamental to the contentment of our people. Millions of people in this country have neither. While the world recession was not the Government's responsibility, some of their responses to the situation have been somewhat pathetic. Let me give one example. It is their abysmal, insane proposal to shut 31 pits. I do not suppose anyone in the Government knows what a coal mine is and how it operates. The Government merely think that they have miners. Of course they have miners. They never stop to think of the incredible machinery needed to keep those mines safe, of the scientists and technicians involved or even of those who make miners' helmets. The Government thought of none of those things, because they have little knowledge of this country's great industries.
The crisis may not be entirely the Government's responsibility. It is a world problem. It was not the nation's financial institutions that delivered the worst recession since the Second World War. It does not give me much pleasure to say this, but I must acknowledge on behalf of millions of working people that the Government were insensitive when they entered the ERM at the wrong exchange rate, kept interest rates too high for too long, and failed to respond to the calls for relief from consumers and business until the number of people in arrears with their mortgages had risen to an astonishing 1.9 million.
Great slices of manufacturing have been wiped out, and nearly 3 million people have been put on the dole. That is the Government's fault. They failed to respond to the incredible situation we found ourselves in due to the world recession. Unemployment is the curse of family life. It does not mean merely that the breadwinner is out of work. When young people are out of work—especially apprentices who cannot carry on because the firm is packing in—their souls are depressed. Unemployment endangers our nation's civilised discipline. It impoverishes our nation. Many

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of our young people believe that they have no future in this country. Economists and businessmen suffer the same grave anxieties.
We must acknowledge that there is no easy short-term solution. We must always be aware of the dangers of inflation. However, as Beveridge said, full employment in a free society is a real possibility. Immediately after the greatest war in the history of mankind, the British Government did remarkable things. They created full employment and the NHS. They were all achieved after millions of our men and women had been fighting a great war. It is about time we gave back to them their right to have jobs and houses. We need confidence. Job losses damage confidence. Our young people are affected. There are 750,000 young people unemployed. In Scotland the position is so disastrous that unemployment has risen by 133 per cent.
It is the nation's task not merely to reduce unemployment but to re-establish full employment. Unemployment is expensive for the Exchequer. All aspects of unemployment cost about £25 billion. That is the annual cost of our present level of unemployment. It is disastrous. Those who have done nothing about it are responsible for the disaster. It is frightening to have nearly 3 million people out of work. The claim has been made that it is economic lunacy for 400,000 building workers to he jobless at the same time as 140,000 families are homeless or, if not homeless, living in temporary accommodation. That in itself can be a disaster. Overcrowding and living in these depressing places affects a family in a savage manner.
Our political democracy must constantly put the welfare of ordinary men and women on the agenda of political discussion and concentrate on it. I sincerely hope that the Government will henceforth do that, for unemployment invades the deep serenity of a happy home. It is caused by the cold austerity of unbridled laissez-faire, greed and vulgarity.
The loss of work to an ordinary British workman is the loss of status, encouraging the degrading shadow of poverty. Yes, preventable poverty is a crime. Our people deserve better of us: let the TUC, the CBI and the Government get together to see whether somehow or other they can find a realistic answer to this dreadful problem.
When we look at housing alone, it has been said quite rightly that at one time people in the United Kingdom were the best housed in the world. We are now dropping right down to being one of the worst. It also once used to be said that an Englishman's home was his castle. Millions of our families in this country have not even a cellar to live in. It is a fundamental crime. Homelessness is now a nationwide crisis. More or better housing is a basic civil right, yet the Government and the councils have no real programme. Local authorities need guidance from the Government and the Government have failed them as well as the people.
Many problems are caused by the breadwinner losing his job. No job, no home for the family! In 1991, the private sector had the lowest level of
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completions since the First World War. The record of those wonderful people who do not believe in anything being publicly owned, the idiots who would not even mind privatising the British Army or the Royal Air Force, is a disaster. If we want to understand the problem, we should look at the massive, insuperable problems facing Westminster City Council.
Scotland has had an increase in homelessness of 133 per cent. over a couple of years. In general, local authority capital expenditure is to decline by £316 million up to 1995–96. That in itself is an incredible threat; it is a positive disgrace. It is the kind of attitude that led to people sleeping in cardboard boxes in the London streets. If I may say so, the thousands of cardboard box sleepers in London's streets are not merely a disgrace. They cause severe problems for our police who handle the situation admirably. If the police were not doing a good job on the streets of London with the people who cannot help sleeping in cardboard boxes, the situation would be serious.
Government spending in real terms has fallen from £11.5 billion in 1979 to £5.5 billion in 1991. Yet Shelter claims that the provision of homes costs less than homelessness. It is cheaper to put a family into a home of its own or a rented home than to treat it as homeless and cause the home to be repossessed when the family cannot afford to keep up payments on the house. The simple term "repossession" seems to be enough for the Government.
I believe that practical and compassionate understanding is necessary rather than just saying that so many have been repossessed. What that means is that there are many ordinary people whose lives have been savagely attacked and demeaned. The attack on homelessness and unemployment through government spending on public sector housing in England was £4 billion a year ago. Yet a programme to increase output to 100,000 homes would cost an extra £2 billion. At the same time, it would create employment with roughly 100,000 jobs.
The men and women who can design and construct a variety of homes are brilliant people—architects, designers, engineers and others. But they are not designing homes; instead, they are unemployed. I cannot understand why the Government cannot see that. It could be interpreted as an unrealised form of masochism by the Government. The general view of specialists is that the problem with the Government's approach to housing policy is that it offers decorated branches but no solid trunk.
We have heard the promises; we have listened at Question Time to all kinds of things that encourage us. Then when we wait for them to be made reality, they have gone with the wind. Our Government should respond to people and not be put off by the high prices which are always put up by the Treasury. It is better that the Government should talk to Shelter and the other organisations.
In the mid-1970s the UK was one of the best housed nations in Europe. If we wandered round Europe in those days, the point always made by the French, Dutch and Germans was our remarkable housing formula in the UK. Measuring housing

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expenditure as a percentage of GDP, we are now at the bottom of the table. At one time in the mid-1970s we were at the top. That should give the Government anxiety. The unemployed are those who have lost their homes—repossessed because they could not pay the mortgage. They feel bitter. That is dangerous for the nation and the Government must do something about it. When the breadwinner loses his job and has to surrender his house, which is repossessed, it amounts to a catalogue of despair for thousands of people.
I can just imagine it. I can remember it happening to my family. My father was a mercantile engineer of high standing. My parents were buying their own house; they had five children by that time. Suddenly, there came unemployment. My father was not wanted any more. He went up into the mountains of Wales to see whether he could find work among the miners. He went to the docks. He could find no work. So from our nice little house we had to move into one room to find shelter for the seven of us. As a youngster of about eight or nine, I asked, "What kind of government have we and what kind of country do we live in?"
Those questions are being asked today by millions of ordinary, decent people who may not have any particular political outlook. All they know is that the Government have allowed them to suffer this terrible embarrassment. Hundreds of thousands of people are suffering a catalogue of despair.
Another example of what happens when people lose their houses, as so many millions have, is the long-term separation of husband from wife, sometimes followed by divorce. The family is split. The grievous effect of those events on the children of such a marriage is too terrible to contemplate. But it happens. With unemployment and homelessness we are creating broken families.
So there is an urgent need for the Government to seek the guidance of Shelter and the CBI. On many of the sub-committees of the CBI are brilliant men and women who can give terrific advice. They are able and well experienced. The same applies to the TUC. We may be able to have guidance from the council of churches and representatives of local authorities. We should bring in the bankers who can help enormously and, I understand, wish to do so. What is wrong with the CBI, the TUC, the bankers and the housing associations that the Government cannot bear to listen to them?
I must say a few words in favour of the present housing Minister, Sir George Young. He has done his level best, and he is a good trier. He seems to understand the situation. It is about time he received more support from the Government. I hope there will be a genuine appreciation of all the bodies I have mentioned.
Homelessness and unemployment are the twin cancers that threaten our country. We were threatened before back in the 1930s and during the last war, but in the end we won the day. It is vital to erase the threats and help those in need and thereby raise the status of our nation. That is a worthwhile aim. I plead with the Government to understand what a lack of housing means to people and what it means to people when they lose the house for which they may have
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been paying over four or five years. I plead with the Government to understand what it means to an ordinary British family to be put out on the streets with their children. I ask the Government to give full consideration to housing and unemployment and to consult with the bankers, the TUC, the CBI and all the other organisations that understand the problems of housing and of the unemployed. If the Government do not do so, a desperate situation could arise in our nation. All I ask is for the Government to acknowledge that threat and be prepared to make a fresh start to erase ultimately unemployment and homelessness. I beg to move for Papers.
5.41 p.m.
Lord Skidelsky: My Lords, I am grateful to the noble Lord, Lord Molloy, for introducing this important topic and for giving us the opportunity to discuss it. I must say that I was puzzled to know how he would link up unemployment with housing provision. After he sat down I was still not quite sure what the economic link was. His argument seemed to be that the Government have created high unemployment, that high unemployment causes homelessness and therefore the Government ought to build lots of new houses. That seemed to be the gist of the whole matter.
However, the noble Lord did not look into or analyse the real relationship between unemployment and housing or consider the possibility that one cause of high unemployment is the nature of our housing market as it has developed over many years and the labour immobility that results from that inflexible housing market. The noble Lord did not consider how housing might be made more flexible to lower unemployment. I believe that is the gist of the economic case.
I agree completely that unemployment is too high. I also agree completely that there is a shortage of rental accommodation. But is the solution simply to go on adding to the municipal housing stock? I do not think it is. If we look at the housing tenure structure in Europe, one basic difference between the United Kingdom and the rest of Europe stands out; that is, we have the lowest private rental sector in Europe— about 7 per cent. Compare our housing position with that of Germany and France, our two most successful competitors. The figures for owner occupation, private renting and social renting are: for Germany 40 per cent., 42 per cent. and 17 per cent. respectively; for France 53 per cent., 20 per cent. and 17 per cent.; for Britain 67 per cent., 7 per cent. and 26 per cent. Compared with Germany and France we have a much larger percentage of home ownership, a substantially larger social rental sector and a much smaller private rental sector. The structure of our housing tenure is very different from that of the continent with a much higher proportion of privately owned houses, a much smaller proportion of privately rented houses and a larger municipal housing sector.
The automatic response of the Opposition parties to homelessness is to say that we must build more council housing units, even though, except for Holland, we already have the largest municipal

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housing sector in Europe. But there is one thing that is crucially wrong with that policy. The point can be put quite bluntly: the greater the proportion of the working population in municipal housing, the greater the immobility of labour will be. The reason is not the rent subsidy, but because once one has been allocated a council dwelling all the incentives are to stay put in it. Someone who rents a council house in one region will have the greatest difficulty obtaining one to rent in another area. In order to move he will have to rent or buy a house in the private sector and give up his council house together with his subsidised rent. That limits mobility among council house tenants, particularly among the unemployed who might otherwise move to take jobs. Thus, one of the main purposes of a rental sector, to encourage labour mobility, is strangled at source. From the point of view of mobility, the sale of council houses was a clear gain and for that the Government must be congratulated.
I would not, therefore, favour any substantial expansion in municipal housing provision at the present time unless a proper market is established in council housing tenancies, exactly as exists in the unregulated private rental sector. If rents were to be set at market levels there is no reason why local authorities should not advertise vacancies in the newspapers exactly as private landlords do. The market system here can be used to support the social housing sector and make it work for the benefit of the economy.
The main problem, as practically all who have studied the housing problem will agree, is the small size of the private rental sector. That is something to which I have already alluded. That has shrunk to 7 per cent.—by far the lowest percentage in Europe. But the position is worse than that. Of that 7 per cent., about one-half is accounted for by regulated tenancies; tenancies with controlled rents—that is, rents subsidised by the landlord—and rents with security of tenure. This means that one-half of the private rental sector is not part of the housing market at all. There is no more a market in regulated tenancies than there is in municipal tenancies. The incentive is for holders of these tenancies to stay put, irrespective of their employment prospects in that area, because if they move they lose not only their subsidised rent but also their security of tenure.
The fact that the great bulk of rented accommodation in this country is outside the housing market has an enormous bearing on the question of the shortage of affordable—that is, low rent—accommodation. Other things being equal, the narrower the market for goods or services, the higher prices will be. Rents in the unregulated private sector are much higher than they would be if there was more accommodation to let and the problem of homelessness is correspondingly increased.
I think we can now see, to my way of thinking, the real nature of the link between housing and unemployment. It is almost exactly the opposite of that postulated by the party opposite. The tenure system which applies in municipal housing and
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regulated lettings increases the rate of unemployment by reducing the mobility of labour. Patrick Minford, Michael Peel and Paul Ashton have calculated that,
"under present UK labour market institutions around 2 percentage points of today's unemployment is due to the immobility of unskilled labour induced by the Rent Acts and Council house subsidies".
That is 2 per cent. on the natural rate of unemployment, or about 600,000 workers. That is a colossal figure. Yet that is the system which the party opposite has supported through thick and thin. Whenever the Government have moved towards decontrol, the Opposition have vowed to put the controls back, in strengthened form, if they return to power. Their policies and threats can be held directly responsible, unintentionally of course, for there being 600,000 more unemployed than we need to have. That fact should be better appreciated than it is.
In the Housing Act 1988 the Government decontrolled new private lets through the shorthold system, but on the whole that has not led to any noticeable expansion of the private letting market. The reason is that landlords and new investors have become too discouraged by the history of the Rent Acts since the First World War and too afraid of retroactive legislation, as occurred in 1974, to enter the market, especially at the lower end where the threat of reimposition of controls is greatest. I do not see any other explanation for the fact that at present there is admitted to be a large stock of unused accommodation, not only in London.
I do not believe that one should restrict oneself to analysis. One should propose constructive measures to improve the situation. What can be done to enlarge the market for rental accommodation? Three reforms follow from the arguments that I have put forward.
First, rents in the municipal and regulated sectors should be allowed to find their market-clearing level. For the regulated sector there are many suggestions but one that attracts me as a first step would be to amend Section 70 of the Rent Act 1977 so as to require the rent officer to have regard only to the rent allowable for housing benefit in fixing a fair rent for a regulated tenancy. Nothing is more absurd than the Government paying out £70 or £80 a week, or even more, in housing benefit whereas fair rents for regulated tenancies are fixed at half that amount on average. If tenants cannot afford the market rents they should be subsidised by the Government, not by the landlord.
My second proposal is that security of tenure should be ended on all existing tenancies with perhaps a two-year period of notice. New contracts could then be negotiated freely between landlords and tenants at market rents, or a mandatory repossession order could be served. I favour a scheme of compensating regulated tenants by establishing a procedure for commuting property rights established under the Rent Act 1974 into cash. Commuting property rights into cash is an old tradition and I believe that would be a fair procedure for bringing to an end security of tenure. However, the right of repossession on payment of agreed compensation must be automatic, except in the case of the elderly or sick.

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Finally, all council house tenancies should be marketable. That would be an imaginative way of combining security of tenure, which would not be an issue in council house tenancies—and that would be the main difference between council house tenancies and private tenancies—with an incentive to move if a job became available in another place. If the tenant moved the lease would simply revert to the council.
The effects of those reforms taken in combination would be as follows. Their very first impact might be to raise the average level of rents somewhat but there would soon be downward pressure on rents in the whole of the rental sector, thus increasing the stock of affordable rental accommodation. They would put downward pressure on house prices by increasing the attraction at the margin of renting rather than buying. That must certainly be an advantage at present. They would encourage new residential building for rent. They would encourage the ownership of capital other than housing by making it more attractive to invest in shares, small businesses and so on. The ending of tax relief on mortgage interest would also pull in the same direction, but that is a topic for another time. Those reforms would also tend to lower the rate of inflation, which everyone thinks desirable, and they would lower the rate of unemployment substantially by increasing labour mobility.
Standing in the way of all those desirable consequences is the Opposition's obsession with rent control and allocating municipal housing by officials rather than by market forces. Is it so difficult to agree that the existing system of controls—a relic of former conditions—has served the economy exceedingly ill over the past 50 years? Is it so difficult to work together to find an equitable scheme for bringing this pernicious system of controls to an end?
We all accept the goal of an enlarged rental sector. That was true of the noble Lord, Lord Molloy, in his opening remarks. I have argued that the best way of bringing that about is to increase the size of the market for rental accommodation because that is the only method consistent with increasing labour mobility, which is one of the chief purposes of a rental sector. Economists are virtually united in considering that increased labour mobility would lower the rate of unemployment, which we all want. I believe that the Government would go ahead with a scheme of decontrol, subject to suitable safeguards, if the Opposition supported it. This should not be a party matter. The ball is in the court of the party opposite.
5.55 p.m.
Baroness Turner of Camden: My Lords, I thank my noble friend Lord Molloy for introducing a debate on the subject of unemployment, linked to housing, and in particular for the impassioned and informed way in which he did so. We debated unemployment as recently as 25th November when a large number of noble Lords indicated their interest in the subject by participating. Unfortunately, the response from the Minister on that occasion was disappointing. We argued then for the Government to develop as a priority a strategy to deal with unemployment, stressing that it should be given precedence over
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everything else. My noble friend has extended the debate today by including housing, and how right he was to do so.
I was surprised by the remarks of the noble Lord, Lord Skidelsky, who seemed to argue that unemployment was basically the result of immobility. That is not the case. There is now unemployment in almost every area of the country, and in some areas it is very substantial. Therefore, simply increasing mobility will not help to solve the basic problem.
The two most basic requirements of civilised living are a job and a home. Quite often, it is not possible to have one, and to keep it, without the other. That is seen in stark terms among young homeless people. They cannot get homes without jobs and no one will give them jobs if they do not have a permanent address, so they are permanently marginalised. It is hardly surprising that we are seeing an increase in petty crime, and sometimes violent crime, as such young people become increasingly alienated.
I do not want to go over again the worsening unemployment figures. My noble friend has already referred to them. Suffice it to say that in 1975, according to the system of assessment then in place, unemployment stood at 3.7 per cent. of the workforce. On the same basis—and one has to use the same system because otherwise comparisons are meaningless—we have unemployment now of 14.7 per cent. Much of that new unemployment is in the South East among people who would not in the past have imagined that such a thing could happen to them.
Many are in a desperate situation. Encouraged into the housing market in the 1980s they now find themselves with mortgages they cannot repay and houses they cannot sell at the prices they paid for them. In 1982 an average of 132 people a week had their homes repossessed because they were unable to repay their mortgage loans. One borrower in every 200 was six months or more in arrears with mortgage repayments. In the summer of this year one household in every 32 was in arrears and the weekly average of repossessions was 1,375–10 times the number of 10 years ago. Clearly we need, but do not have, a mortgage benefit scheme to assist owner occupiers who are at risk.
So we have an increasing problem of homelessness. We have been warned that it will rise. Homelessness will increase and council waiting lists will lengthen unless the Government double the number of new homes provided each year for rent, according to a recent study by the Housing Corporation. Yet the number of new private homes started by builders fell sharply during the summer, according to recent published figures. If the trend continued throughout the year, the total number of housing starts by private builders would be the lowest for more than a decade. The fall was offset by an increase in public sector starts including those made by housing associations. But overall public and private starts still fell by 3.6 per cent. compared with the same period last year. At the instance of the Government, housing associations seem to have taken over from local councils the role of providing social housing—a move that I personally do

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not find particularly acceptable, although I have no wish to denigrate housing associations which in the main do a reasonably good job.
I believe, in contrast to the noble Lord, Lord Skidelsky, that it should be a continuing role of local authorities to provide low rented housing and that the Government should facilitate that role. I agree with the noble Lord that we have a structure in this country that is far too heavily weighted in favour of private housing ownership—not really ownership at all, because the ownership is mostly with the building societies. That has arisen because of past government policies in that area. But municipal housing need not mean immobility. If there is enough municipal housing people will be prepared to move from one area to another.
It seems incredible that with all this obvious need there should be so much unemployment in the building industry itself. Employment in the industry has fallen by 400,000 in the three years to June 1992. Employment continues to fall sharply. In addition, there have been job losses in the materials and supply industry. Short-term prospects for employment in the industry are poor. The industry does not expect an upturn in the private sector until there is a return of consumer confidence.
In the public sector, completions are expected of the order of 30,000, reaching 35,000 for each of the two subsequent years. The increased capital receipts for local authorities are expected to be used largely for refurbishment of existing housing stock rather than new build. These statistics have to be seen against the need highlighted by organisations like Shelter, which argues for 100,000 new homes a year, and the Institute of Housing, which puts the figure at 130,000 a year.
The Trades Union Congress, as my noble friend said, has called for a major programme of house building to relieve homelessness. It points out that only 22,000 homes for rent were built last year, which itself falls short of the Government's target of an average of over 50,000 a year. It says that making money available to buy up 20,000 unsold properties will not create new homes and that while local authorities will at last be able to use some of their capital receipts from the sale of council houses, their overall capital programmes are being cut sharply.
A study undertaken some years ago claimed that each new house built created 2.5 new jobs. The Building Employers Confederation points out that the cost of supporting unemployed building workers, of whom there are now large numbers is costing the Exchequer £1.8 billion a year in unemployment pay and social benefits.
Building homes has a quick-acting effect upon employment. That is one of the reasons why I believe my noble friend was right to link employment and housing in this debate. New homes lead to a demand in other areas such as furnishing, kitchen equipment and other goods. This in turn helps to create employment in those areas. Until the Government act to restore confidence, either by building homes, or allowing or indeed encouraging local authorities to do
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so, we shall not get out of the vicious circle. Unemployment, not only in the building industry but across the economic spectrum, will continue.
The Government may be proud of the fact that inflation is now below the rate in Germany. But that has been achieved at a truly awful price: by the one in 10 people within the workforce now out of work (even on the Government's own figures); by those fearing loss of their homes or whose homes are already repossessed; and by the homeless, particularly the young homeless, who face a bleak and uncertain future.
I return to the theme of the debate, so ably introduced by my noble friend. Everyone has a basic requirement—a job, a place in society and the status that gives, and a home—without which it is impossible to lead a satisfying and fulfilling life. It is the job of government to facilitate those very modest ambitions. I await with interest the Minister's response.
6.5 p.m.
Lord Gisborough: My Lords, we hear about the unemployed and homelessness in London. But the situation is not confined to London. I would like to speak by reference to figures I have from my own county of Cleveland, which is probably representative of most other areas.
Many of the young unemployed there are second generation unemployed whose fathers were made redundant years ago, and there has been no pattern of example of going to work. Thus, in that county, 29 per cent. of unemployed people in the 18 to 24 bracket have never had a job. Thirty-seven per cent of those unemployed for six months have no skill.
Even if the young have succumbed to the encouragement to get training, they have found, or at least perceived, that there is no job at the end of it. Little wonder, when there are 35,000 unemployed in the county looking for work. Moreover, they see the Government taking away 180 jobs to go to Bath, a place where there is virtually full employment.
These youngsters without the skill to get a job, without the will to get a skill and without a home, look at the advertisements on television and feel that they can never partake of the goods on offer. They have no job; they feel no worth or self-respect; they have no income and no home. They feel outside the mainstream of society and that it is all the fault of what they call society. They just turn off and form a permanent alienation that can lead to a very dangerous situation, not least to those who have homes and cars. That is probably a substantial cause of the spread of drugs, for that is an occupation that not only enriches them but one in which they can get their own back on society. The drugs then promote further crime against property and person.
In nearby North Yorkshire, 77 per cent. of offenders are out of work. That is not only bad in itself, but those offenders cannot even be punished as they have no money from which to pay their fines. Many of them have a succession of appearances in court that make a nonsense of the unit fine system.
The biggest town in Cleveland is Middlesbrough, which has problems that probably are not unique in

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the country. Middlesbrough was originally a centre of heavy industry. In recent years, there has been a dramatic reduction in employment in the iron and steel, chemical and shipbuilding industries. The council is leading regeneration in the area and Middlesbrough was one of the successful contestants in the Government's City Challenge programme targeted for East Middlesbrough.
Unemployment is a major social and economic problem, particularly within the challenge area and on council housing estates. Unemployment rates in the challenge area average 22 per cent. The average for the Middlesbrough area is 14 per cent. Within the challenge area, long-term unemployment is more common combined with low educational achievements and low or redundant skill levels; 46 per cent. of the challenge area's economically active residents are semi-skilled or unskilled labourers.
The East Middlesbrough area consists mainly of post-war council estates, where unemployment is just a symptom of wider deprivation. On these estates the majority of tenants are receiving benefit—82 per cent. of council tenants receive housing benefit. Crime levels are high; burglary rates are 30 per cent. higher than in the rest of the borough. Residents experience higher infant and standard mortality rates. There are more overcrowded households and higher levels of single parents.
Although it is principally a council housing area, right-to-buy has introduced numbers of owner occupiers, but mainly in the better estates, concentrating deprivation in the less popular areas. The housing stock is generally in good condition. However, problems of poor environment, vandalism and litter are prevalent.
Employment is the key factor which would have the greatest beneficial impact on the area. The economic profile of the area is changing gradually with the introduction of economic and employment schemes under the City Challenge programme. City Challenge schemes are of great benefit, providing new stimulus to the housing market and helping to regenerate decayed areas. It has given skills activity, involvement and employment and has introduced economically active residents who have been able to become owner occupiers at affordable costs.
Unemployed people are being encouraged to improve their own housing situation by getting involved in self-building schemes. One scheme in the City Challenge area will provide 22 such homes. The participants will receive training in a construction trade as well as broader personal skills instruction. Once built the houses can be rented or occupied on a shared equity basis depending on the individual's employment and income situation.
High unemployment and resulting poverty have a significant impact on private sector housing. For example, the older housing is becoming increasingly unfit and house owners are becoming less capable of funding repairs. About 7,000 older private houses in Middlesbrough are now classed as unfit. That in turn puts increasing pressure on scarce resources available for renovation grants. Not only does it mean increases in terms of numbers of applications but each
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application costs more. For example, 76 per cent. of grant applicants are on income support or from low incomes and are entitled to 100 per cent. grants. The implications for the council's resources are therefore severe.
Outside the towns and in the country there is still homelessness, brought on by the high prices of second homes. One of the best and most imaginative schemes to help people into houses is the low housing cost schemes. Many of those depend on the generosity of land owners. One example reported recently was at East Harlsey where the land was not just undersold but was actually donated. Similar schemes are run elsewhere, and I think that the Development Commission has played a part along with district councils.
In June it was reported that a new scheme was underway which was recruiting householders to let out their spare room to someone who is homeless. The scheme has been successful and should be emulated elsewhere. It may even help some houseowners who are having difficulties with their mortgage repayments.
But both locally and nationally a lot has been done and is being done to tackle the evil of homelessness. More than 53,000 homes are being built per year and housing associations will be enabled to buy more than 16,000 houses for those in need. The Tenants Initiative will help first time buyers to the tune of £50 million. The drop in interest rates should make a significant difference to mortgage repayments, knocking off some £130 a month for the average house. Nearly £30 million a year is to be made available to help those sleeping rough in central London. One curious fact is that free beds are at this moment provided by the City of Westminster but the rough sleepers prefer not to use them. The housing investment programme and the revenue subsidy will help local authorities to cope with their particular problems, as will the ability in future for local authorities to spend some of their funds from the sale of their assets on new houses and other capital projects. The increase in the number of homes during the past decade has in fact exceeded the growth in the population. But more people now have second homes and more people are single or divorced, doubling the demand.
But the Government cannot be accused of just sitting back from it all. The noble Lord, Lord Molloy; went slightly over the top in his criticism and lost some of his credibility. I wish to point out that £4 billion a year has been given to Action for Cities involving 57 inner cities; 11 City Challenge round one have £82 million per year; 20 for round two have £150 million per year; DoE Urban Group programmes account for £1 billion going to inner cities and derelict land; £255 million of city grant has generated £1 billion of private sector investment in inner cities; and there were 8,700 Urban Programme projects in 1991. The list goes on.
No one can deny that the Government have made every effort to combat both unemployment and homelessness with a great variety of different and successful schemes to tackle both. But the fact remains that both evils are with us and will remain with us for a long time to come. They will continue to demand the closest attention by the Government for years to

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come, particularly in the north of England. Failure to deal with this demand may jeopardise the very fabric of society as we know it.
6.15 p.m.
Lord Ross of Newport: My Lords, I congratulate the noble Lord, Lord Molloy, on his choice of subject and on his bravery in coming to the House with the aid of two walking sticks. He fell off a horse and we welcome his speedy recovery. I am sorry that the noble Baroness, Lady Fisher of Rednal, is unable to be present. I understand that she is unwell. Only today the City of Birmingham announced 3,000 redundancies, some of which are in the building maintenance department.
The lack of any real debate on housing during the general election in May was extraordinary. I tried to stir it up in my own party, but that did not happen. We have, however, had some small but welcome initiatives since the election, in particular in the Autumn Statement. Much remains to be done and many of us believe that it could be done despite the financial restraints which curtail current government action. I read a despondent article in Building Material Producers dated 4th December which stated:
"Conditions in the housing market have deteriorated sharply since August and a steep decline in house building activity is anticipated as the year draws to a close. This is reflected in a downward revision in the forecast for starts in 1992 to 125,000 from the 130,000 expected in July. Dramatic redundancy announcements are deterring buyers who are so far failing to take advantage of low mortgage rates. House prices are expected to fall further over the winter months".
That is a depressing story.
I have considerable respect for the housing Minister, Sir George Young, as does the noble Lord, Lord Molloy. He does not lack advice. Having recently vacated the chairmanship of the National Housing Forum, which I occupied for some three years, I have a pretty good idea of the number of professional and charitable bodies on the housing scene. They are deeply involved, well informed and have put forward some extremely well researched proposals. I imagine that many must land on the Minister's desk almost daily.
A major development within the past decade is the welcome consensus which covers the whole field of housing provision. I am sorry that the noble Lord, Lord Skidelsky, is no longer in his place because I wish to refer to some of his comments. No longer is "private" in renting terms a dirty word. During the latest general election a housing spokesman for the Labour Party said that it would be pleased to see the private rented sector rise to about 15 per cent. of the housing total. That attitude represents a change. Indeed, all political parties want to see the role of private landlords substantially enlarged. When I was a member of the other place and some 15 years ago made remarks to that effect I was nearly hounded out of court. We should pay due respect for that welcome state of affairs to the Rowntree Foundation and its director, Richard Best. It has funded so much good work, including the two reports chaired by His Royal Highness the Duke of Edinburgh and other reports through the National Housing Forum.
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I wish to comment on some of the remarks of the noble Lord, Lord Skidelsky. He spoke of the immobility caused by the control on rent. I agree that there is a certain amount of truth in that. However, when the housing market and the building construction industry was booming in the South, particularly in places such as Docklands, vast numbers of people travelled down to work from the North East and the North West. One had only to be at Euston Station at 5.30 on a Friday night to see the Scouses going home to Liverpool and then coming back on the Sunday night train. I know personally many Geordies who came down from Newcastle to work. They were earning large wages but they came because the work was available and they went home at weekends. Mobility would certainly be helped if there were a bigger private rented sector.
The noble Lord, Lord Skidelsky, says that most people can face market rents. I invite him to look at the Evening Standard any night of the week. He will see columns of advertisements for accommodation to let, but they are mostly at rents upwards of £150 a week. Those in receipt of housing benefit cannot possibly face such rents. If they were able to they would not receive housing benefit because that would be ruled out by the rent officer as far too high an amount to pay. However, I agree with him that if we can get rents nearer to a sensible return on capital value—and, after all, house prices have come down remarkably over the past year or two; I understand it is even possible to buy a flat in parts of Wandsworth for about £10,000 at the moment—people could get a return on the rent. It is nearly there. It is a disaster for the people who own those places, and these are the poor devils who are being repossessed in large numbers at the present time.
Anybody who has bought a property auction catalogue or had one sent to him will see there are marvellous bargain auctions every month. It is a tragedy to see all these repossessed homes being sold by the building societies. Some are even sold by housing associations. I cannot understand it. The Network Housing Association has been selling some of its properties. There are a lot of greedy people about who buy these properties cheaply. They do not intend to occupy them. They put them back on the market with a £10,000 upward hike and sit back and wait. It is a nasty situation. I hope that the noble Lord, Lord Skidelsky, will read some of those remarks when he gets his Hansard.
The best article that I have seen from any political source in recent times is that by George Walden, MP, a former Conservative Minister. His main expertise is usually in foreign affairs and he is often seen on television. He is a very capable person. He quoted Mr. Tim Melville-Ross, who is the chief executive of the Nationwide Building Society, as calling for the end of mortgage tax relief. I had an argument with Mr Melville-Ross at a meeting at the Building Societies Association with the Council of Mortgage Brokers because he wanted to double it at that time. He seems to have changed his mind, and I welcome that.
Let me quote from what Mr. Walden said:

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"Over the last few months, housing history has been made. Mr Tim Melville-Ross, chief executive of the Nationwide Building Society and chairman of the Council of Mortgage Lenders, has called for the end of mortgage tax relief. More than that, he said that home ownership in Britain is an 'obsession'. But Mr. Melville-Ross is as right as he is brave. As an MP, I have seen the raw end of our home ownership obsession. What do you say to the distraught mother in a council house, whose 23-year-old son responded to government incitement to 'get on the housing ladder' by buying a one-bedroomed flat for £55,000 which he had to sell for £30,000 two years later, so starting life more than £25,000 in debt?
How do you deal with the middle-aged couple on a smart estate, when they tell you that their little building business has failed, they can't keep up the mortgage on their £90,000 semi-detached (now worth £65,000), and are going with their two children into bed and breakfast?"
In a street I know well in Ryde a house has just been repossessed. Sadly, a man was made unemployed and he had seven children. They are split up and have gone into bed-and-breakfast accommodation. What an appalling situation. They tried to break back into the house the next day—and, God knows, I sympathise with them—but they were turfed out.
At the end of this article Mr. Walden says:
"Telling 68 per cent. of the people they are worth less than they suppose is not popular politics. But the government could at least change the emphasis of its housing rhetoric to make clear that the overriding national need now is to make private renting a real option".
I support that.
"At present, the government can't win. Like everyone else, it knows that MIRAS is costly madness"—
I think it is £6 billion plus—
"but can't say so. It has to pretend to be in charge, but the root causes of our housing problems are either out of its hands —such as our phenomenal increase in family break-ups—or untouchable, such as MIRAS.
Conservatives have got their philosophical knickers in a twist on housing. Preaching home ownership is incompatible with free choice. MIRAS is incompatible with a healthy aversion to indiscriminate subsidy. A 'home-owning democracy' is a nannying slogan, and a 'property-owning democracy' never meant houses in the first place, but shares or whatever people chose to own—houses included.
Modern Conservatives shouldn't be pandering to fetishes, but telling people the truth".
I share Mr. Walden's belief that we have to get to grips with MIRAS and put much of the £6 billion that it currently costs the state to better effect. I am told by my deputy leader that it is nearer £8 billion. It is a large sum of money whatever it is.
Obviously the timing of such a move must be carefully considered and some measure of housing cost relief put in its place. Otherwise we put in jeopardy the low income owners who desperately depend on it. I do not see why it should go to all those people on £100,000 plus. They are the sort of people I would tackle first. Various suggestions as to how this could be done have already been circulated widely and will be well known to Her Majesty's Government.
Have they the courage to act? The suggestion was in the second report of His Royal Highness the Duke of Edinburgh. This is the time to act, in the early stages of the Government's term of office. This is the time to get to grips with it. People will see the sense of it in a few years' time. At least the suggestion ought to be openly discussed and not used as a party political football. If we take the case of the repossessed couple referred to in Mr Walden's article, which could be
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repeated many thousands of times, what nonsense it is that they cannot be helped before having to vacate their home.
The experimental mortgage to rent scheme which was talked about a year ago seems to have died a death. Even the housing associations currently seeking to acquire some 20,000 low-cost homes under the Government's £630 million scheme, which I welcome, have been told that they must acquire only vacant properties. Although I saw in the Observer on Sunday that something like one in 10 are claimed to be repossessed homes, certainly in Wales—I have to talk from Welsh experience as I sit on a Welsh housing association; incidentally we are buying 27 properties—we are told that they must not be properties with people in them which are about to be repossessed. The properties must be empty first. That is a great shame because we ought to be able to help them before they are evicted.
Putting families into bed-and-breakfast accommodation is the most soul-destroying and expensive way to house the homeless. Surely some of the money could have been used to acquire such properties before they were vacated. Once families qualify for housing benefit the chance of getting them back into low paid work recedes, and so more unemployment results. There is certainly a case for looking at the restructuring of housing benefit itself. Moreover, housing associations should be trying to provide accommodation for a whole cross-section of the community; otherwise they fall into exactly the same trap as the large local authority housing estates. I recently rejoined a management committee of a housing association in a rural area, and we estimate that at least 70 per cent. of our tenants are on housing benefit.
I hope the Minister will deal with this. There is a move that has been going on for the last few months in Wales—and I gather this is now happening in England—to restrict the number of housing associations carrying out actual developments. It is claimed that, with standardised designs and larger contracts, even if split between sites, the money will go further. That has rightly been condemned by the federation in Wales, and I hope it will be condemned by the National Federation of Housing Associations in England.
Before this movement takes off, I beg Ministers to look back at the mistakes of the 1960s when such ideas were again rife. The cost of putting right errors of design then has been phenomenal. One has only to go to Andover. It cost millions to re-roof the houses in Andover that were all built with flat roofs. Moreover, statistics from Rowntree also show that on average smaller housing associations build more cheaply. If we really want to put more of the smaller local builders, architects and surveyors—who are apparently surviving on work coming from housing associations—out of work, this is a good way of doing it —giving it all to the Laing's and Wimpey's of this world. But it is not the right way to go about this, and I hope the practice will die a quick death. I hope to get an undertaking from the Minister that this will be looked at.

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Who, worth his salt, giving his time freely and willingly—and one gives a lot of time and reads a lot of paper—will want to serve on a housing association that deals solely with management and has little or no say on the construction side? We are there because we want to see houses built for the children in the area in which we live. Will housing associations in time be obliged, as is proposed for local authorities, to go out, if they are purely managers, to compulsory competitive tendering on management? The mind boggles at the way we might be dragged along in due course. We do not get paid, and we willingly spend much time and effort on the job, but our enthusiasm will be killed stone dead if that is the way we are to proceed.
But the Government may feel that this is the way they want to go. They have cut the Housing Corporation cash allocations for 1993–94 and 1994–95 by a total of £350 million, while claiming that the target of 50,000 houses can still be met—a target which is only half what it should be, because by common consent in the social market building sector we should be building over 100,000 a year. Even the Audit Commission said 70,000.
I am running out of time, but I should like to suggest that there are alternatives to bed-and-breakfast. Why on earth do we not use prefabricated units? Why on earth do we not use decent mobile homes on decently serviced sites, giving people a bit of privacy and somewhere for the kids to play? It would not cost the earth. I cannot understand why this is not being done. Actually, it has happened a little bit in Southwark and one or two other places. Also, what about all these empty offices all round London? I suggest to the Minister that he takes the Royal Institution of Chartered Surveyors latest journal as bedtime reading tonight. He will see that it is perfectly feasible to convert offices into living accommodation. If we do not do that we shall have thousands of offices —I say to him quite seriously—empty in the City and elsewhere.
Case studies show that conversions to residential units are perfectly feasible, and surely desirable. Seventy-two per cent. of sites in Islington are plainly suitable for residential use and only 17 per cent. for commercial use. We could at a stroke bring people back into our city centres, put the many empty office blocks to good use and reduce some of the traffic problems that now exist. "Planning" is a dirty word for the Government, but let us bring it back. Let us look at the transport problems. Do not let us shut down London's best hospitals and then bring everybody back into town. That is the way we ought to be going, and saving some of our countryside.
In July of this year the theme for National Housing Week, promoted by the NHF, was "Homes for our Children". We commissioned a report from Jean Conway, Jane Dark and Christine Holman of the Sheffield City Polytechnic. It was said that this was an excellent piece of research and was indeed commended by the Minister himself. I should like to quote from its
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conclusion, and then I promise to sit down. The heading is "What happens now?". Jean Conway says this:
"If there is no serious response to the housing needs of young people a number of consequences can be predicted. The short term emergency provision, the DoE's Rough Sleepers Initiative, is already full with nowhere for people to move on to. In the medium term those who are young and inadequately housed today will be in their 20s, establishing families and still inadequately housed in five or so years time: they will be the priority homeless of tomorrow and a more costly housing need to meet.
Demographic trends show a decline in the proportion of the population of working age soon after the beginning of the next century. Yet young people without a decent home find it very difficult to obtain training and skills, get a job and maintain it. If they are not housed, they cannot be the workforce which will be needed to keep the economy going".
Perhaps that is an argument for a development of the "Foyer" type which occurred in France, where hostels provided for young people also include training and leisure facilities, skills for living and counselling on employment. It is true that one such centre opened in Nottingham in March and others are under construction in Southwark and the North West. All the details, plus many of the excellent suggestions, are included in the publication Homes for Our Children. I hope that the Minister will take time to read it: I can lend him my copy.
6.33 p.m.
Baroness Hollis of Heigham: My Lords, as the noble Lord, Lord Molloy, said in his opening speech on this very welcome debate—and may I say, like the noble Lord Lord Ross, we are delighted to see him back here after his accident—the two things that matter most to people and that make possible decent and secure family life are a job and a home. The truth is that if you are unemployed in this country you are now increasingly likely to be homeless and if you are homeless in this country you are almost certain to be unemployed.
The Government's industrial policies have seen our manufacturing industry undermined. Unemployment has risen to nearly four million. New socially rented housing is down to a quarter of the starts of the late 1970s, and in consequence more and more marginal families are pushed into an owner occupation which they can barely afford in good times and which is impossible for them to maintain when unemployed.
Why? Because over the last decade we have not had a housing policy from this Government but a tenures policy: a switch from one tenure to another, from socially rented to owner occupation. Money, which could and should have been invested in new homes, has instead been spent on financing the debt with which to add not new homes to the stock but to change tenures within the stock. At the same time, the success of that policy, and in good times we would support it, has been subverted by the Government's own economic and industrial policies of mass unemployment. This has meant that families could not afford their homes when they had bought them. So, as the noble Lord, Lord Gisborough, described so eloquently and in such accurate detail, we face a

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landscape of mothballed factories, repossessed homes and crumbling stock while the unemployed become homeless and the homeless remain unemployed.
If you are unemployed you are increasingly likely to be homeless. Why? If you are unemployed your home is both secure and affordable only if you are in socially rented housing with full housing benefit. But if you are a private tenant your problems are very real because landlords of new tenants demand a month's rent deposit in advance and often a month's rent as well while benefit is paid fortnightly in arrears. If you are unemployed in any case many landlords will not take you. If they do, housing benefit often does not cover the full rent. As the Rowntree Foundation has shown, a third of tenants' claims for housing benefit were cut, usually on the ground that in 25 per cent. of all cases the rent charged was above the fair market rent. On average, therefore, the tenants had to find the extra £20 themselves out of income support already top-sliced for fuel, water and debts.
The noble Lord, Lord Skidelsky notwithstanding, it is the tenant who pays and not the landlord who subsidises. As the tenants seldom can do so, they are usually evicted for arrears and put on the streets, regarded as intentionally homeless, and not rehoused. Not only private tenants but owner occupiers are hard pressed. Over one million people at the moment cannot afford to move because their homes are worth less than they paid for them. Two-thirds of employers, as the noble Lord, Lord Skidelsky, rightly said, are complaining about rigidities in the labour market, but they are rigidities following the rigidities of a housing market dominated by owner occupation. After all, there are nearly twice as many vacancies in the private sector as there are in the local authority sector, but because families cannot sell they cannot move.
More alarmingly still, nearly a million families have heavy arrears on their mortgages, and in the last 12 months 80,000 families suffered repossession. As many of them were held to be intentionally homeless only 20,000 of those 80,000 families were able to seek and obtain decent affordable housing from the local authority. That is 200 families a day repossessed: twice the figure of two years ago. If such families become unemployed and they are owner occupiers on income support, half the mortgage interest payment is paid for the first 16 weeks. As a result, debts mount, from which many never recover, arising from the other 50 per cent.
Even so, they are the lucky ones compared with those families where perhaps a husband loses a full-time job and a wife remains in a modest part-time job—as a nurse or a shop assistant—where she is on family credit. As a result the family receives no help with mortgage payments at all. If that family is sensible, she too will stop work. She too will become unemployed in order to keep her home. That is perverse social policy.
Every government initiative so far to aid the situation has been an utter failure, as the Minister will confess if he is honest. I am sure that he will be. The housing associations' leased management scheme on behalf of building societies, which the Chancellor in another place proudly announced would acquire over
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40,000 repossessed homes for families, in a year has helped just 120. Forty thousand was the bid and 120 is the result. The new vaunted scheme in the Autumn Statement, by which housing associations are going to get £580 million to buy 16,000 repossessed properties, will do no such thing, the noble Lord, Lord Gisborough, notwithstanding. It is already clear that they are going to buy new build and not repossessed homes. In any case it is not new money but money mainly brought forward from the next two years of housing association expenditure, and therefore at the expense of their own rents and building programme.
We have not had a housing policy but a tenure policy. We have seen the sale of 1.6 million council houses (which otherwise we would support) that has reduced stocks to let by pushing marginal families into owner occupation. Local authorities in many places now have to buy back those same homes from former council tenants who are too poor to pay for them and maintain them. We have seen the voluntary transfer of stock (71,000 houses) to housing associations and shared equity schemes. Of all the absurdities, we now see a rent-to-mortgages scheme that will push marginal families still further into the ranks of owner occupation that too few can afford at precisely the time when the opposite is needed—a mortgages-to-rent scheme to keep people afloat in their own homes and eligible for housing benefit.
One of the many items of research carried out by the Rowntree Trust has shown that less than 30 per cent. of young couples who are both working can afford to buy a new modest home. Barely 45 per cent. can afford to buy a modest Victorian terraced house. To ask them to do so in good times is a strain; to ask them to do so when one or both partners is unemployed is impossible. We would support the Government's initiatives to change tenure if they added to housing choice and to the housing stock. Instead, they have done neither and we see the results around us. As my noble friend Lady Turner said, only socially rented housing offers decent quality, affordable housing with rents covered in full by housing benefit. Only socially rented housing breaks the link between low income and what is often literally lousy housing that in the past has done so much to produce family poverty, ill health, illiteracy and deprivation. What the unemployed need, and increasingly cannot gain access to, is social housing. Notwithstanding what the noble Lord, Lord Skidelsky, said—and I believe he was wrong—the loss of private renting has not been because of the emergence of council housing; the loss has been to owner occupation. We accept that tax subsidies have artificially weighted owner occupation at the expense of both private and social renting alike.
In the early eighties social housing represented some 40 per cent. of new starts. It now accounts for only 23,000 of a much lower total of 163,000 properties. We have seen social housing go down to a quarter of what it was in the early eighties. I take my own authority of Norwich. In the 1970s as housing chairman I chaired a committee concerned with the building of 700 to 1,000 council houses per year. They were good quality semi-detached houses cherished by

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their tenants. The rent arrears were very low. We never saw any but the proverbial tramp sleeping rough. Never during the 11 years that I was housing chair did we put families into bed and breakfast accommodation for more than a weekend. Those houses have been sold off and the rungs of the ladder are no longer available to the next generation. In consequence, Norwich has £40 million of capital receipts, none of which it can touch. That is idle, wasted money. At the same time, people are sleeping rough in cars, under bridges along the River Wensom and trying to sleep in the shadow of the cathedral spire—something that people have not done since the days of the blitz. Walk around Norwich at night—and I invite the noble Lord, Lord Strathclyde, to do so—and you will stumble across bundles of black sacks and newspapers left out for the refuse collectors. Dimly in the dark one will see that there are fellow human beings there.
Homelessness has soared; it has tripled since 1978. As Shelter reminds us, nearly one million people applied to local authorities as homeless in 1991. Nearly half of that number, despite what the noble Lord said at Question Time today, are homeless because their present living conditions with families or friends have broken down. They have been living in spare bedrooms and have not been able to wait out their time on ever-lengthening waiting lists. Often husbands and wives sleep with their respective families. Twelve per cent. of those families are homeless because of mortgage arrears; 15 per cent. are homeless because private tenants have lost security of tenure, notwithstanding what the noble Lord, Lord Skidelsky said. In other words, three-quarters of those families owe their homelessness directly or indirectly to government housing policies.
In 1979 in the city of Norwich only one family in 10 was housed by the local authority on grounds of homelessness; the figure is now over one in two. Approximately 150,000 families, or some 500,000 adults and children, are officially treated as homeless by local authorities. As many again, though homeless, are not deemed to be of sufficient priority and have joined others in squats, have slept on floors or have remained with violent partners and at risk. If it is the case that once unemployed one is increasingly likely to be homeless, whether in the private rented sector or in owner occupation, so is the reverse true: if one is homeless one is almost certain to be unemployed.
During the general election I was working in Great Yarmouth. I was shown a corner house that had been empty since the previous August and was deteriorating badly. It had been owned by a couple. The husband whose wife had become pregnant was a carpenter and had lost the opportunity for overtime. Their income had been more than halved. As a result he could not keep up his payments and was repossessed. After bed and breakfast accommodation, he was rehoused. The only property that a good local authority could find was a cottage about 10 miles out in the countryside. He could no longer afford to run his car. He lost his home and as a result lost his job as a carpenter. What he swapped for both of them were debts. That was a story manufactured by government.
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If people are unemployed they are likely to be homeless; if they are homeless they are almost certain to be unemployed. Eighty per cent. of the heads of homeless families are unemployed, and most of the homeless are families. Those families go largely into bed and breakfast accommodation; that is, shabby hotels and hostels, where on average they stay for nearly a year. Two-thirds of those families live in overcrowded conditions. On average 21 people share one cooker. The wiring, cooking and hygiene arrangements are downright dangerous.
What of the young single people for whom local authorities can and do take no responsibility? Shelter's night line received 23,000 calls from people, nearly half of whom were sleeping rough and 40 per cent. of whom were under 25. Many have no homes to go to. Only about 1 per cent. of young people are in local residential care. These people form one-third of all the young homeless on our streets.
The Government may talk of its London initiative but the £33 million this year is a cut in cash terms on the £38 million last year. The problem grows. As a result, youngsters sleep rough and risk drugs, prostitution and AIDS. They are our children.
The homeless need homes. As the noble Lord, Lord Ross, and others said, we need something like 100,000 new homes for social renting each and every year. That has been said by the Audit Commission, the National Audit Office, the Tory-led ADC, the Institute of Housing, the National Housing Forum, the Housing Corporation and all academic research. Where is that housing to come from? Nationwide £6.5 billion is tied up in capital receipts, of which £5 billion cannot be spent. The Government will point to the release of capital receipts for the next 13 months. The AMA estimate that it will be £300 million this year and £550 million next year, making £850 million in all—far from the £1.75 billion that the noble Lord was erroneously, in my view, quoting today during Question Time. Since £400 million of that £850 million will be taken away from credit approvals and Exchequer subsidy for improvement grants will fall from 75 per cent. to 60 per cent., as the noble Lord, Lord Gisborough, rightly reminded us, it means that government will be allowing local authorities to spend more of their own money this year to permit the Treasury to spend less.
We are certainly not seeing much new money. We are not even seeing much additional money. We are seeing the money of local authorities substituted for Exchequer subsidy. In the process local authority total capital spend will be restored to where it was two years ago. That is all that the much vaunted Autumn Statement initiative represents. So much for new initiatives. It means therefore that while my local authority still has £40 million of capital receipts tied up, it will probably only acquire and be able to spend £4 million under the Government's Autumn Statement and much vaunted new initiative. A welcome release, perhaps, but nowhere near touching the size and scale of the problem.
We know what needs to be done. We know that we need to reform housing benefit and give tenants in the private rented sector additional security. We know

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that we need to help owner occupiers who are unemployed or on low incomes to stay in their own homes either by converting the mortgages to rent to enable them to enjoy housing benefit, or by allowing those on family credit to receive a mortgage benefit so that they are not penalised perversely if they seek low paid work. Above all, we must build 100,000 new homes a year to rent.
The Government's figures, as my noble friend Lord Molloy reminded us, show that it costs twice as much to keep families in bed and breakfast accommodation —£14,000 a year—as it does to build them a new home, around £7,000 a year. As the National Audit Office said in 1990,
"Paying bed and breakfast charges in the long term, rather than as a temporary expedient, is more expensive than building new council accommodation".
The benefits are that those newly housed may then become the newly employed. As my noble friend Lady Turner reminded us, new building feeds speedily and directly into employment; it releases demand without sucking in new imports and worsening the balance of trade. Every £20,000 spent on construction creates a job; every new house built creates a job on site, a job in the construction supply side offsite and probably half a job in retailing-related manufacture. Thereby those newly employed can acquire housing of their own. Build a rented house and in the process one earns enough pay to buy a home of one's own. Yet instead, in 1990 we saw 5,000 building firms become insolvent; in 1991 the figure was 7,000. There were 600 jobs lost every working day in the construction industry over the past three years—400,000 in total. Half of the cost of new building would immediately be recouped through the saving on benefit payments. In Norwich around one-fifth of the men out of work come from the construction industry; half would be back in work if we were able to release just half of our capital receipts.
I invite the noble Lord, Lord Strathclyde, to take a second walk around Norwich—a city with which I know he is familiar—and he will see thistles in the fields bought a decade ago for housing; he will see homeless families in bed and breakfast accommodation; he will see unemployed building workers at risk themselves of becoming homeless, and he will see £40 million of untouched, unusable capital receipts idling away—wasted money, wasted lives. I wonder what kind of economic madness afflicts us all, what blinds us to the misery of homelessness that we have constructed when instead we could have constructed homes.
6.53 p.m.
Lord Strathclyde: My Lords, I too join other noble Lords who have spoken in the debate in welcoming back the noble Lord, Lord Molloy, after his recent illness. He is in fine voice and has quite rightly drawn attention by his Motion to the link between housing and wider economic issues. As with so many other issues, achieving our aspirations for housing depends on what we can afford, not just as individuals but as a nation.
I thank the noble Lord, Lord Molloy, and the noble Lord, Lord Ross of Newport, for their accolade to my
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right honourable friend the Minister for Housing, Sir George Young. I understand the respect in which he is held in housing circles.
Of course, government cannot create jobs. It is industry and commerce that create employment by producing the goods and services that customers want. Government's role is to establish an enterprise economy that will generate sustained economic growth and jobs.
We are committed to low inflation and sound public finances as a sound basis for growth. British business is now well placed to take advantage of the lowest interest rates in the European Community and a highly competitive exchange rate. The benefits of that, and the measures to boost investment and confidence announced in the Autumn Statement, should be felt, and will be felt, in renewed growth, wealth creation and providing new jobs. But where homeowners have lost their jobs, income support ensures that they have sufficient funds to meet their reasonable housing commitments. The interest payments on a mortgage are included in the calculation of a claimant's weekly needs. For those who rent their home, housing benefit will help an estimated 4.5 million people meet their rent liabilities in 1992–93.
With Christmas approaching we have seen a rash of news stories lately about the problems of homelessness; and it is, of course, right that at this time of the year in particular we should recognise the difficulties faced not only by those sleeping rough in the streets of the capital and elsewhere but by those who are living in some of the unsatisfactory kinds of temporary accommodation. But this is not just a seasonal issue, as some people seem to think. This is a year-round problem, which demands year-round concerted action. If housing were considered more newsworthy throughout the year, perhaps we would have more reasoned coverage of how the problems are being tackled: by central Government, by local authorities, by the Housing Corporation and the housing associations, and by charitable and Church groups—exactly the kind of bodies mentioned by the noble Lord, Lord Molloy.
Real progress has been made and following the Autumn Statement of my right honourable friend the Chancellor, we are well placed to go on making progress over the coming years. The measures we have taken to help the housing market and the construction industry will not only give a boost to confidence but will be of particular value to those who need help with their housing.
First, the Chancellor announced an additional £580 million for the Housing Corporation in 1992–93 to help housing associations purchase new, empty or repossessed homes. We estimate that that will mean 16,000 new units of social housing stock. The target we have set of 153,000 new units of social housing over the three years from April 1992 should be comfortably exceeded; in fact, we now expect 170,000 homes to be made available over that period.
An excellent start has been made already with over 1,200 approvals given for housing associations to buy some £62 million worth of property by 10th

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December. The purpose of the package is to stimulate the housing market and to provide homes this year. Prompt action is vital if both those aims are to be achieved. We are satisfied that the Housing Corporation is well on course to meet our target that all transactions should be approved by the end of March. A further £20 million is being made available through the corporation to enable housing association tenants to buy homes in the private sector, and £30 million through local authorities to enable council tenants to do the same. The estimated 3,500 homes in the social sector which that frees up will then be ready for use by those in housing need, including homeless families.
Secondly, the relaxation in the rules on local authority capital receipts will give authorities an estimated £1.75 billion of extra spending power. We expect that they will devote around £1 billion of that towards the renovation of run-down council estates. Not only will that mean valuable improvements in living conditions for the tenants of those homes, but it will also provide employment in construction and building maintenance.
The capital partnership which we have set in place aims to encourage local authorities to direct their new spending power towards projects which will be of lasting benefit to their local communities. Government grant or credit approvals of £200 million will be available; and the Housing Corporation will seek to improve the output it can achieve from the £400 million it has available for new schemes next year by taking advantage of capital partnership opportunities. In addition, we have set up a £30 million Housing Partnership Fund to provide incentives to those authorities which are less able to raise receipts, but which nevertheless have worthwhile projects.
I know that the noble Baroness, Lady Hollis, and I can disagree about the exact numbers, but the principle of allowing local authorities to spend 100 per cent. of their receipts is one for which she has fought for a considerable amount of time. Instead of harking back to the money that was raised in the past, the noble Baroness and her local authority should look forward to the assets which they have in their local authority area and see how they can be put to sweat more for the needs of the local people.
Baroness Hollis of Heigham: My Lords, I thank the noble Lord for giving way. I entirely endorse every word of the final two sentences. In the light and spirit of those remarks, can we hope that the same attitude will be taken to the existing receipts which are held unused, idle and wasted by local authorities and not just as regards the receipts which are about to come to local government?
Lord Strathclyde: My Lords, the noble Baroness will know that I am not in a position to give her any comfort about the existing receipts. The announcement that we made is one clearly for future receipts.
Baroness Hollis of Heigham: My Lords, why not?
Lord Strathclyde: My Lords, I am quite happy to tell the noble Baroness why not. It is because this is a
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policy which has been in existence for many years. We believe that local authorities with the greatest amount of receipts are not necessarily the ones which need most money. Furthermore, we have public expenditure considerations to take into account. I am not at all convinced that it has been Labour Party policy, particularly at the last election, to release all past receipts to be used by local authorities. I am sure that this is an area which we shall come to again. The point is that over the next 13 months there is a magnificent opportunity for local authorities to demonstrate that they can do what they have always said they can do; namely, to spend money wisely and responsibly and to look after the needs of local people.
I have so far mentioned two points of action. Perhaps I may now move to a third. The Chancellor announced the continuation of the Rough Sleepers Initiative, with additional provision of some £86 million over the next three years. The programme has visibly reduced the number of people sleeping rough in central London. The latest count of people sleeping rough in central London, carried out by voluntary organisations last month, found 420 people sleeping rough, which is down on the 1,000 plus estimated before the initiative began. As I said at Question Time earlier today, what is particularly encouraging is that of the 420 people identified, only 20 or so were aged 18 or under, which would seem to indicate that young people in particular are benefiting from this initiative.
The noble Baroness, Lady Hollis, suggested that we had cut available resources. It is not a cut. It represents an additional £60 million over the resources earmarked for the Rough Sleepers Initiative before the Autumn Statement. At a national level, the Government give grants under Section 73 of the Housing Act 1985 to voluntary organisations concerned with the single homeless. This year resources of £6.1 million are going to support 150 projects across the country which are of direct help to single people who are homeless, or at risk of becoming homeless. Of those projects 81 are aimed specifically at young people, which we hope this year will secure supported or independent accommodation for around 8,700 young people; provide resettlement advice and training to around 21,000 young people, as well as aftercare and support to around 3,200 clients once they have secured more permanent accommodation. It should be noted that resources for Section 73 grants have been increased to £6.45 million next year; and, in total, over £20 million will be available for Section 73 grants over the course of the next three years.
As far as the benefit position of young people is concerned, the Government take the view that the majority of people aged under 25 are non-householders and that their average earning power is lower than that of older people. Benefit rates reflect that. Sixteen to 17 year-olds already have the positive options of continuing in full-time education, getting a job or taking up the guarantee of quality training through youth training. We believe that replacing income support for 16 and 17 year-olds with guaranteed YT places is an important step in steering these youngsters away from early dependency on benefit.
Baroness Turner of Camden: My Lords, I am grateful to the noble Lord for giving way. Is he telling the House that the Government are able to keep their guarantee to young people so that there are training places for everyone who wants one? Is that really the situation?
Lord Strathclyde: My Lords, yes. We have always made it clear that the guarantee is in place and it is exactly that. It is a guarantee of training for all those who require it in the age group. This is a well-trodden path. I have had many discussions with the noble Baroness, Lady Turner, on this subject. The point is that there are occasional gaps between people seeking a job and coming onto a YT place. But the principle of what I have said is one that should be supported from all parts of the House. We do not want to create a dependency culture. We want to provide good quality youth training. That is what we have done over the course of the past years and that is what we shall continue to do.
Baroness Hollis of Heigham: My Lords, I thank the noble Lord for giving way. He has been generous. In the light of and in the spirit of his remarks, and the fact that he has recognised in his reply to my noble friend Lady Turner, that there are occasionally "unfortunate" gaps between seeking and obtaining a YTS place, will the Minister therefore undertake to restore benefits in that place so that people—we estimate between 80,000 to 100,000 across the country—are not left destitute?
Lord Strathclyde: No, my Lords, that is not necessary. As I said in my initial comments, we are not seeking to create a dependency culture for people in this age group. There are other opportunities: getting a fulltime job themselves, staying in fulltime education, or taking the choice of a YT job. That is what is appropriate for people in that age group and that is what works. Youth training remains central to the Government's commitment to training. The employment department is ensuring that no TEC or LEC in Scotland is being prevented from meeting the guarantee through lack of funds.
I now turn to the title of this evening's debate. I feel that there is a misleading connection between unemployment and homelessness, as my noble friend Lord Skidelsky pointed out. For the vast majority of those who face the personal tragedy of unemployment, one does not necessarily lead to the other. Housing benefit is available for tenants and income support is available for owner occupiers to enable them to stay in their homes until they can find another job. The noble Baroness, Lady Hollis, made a valiant attempt at making the link. In her argument she created that link; but I do not believe that it can be generally applied that if you become unemployed you naturally become homeless or that, necessarily, if you are without a home that you are unable to find a job.
Baroness Seear: My Lords, I apologise for interrupting the noble Lord. Is he not aware that in order to meet the opportunities in the labour market it is often very necessary to leave your home and go to another part of the country? That is when difficulties
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arise. You cannot get into a council house and you cannot buy. What are you to do? When I was an area board chairman of the MSC we were constantly up against that problem. We had jobs in our area and there were people in the north-west of England who would have liked to have taken them, but there was no accommodation that they could afford either to buy or rent. Surely there is a connection with unemployment.
Lord Strathclyde: My Lords, I believe that the noble Baroness is right to raise this problem of housing and mobility. We as a Government are committed to helping people in the social sector who need to move for employment reasons. We currently provide 100 per cent. funding for the housing mobility agency homes to run a number of schemes, including the national mobility scheme and home swaps, as it is called, to help council and housing association tenants to move to the area of their choice for employment or social reasons. Perhaps this is an area which we need to investigate further in order to provide the opportunities. With the figure which my noble friend Lord Skidelsky used of a 2 per cent. reduction in unemployment, and if we can marry up job opportunities with people who need the jobs, that is a substantial advantage and something that we should aim to be doing.
Many noble Lords have drawn attention to the problems of the relatively small group of young unemployed people who have no home to hang onto—the rough sleepers on whom we are targeting help. That includes help not only in finding permanent accommodation, but also in finding appropriate training and jobs through, for example, job clubs and the Foyer initiative.
The aim of our housing policy is to ensure that a decent home is within reach of every family. Most people prefer owner-occupation, but there are many who either do not choose or who cannot afford that option. It is vitally important that we target public subsidies effectively on those families and individuals who are in greatest need and that we ensure that the resources that we are able to spend on housing are used as effectively as possible.
Lord Ross of Newport: My Lords, the Minister has been kind enough to give way several times, but perhaps I may raise just one more point. He said that housing benefit, or other forms of benefit, is available to those who need it, but there is a problem when the male earner loses his job if his wife is still in a low-paid job. In that case, they do not qualify for housing benefit. That is the problem, is it not? Those are the people whose homes are now being repossessed. They do not qualify for help because the wife is in work, albeit low paid work.
Lord Strathclyde: My Lords, in that case the noble Lord will be glad to hear that, through the reduction in interest rates and the negotiations between my right honourable friend the Chancellor of the Exchequer, the lenders and the banks, fewer and fewer homes are being repossessed. Naturally, we should like that to continue.

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The noble Lord, Lord Molloy, and other noble Lords referred to the economic lunacy of 400,000 building workers being unemployed when thousands of people are not housed. Perhaps I may reiterate the measures that we took in the Autumn Statement. There will be £1.75 billion extra spending on capital projects; cash plans for road programmes are being maintained; capital spending on health is at an all-time high, and the Jubilee Line extension is to go ahead. This year, of all years, was a tight year for public expenditure, but the Government have done their utmost to provide the construction industry with a boost. The £750 million of additional money to boost the United Kingdom housing market by purchasing new, empty and repossessed homes will have a significant effect on confidence while providing an additional 20,000 units of social housing.
In a most interesting speech, my noble friend Lord Gisborough was right to draw attention to the importance of spending on inner-city improvements to tackle both housing and employment issues. I am grateful to him for pointing out so many of the initiatives that are taking place.
The noble Lords, Lord Molloy and Lord Ross of Newport, mentioned the huge expense of bed-and-breakfast accommodation. As I pointed out earlier at Question Time, in the 12 months up to 30th September the use of bed-and-breakfast facilities as temporary accommodation fell by 23 per cent. That is a considerable achievement. All sides of the House must agree that bed-and-breakfast accommodation is not always the most appropriate place for homeless people.
We recognise the difficulty, to which the noble Baroness, Lady Hollis, referred, that some homeless people face in raising a deposit to gain access to private rented accommodation. I hope that she will be encouraged to hear that we are funding a pilot scheme in London, run by the Notting Hill Housing Trust, to provide rent deposits for homeless people. In due course, we shall evaluate the success of that scheme to see whether it should be more generally extended.
There is clearly a great deal more to be done in housing the homeless and in providing more opportunities for people to find their own homes, whether in the private rented sector, through housing associations or local authorities, or through owner-occupation. The picture for the future is by no means a bleak one. We are providing extra finance for new homes. That will help to increase opportunities for employment. During the 1980s we built an enormous number of houses. We also provided unparalleled opportunities for increasing employment. I feel sure that what we did in the 1980s we can do again in the 1990s.
7.15 p.m.
Lord Molloy: My Lords, I was a little perturbed by the noble Lord, Lord Skidelsky, who seemed to suggest that people who might be placed in council housing could be sufficiently well off to buy a house of their own and that their income should be looked into.
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One of the most detestable Acts of Parliament in the United Kingdom's history involved the means test. I feel sure that the Government will not return to that.
I thank the noble Lord, Lord Ross of Newport, for his kind remarks and other noble Lords for their personal remarks about me. I am grateful also for the magnificent support that I received from my noble friends on the Front Bench. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Bank of England: Long-Term Price Stability
7.16 p.m.
Lord Ezra Lord Ezra rose to ask Her Majesty's Government whether they consider that additional responsibility should be given to the Bank of England to assist in securing long-term price stability.
The noble Lord said: My Lords, I start by thanking those noble Lords who have stayed until this late hour to debate this Unstarred Question. They are a small but highly qualified group.
I have put down this Question for debate because of the continuing importance of the issue of inflation and the need to reassess the long-term approach to it, particularly following sterling's withdrawal from the exchange rate mechanism. Membership of the ERM introduced for the first time an institutional element into the policy for dealing with inflation. Now that that has gone, perhaps for some time, it seems to me to be desirable to consider what alternative institutional means can be developed.
Before doing so, however, I think it would be helpful to put Britain's recent experiences with inflation into historical perspective. The Governor of the Bank of England referred to this in his important speech to the London School of Economics on 11th November. He showed that persistent inflation is a relatively modern phenomenon. From the mid-13th century until the start of the 20th century the value of the currency had been relatively stable, with the exception of a period of inflation in Tudor times and at the end of the 18th century, at the time of the Napoleonic wars. However, even in those two cases, the increase in inflation had been relatively slight compared with what has occurred in the present century. An analysis of inflationary trends in this century shows that the period of greatest price instability was concentrated in the 1970s and the 1980s. In the 1970s, price inflation reached a peak of 24 per cent. in 1975. It was subsequently brought back to 8 per cent. in 1978 by actions taken by the Labour Government on wages and on public spending. The peak of inflation in the subsequent decade was reached in 1980, largely as a result of the increase in VAT. By 1986 inflation fell to 4 per cent. but rose again to almost 11 per cent. in 1990. This was followed, as we know, by severe monetary tightening with interest rates going up to 15 per cent. Since then, and helped by entry into the ERM in October 1990, inflation has been brought down to the most recently announced figure of 3 per cent.
So, the experience of the past 20 years, during which inflationary pressures have been the most intense in our recorded history, has shown that governments have tended to act after high inflationary levels were reached and then brought the level down again. While this may have appeared to indicate some success of government policies, it has also had the effect of substantially destabilising the economy and accentuating the succession of booms and recessions to which we have become more prone in Britain than in other Western countries. To avoid this going on into the future, it seems essential that some longer-term system for securing price stability should be devised.
In this connection, it is instructive to consider what has been going on in other Western countries. Let me start with Europe and then move to some countries outside Europe. The role of the German Bundesbank is well known. It has the primary responsibility by law to safeguard the currency by regulating the supply of money and credit in the economy. Its main weapon for doing so is the level of interest rates. It is perhaps less well known that a number of other European central banks also have a major responsibility for ensuring price stability in their respective countries. For example, the independence of the Banca d'Italia has significantly increased over the past decade. It now has statutory authority to set the official rates on discounts and advances, and a Bill currently before the Italian Parliament would eliminate its remaining links with the Treasury. In the Netherlands price stability is the primary policy objective of the central hank. It has considerable operational autonomy, although in the last resort responsibility lies with the Finance Minister. He may give directions to the bank but so far has not done so. In Austria the central bank has the formal responsibility of maintaining both the internal and the external value of the currency. This responsibility was introduced with the National Bank Act 1955. In Switzerland the National Bank has the responsibility for monetary policy including the setting of interest rates. In France the central bank has formal responsibility for the regulation of credit and operational monetary policy, although it, too, like some other countries, is subject to directions from the Ministry of Finance.
Moving outside Europe the responsibility of the Federal Reserve of the United States is as well known as the role of the Bundesbank. But the role of the Bank of Canada is perhaps less well known. It has the responsibility for carrying out policy to achieve inflation targets agreed with the Minister of Finance. In New Zealand the Reserve Bank was given independence in 1989 in the formulation and implementation of monetary policy. Inflation targets are set by agreement between the Minister of Finance and the Governor of the Reserve Bank and currently are set at between 0 and 2 per cent. by 1993. The Reserve Bank is accountable for its performance to Parliament and publishes a six-monthly monetary policy statement. The Finance Minister has the right to sack the Governor for non-performance. So far he has performed.
It seems to me that, in the light of this review of
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what has been happening in a number of leading Western countries, the time has come to re-examine the role of the Bank of England in helping to achieve price stability. Some steps have, indeed, already been taken in this direction. In the Mansion House speeches of the Chancellor and the Governor delivered on 29th October 1992 explicit targets for inflation were set with the objective of achieving less than 2 per cent. over the longer term, and a move was taken towards more institutional and open procedures for achieving this objective. Regular monthly meetings are to be held between the Chancellor and the Governor starting this month, and the monthly report which would be considered at that meeting would be published. The first such report has already been issued. Whenever a change of interest rates takes place the authorities would set out an account of the reasoning behind it. This was done on the occasion of the last two changes in interest rates. Furthermore, the Bank would produce a regular quarterly report on inflation which would analyse inflationary trends and pressures in the recent past and would take account of likely future developments.
These are important steps forward. But I believe that the publication of analytical reports and an indication of possible future trends does not go far enough. I hope we shall be told in addition what conclusions the Bank has reached. These could be included in the quarterly review to which the Bank is now committed. Indeed, the quarterly analyses would in my opinion be incomplete if they did not conclude with the action recommended by the Bank in the light of those announcements.
I wish to suggest that the time is now ripe for the Bank to be given greater responsibility in securing long-term price stability and that in the discharge of this responsibility it should be directly accountable to Parliament. I submit that it is essential that an effective institutional framework should be established to secure price stability in the long term and, above all, to avoid the ebbs and flows which have been so damaging to the British economy, particularly in the past 20 years.
Inflation is now at a low level and, according to most estimates, is likely to remain low for the next year or so. But, on the basis of past patterns, inflationary pressures could begin to take hold once more as the momentum of economic recovery gathers pace and the impact of sterling evaluation works its way through the system accompanied by a widening trade gap. Indeed the first signs of this have already become apparent. It has just been announced that the producer input prices, seasonally adjusted, rose by 2.4 per cent. in November. That is the biggest monthly rise since October 1976–16 years ago. Compared with November last year, input prices rose by 4.1 per cent., well above the current annual level of inflation. Inflationary trends must be anticipated and suitable action must be taken before, not after, the next inflationary spurt.
The review of experience in other countries shows certainly that there is no unique blueprint for dealing with this issue. I would therefore like to suggest that the subject of identifying the most practical means of

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securing long-term price stability should be remitted to an ad hoc committee of this House, for which provision has been made following on the Jellicoe Report. I would visualise the task of such a committee being to analyse past trends on prices and inflation, to review what is being done in other countries to contain inflation and to make recommendations.
Recent history has shown that it is possible, through government action, to bring down inflation once it has reached an unacceptably high level. What has so far proved elusive is to maintain inflation at a low level over a long period. This is the problem to which I feel we should now address ourselves with urgency.
7.28 p.m.
Lord Boardman: My Lords, before dealing with the main argument of the noble Lord, Lord Ezra, perhaps I may pick up one point that he made in regard to the rise of 2.4 per cent. which has just been published. The noble Lord should surely recall the familiar 'J' curve, which inevitably means that after a deflation of one's currency the immediate consequence for some months is an increase in import prices before the benefit of the increased export prices comes through. I would be very sad if the figure which the noble Lord quoted were taken as undermining confidence in the attack on inflation which has been so successful and which I believe will continue to be so.
I have no present interest to declare but I was for some years the chairman of one of our leading clearing banks. In that capacity I had many discussions and meetings with the Bank of England. I know quite a lot about its operations from that end. A long time before that, when I was Chief Secretary to the Treasury, I saw quite a lot of the Bank of England from the other side of the table. I saw its operations in the relationship with the government of the day. While the noble Lord does not go so far as to suggest that there should be an independent Bank of England, it must be an almost inevitable consequence of his speech—giving greater responsibilities to the Bank of England; and indeed, to pick up a phrase that is often used by some on the Benches opposite, the independence of the Bank of England is something that should be secured. I strongly disagree with that. If I deal with that point I may not be dealing directly with the point made by the noble Lord about setting up a group to study the issue. I shall deal with what I believe to be the worry underlying the Question that he has tabled. He gave various examples of countries which allocate different responsibilities to their central banks. I shall not try to cover all the countries. I do not know the conditions in many of them.
Perhaps I may pick upon three of the countries to which the noble Lord referred. I shall take Germany first. The Bundesbank has always been held up as a great example of the independence of a bank from the political considerations of the Government. That is a much overstated claim. When Germany created unity and brought in East Germany, the Bundesbank said what it believed should be the rate of exchange between the ostmark and the deutschmark, but it was
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Chancellor Kohl who said what it would be. It was Chancellor Kohl's political decision that dominated. The views and advice of Karl Otto Pöhl were overruled, with the inflationary consequences that we are all seeing in Germany today.
The noble Lord also referred to the Fed, about which I know a little. He must take care when comparing the system in the United States with any system that might be applicable here. As we know, there is the presidential office on the one hand and Congress on the other, with the Fed stuck between them. The Fed is subject to many political influences and political appointments which severely constrain its freedom. It is not an effective parallel.
The noble Lord mentioned New Zealand. Superficially it seems to be an attractive argument. The system in New Zealand is new. It started in 1989, or something like that. It has been effective in bringing down the rate of inflation, but no more effective than have been the Government in bringing down the rate of inflation in this country, where we are now down to the level quoted by the noble Lord. But at what price? When one sees the economic conditions in New Zealand which have resulted from applying those measures, one wonders whether it is a price that the New Zealanders will think is worth paying.
I ask your Lordships to consider the consequences of giving to the governor or the Bank of England itself a greater responsibility. It would be giving to a non-elected body the responsibility for a large part of our economic policy. Economic policy has to be dovetailed in with fiscal policy. It is the two together that form the basis of the political decisions that have to be made by the political body of the country. In our case it is this House and another place. One cannot have one body with responsibility for monetary policy and a political body to deal with fiscal policy.
The noble Lord suggested that it should be the Bank of England's responsibility to control inflation. That is something that we should all like to see severely controlled. If it were decided that it was necessary to have a massive increase in interest rates to control inflation, would it be right for some non-elected body to impose that upon society, regardless of the enormous unemployment that it might cause and the effects upon our overseas trade that might result from it? I challenge the suggestion that an unelected body should be given that responsibility.
Lord Ezra: My Lords, I should like to make it clear that I did not suggest that the Bank of England should be totally independent. I said that there were many different examples in many countries that we should study to see what greater responsibility it might exercise.
Lord Boardman: My Lords, I follow that, but it seems to me that the inevitable consequence of the noble Lord's speech must be greater independence, if not complete independence, for the Bank of England. That would have serious political and economic consequences. Let us just look at the present position. The Bank of England has a large measure of freedom at present. It has close consultations with and gives a

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great deal of advice to the Treasury. The noble Lord referred to measures that have been taken recently, even as recently as October when we have the monthly monetary report and wide consultations. Some may feel—I sometimes do—that the degree of wide and open consultation is too wide and too open to achieve the right objectives.
The advice given by the governor and the Bank of England is not something that any Chancellor of the Exchequer can lightly ignore. I was Chief Secretary to the Treasury a long time ago and the then Governor of the Bank of England was my noble friend Lord Richardson of Duntisbourne and the Chancellor of the Exchequer was my noble friend Lord Barber. I remember the Governor of the Bank of England coming to the Treasury and laying down firmly what would be the economic consequences of a certain action. He spelt out the consequences of the alternative courses. He made firm and strong recommendations as to what he believed was then appropriate. I shall not enter into what happened as a result or to what extent that advice was followed. But the power of the then Governor of the Bank of England, no doubt still enjoyed by the present governor, to tell the Chancellor of the Exchequer what he believed was necessary and right in the circumstances was strong and compelling. That advice would not have come more strongly or powerfully from an independent Bank. The noble Lord said that he was not suggesting an independent Bank, but that is what flows from what he was saying.
The ultimate weapon of the Governor of the Bank of England, if the Government and the Chancellor of the Exchequer take a certain course which he believes to be extremely damaging to our economy, is to say, "I have the right to and will resign". That is the ultimate weapon. The resignation of the Governor of the Bank of England because he felt so strongly about some economic matter would make any Chancellor of the Exchequer sit up and think hard before going ahead with the decision.
There is a further complication. The international markets result in enormous funds flowing across boundaries at the touch of a button. That makes it difficult to regulate and control the various factors that go to make up inflation, let alone all the other consequences of the flow of funds. Let us just contemplate Black Wednesday, which will be well known and remembered by most of us here. Your Lordships will recall that interest rates were increased twice in a few hours and then brought down as the country came out of the ERM. It was not a happy picture.
Who is to have the power to increase interest rates? If the greater responsibility were to be with the Bank of England, it flows from the point made by the noble Lord, Lord Ezra, that that power would be in the hands of the Bank of England. It would have the responsibility of putting up and pulling down interest rates. I do not know who would have gone to Brussels that night to see how the ERM could be rejigged. I do not know whether it would have been the Governor of the Bank of England, the Chancellor of the Exchequer, or both, trying to compete as to who got
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onto the aeroplane first. That is an example of what happens if one tries to shift the responsibility away from the Government and the Chancellor to some other source, however important that source may be.
I believe it to be important that the Bank of England should retain its present relationship with government. It has the power to advise the Chancellor, the right to be consulted and the right to have an important influence upon this country's monetary policies. It also has a vast range of other responsibilities. It may be only right to mention its responsibilities as a regulator and supervisor of the banks and many of the financial services of the City of London. That is a vital and difficult task, with all the foreign banks in the country and the various financial arrangements that exist. The Bank has to bear with, be supported by and suffer from all the regulations and legislation that have been passed in Parliament—the Financial Services Act and Banking Acts galore.
The last thing I wish to see on top of all this is that we have a consortium of people set up to look at the Bank to see what could be done to make further changes. There are imperfections in its operations, and I am sure that the Bank of England would be the first to acknowledge them. It is aware of them and is trying to improve the whole time. It deserves considerable credit for the way in which it has achieved that.
The last thing we wish to do is to pull it up by the roots and examine them just to see what further changes we should make. There has been far too much of that in the past. I believe that we should leave the Bank of England alone to develop in the light of all the experience it has had and of the many lessons that have been learnt in the past few years. We should leave it to develop and to carry on in its present form.
7.40 p.m.
Lord Cobbold: My Lords, I am pleased to have the opportunity of supporting my noble friend Lord Ezra in the debate on this important subject. I agree with all that he has said and support fully his recommendations.
The issue at stake is ultimately whether politicians can be trusted, or, indeed, can trust themselves with the management of money creation. Is the temptation to finance expenditure by printing money rather than by unpopular taxation too great to resist? I do not agree with the noble Lord, Lord Boardman, when he says that fiscal and monetary policies cannot be separated. I believe that in theory they quite definitely can. Government have a right to tax and to borrow against future revenues. But I am not at all sure whether they have the right to borrow from themselves by running the printing presses. There is a clear case for separation of these functions.
Certainly in this country since the war our track record on monetary management is pretty bad, as my noble friend Lord Ezra has already explained. We have followed a stop go, boom bust cycle. Intermittent bursts of inflation have reduced the value of our currency to a small fraction of what it was worth at the end of the war. That policy has encouraged

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short-termism and has had damaging long-term consequences for our interest rates and the capital development of our industry.
Rather like an alcoholic, we recognise the problem but we find it extremely difficult to kick the habit. Cynics may argue that secretly we are quite content to stay the way we are and that we prefer periodic binges and the inevitable hangovers that follow to what might be described as the boring life of steady growth. Personally I hope that this is not the case, but if the cynics are right then there is little point in changing the status quo.
However, I shall assume that the cynics are wrong and that we are still seeking the holy grail of non-inflationary sustainable growth. Indeed, it is in any event the much trumpeted policy of Her Majesty's Government in spite of our sudden exit from the ERM. It is embodied in the provisions for economic and monetary union in the Maastricht Treaty which the Government are committed to ratify.
The question therefore for debate is whether monetary policy is best left with the government of the day or whether it should be delegated to a separate institution. In the latter event, what exactly should the mandate of the institution be and to whom and by what mechanisms should it be accountable to the public?
In this country, as with many things, the management of monetary policy has evolved in a largely natural and undocumented relationship between the Treasury and the Bank of England. Even before nationalisation the Bank of England did not really have control of monetary policy. In 1937 Montagu Norman told a gathering of Commonwealth central bankers:
"I am a creature of the Treasury".
The Bank of England Act 1946 did not define the objects of the Bank, nor the scope or aims of monetary policy. It merely codified the relationship between the Treasury and the Bank, giving the Treasury power to direct the Bank, and between the Bank and the City, giving the Bank the power to make regulations governing the operations of the commercial banks provided that they were in the public interest and approved by the Treasury—powers which in practice merely confirm the status quo.
We have never had in this country the degree of independence granted to the Bundesbank by its constitution, although I agree with the noble Lord, Lord Boardman, that in the end even the Bundesbank is not wholly independent. Therefore what we would require is not so much privatisation of the Bank to achieve this objective but, by a statute, a clear definition of and separation of the roles as between the Treasury and the Bank, followed by statutory delegation of powers to the Bank under a clear mandate, with recognisable and effective lines of democratic accountability.
The noble Lord, Lord Boardman, felt that giving the Bank of England greater autonomy in this way might have had more dire consequences for the management of affairs associated with Black Wednesday. I cannot think that anything could be
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worse than the way in which that event was managed by our monetary authorities collectively, so I believe that that is not an important point.
The starting point now must be what exists in the constitution and powers of the European system of central banks as embodied in the Maastricht Treaty which is due to be ratified and to which we shall almost certainly become signatories. Article 105 of the treaty states:
"The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community".
These policy objectives are listed in Article 2. I believe that that definition is broadly satisfactory for an "independent" role for a central bank.
The independence of the ESCB for member governments is also underwritten in the treaty in Article 7 of the Protocol which forbids the seeking or taking of:
"instructions from Community institutions or bodies, from any government of a Member State or from any other body". The independence guarantee in this form is also broadly satisfactory.
However, on accountability and reporting I think there is room for improvement. The reporting commitments in Article 15 are for a published quarterly report, weekly financial statements and an annual report,
"to the European Parliament, the Council and the Commission and also the European Council".
I believe that this is not satisfactory. Those provisions should be and will have to be extended in order to achieve the necessary public credibility for the democratic accountability of the institution. There must be more public information on actual policy and operations, akin, for example, to the Open Market Committee minutes of the Federal Reserve system in the United States. Again as in the case of the Federal Reserve system, there should be more public hearings before probably the appropriate committee of the European Parliament and perhaps before combined specialist committees of national parliaments meeting together. Only in this way will true public accountability be achieved.
The Bundesbank benefits from widespread support among the German population. Any institution at the Euro level or at national levels will have to strive to achieve such popular support if it is to succeed.
Given therefore that Maastricht will be ratified, we shall be committed in any case under Article 108 to ensure that our national legislation, including the statutes of our central bank, are compatible with the treaty and the statute of the ESCB before it is established.
That is only a few years away, once again assuming ratification. I hope that the Government will take steps to move in this direction well before the time limit expires. It takes time to establish credibility, and if the Bank of England is to stand shoulder to shoulder with the Bundesbank it must be given time to play in the new rules and operating principles.
I welcome the Government's latest initiative on the monthly meetings to which my noble friend Lord Ezra has referred. I also welcome the quarterly report on inflation and on the management of monetary policy.

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I hope we can move quickly on from here. We need as soon as possible to have a White Paper from the Government on the whole subject and to have the opportunity of a full debate in both Houses of Parliament. Once again I thank my noble friend Lord Ezra for raising this subject and I hope the Minister will take active steps to promote further action on this matter in the near future.
7.50 p.m.
Lord Desai: My Lords, We are grateful to the noble Lord, Lord Ezra, for raising what is a very important question. As he has said, although not many noble Lords are participating in this debate the quality of it has been good. A debate such as this shows the good contributions Members of this House can make on this problem.
I start by saying, perhaps in a pedagogic way, that we are not actually discussing price stability as much as the stability of a low rate of inflation. I do not believe anyone would even try to maintain a zero rate of inflation over a period of time. What we are really talking about is stability in a rate of inflation which is maintained at a reasonably low level, roughly akin to the targets the Government have set. There is a further problem here. Which inflation rate does one take as one's measure of price stability? That has not been referred to so far.
As we have seen increasingly throughout the 1980s the retail prices index is not a satisfactory all round measure of inflation. I should like the Government to look into whether there are ways in which one can improve the measurement of the rate of inflation, especially as regards what factors should or should not be included in that measure. Mortgage payments are a problem area here. We need to know whether there is a drift in the RPI that is caused simply by the way it is measured. I shall not go into the technicalities of the matter but I could concoct cases in which the true rate of inflation could be zero but the RPI could still be either positive or negative.
We have all agreed that inflation is a problem. However, I feel we have not considered in sufficient depth some of these rather dull technical measurement problems. The noble Lord, Lord Ezra, related an historic account of inflation. During the period from 1600 to 1939 the value of the pound stayed the same on average. It went up and down a little but, by and large, it retained the same value. It is only since 1939 that we have experienced persistent inflation in the sense that—if my memory serves me correctly—not a single year has shown a negative rate of inflation. Before we all get carried away, I should say that that has also been the experience of many other advanced capitalist countries. But paradoxically that was also the period of the fastest rate of growth in the capitalist world as we know it. We must remember that.
I am not saying that inflation is good for growth or anything like that, but we have to remember that it is insufficient to consider inflation by itself. We must also consider income growth. What we really want is for economics to serve the world. The bottom line is whether people are becoming better off. We desire low
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inflation only in as much as people can demonstrate that low inflation is a cause of high growth. I do not believe that can be demonstrated.
Baroness Seear: My Lords, I am sorry to trouble the noble Lord but it would help me at any rate if he could clarify a point. Does he not consider that what he has just said as regards an improvement of the standard of living must be accompanied by stability and the expectation of stability? Otherwise the standard of living will rise for a little while but after that funny things may happen to it. Does the noble Lord agree with that?
Lord Desai: My Lords, I quite agree with that in principle. However, there is the paradox that during the post war period, 1945 to 1975, the UK economy experienced its highest ever growth rate on a sustained basis. However, it also experienced inflation at that time. I do not wish to give the impression that I am in favour of inflation but I believe that, eventually, we will have to discuss the costs of achieving a low rate of inflation, and whether low inflation leads to growth. If it leads to growth we should aim for low inflation, but we should not aim for low inflation just for its own sake. During the inter-war period the central bank did not wish to have falling prices much less a low rate of inflation. But the cost was such that as a consequence the reputation of the central bank, in those days at least, became extremely low. I shall return later to an examination of what a central bank can achieve.
In the 1950s and 1960s we had quite low rates of inflation except for the period of the Korean War. However, as has been pointed out, the 1970s and 1980s were bad decades. That experience has convinced me that the UK economy is extremely susceptible to external shocks. Our inflation of the 1970s was to a large extent imported, due to the quadrupling of oil prices. Other people may disagree with that view. As our economy is susceptible to external shocks, we must be careful when deciding on policies to reduce inflation. Is is just monetary policy that will reduce inflation, or is it a mix of monetary and fiscal policies? In that respect I agree with the noble Lords, Lord Boardman and Lord Cobbold. It is not that monetary and fiscal policies cannot he separated: I think they should not be separated. I believe a combination of monetary and fiscal policies would eventually achieve the twin objectives of low inflation and substantial growth. If we let those two policies drift apart, I do not believe we shall achieve our objectives.
There have been three attempts to reduce inflation once it had risen. The noble Lord, Lord Ezra, has referred to this matter. In each of those three cases monetary policy played a secondary, passive role rather than a primary role. When the Labour Party was in power between 1975 to 1978 the inflation rate came down from 25 per cent. to 8 per cent. That was achieved with some monetary control but it was principally achieved with an active incomes policy. That is an important point.
In 1980 to 1983—this has been illustrated by Professor Wilfred Beckerman—the UK economy benefited greatly from a high exchange rate and falling

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import prices. Those continuously falling import prices were important. The control element in that situation was not so much the control of the money supply, because monetary targets were not always met, but it was rather the control of the fiscal deficit. The PSBR control was important. I did not like it at the time but it was effective. The tight fiscal policy achieved the reduction in inflation and not the control of the money supply. I believe that the money supply is a hard thing to control in an open economy, especially with globalised financial markets.
The final episode I wish to refer to is that of our entry into the ERM. I do not wish to discuss whether we should or should not have entered the ERM. However, the fall in inflation coincided with a tight external discipline. I do not believe that in any of those three episodes I have referred to, one could have separated out monetary and fiscal policy. Exchange rate policy, fiscal policy and monetary policy together contained inflation.
Central bankers are suddenly in fashion. They have a great reputation for competence—I do not know why. We ought to examine the record.
Since other noble Lords have mentioned this I should point out that it is not a question of the autonomy or otherwise of the Bundesbank and the Austrian central bank. It is not often appreciated that there is a wage bargaining structure in both those countries which sustains monetary policy. That is also the case in Sweden. One needs a sensible wage bargaining structure, which we do not have and are not likely to have. It is not merely that somehow the Bundesbank controls money supply effectively and therefore achieves low inflation or that its independence is important. The important point is the wage bargaining structure.
Secondly, there is a strong anti-inflationary culture in Germany. As the noble Lord, Lord Cobbold, said, we lack an anti-inflationary culture in this country. It will not be easy to inculcate such a culture. I believe that the rumblings against the Maastricht Treaty and about the unbearable cost of our being in the ERM, which finally we abandoned were due to the fact that a sustained fight against inflation over a period of more than two years seems to be beyond the political capacity of any party.
It is not a question of the central bank being able to control inflation because of its independence. To believe that inflation can be controlled by banks one would have to believe in a strong and naive monetarist theory that somehow money supply and money supply alone causes inflation and that control of interest rates would guarantee an anti-inflationary policy. I have written a book about the subject—I do not believe a word of that theory.
I agree that we should have a great deal more information. The system should be much more open. There should be transparency in the negotiations between the Treasury and the Bank of England to the extent that such transparency would not affect market sentiment. However, in the final analysis I believe that a good anti-inflationary policy can only be achieved through a framework to which both politicians and
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the banks can adhere and which they can sell to the population. Unless one can sell an anti-inflationary policy to the population it will be difficult to replace inflation. We have designed institutions such as our housing market which are sustained by an inflationary psychology. How is one to change people's attitudes?
While I concur with the noble Lord that a central bank has a role to play, I believe that that is much exaggerated. Inflation is a complex problem. We are grateful to the noble Lord for allowing us to discuss the matter.
8.3 p.m.
The Minister of State, Department of Transport (The Earl of Caithness): My Lords, our debate today has been both stimulating and, as the noble Lord, Lord Desai, said, well informed. It has benefited from the contributions of noble Lords who have a wide range of relevant and valuable experience. I, too, am grateful to the noble Lord, Lord Ezra, for providing us with this opportunity to examine a timely and important issue. I have to say that I agree with the noble Lord, Lord Cobbold, that the important issue is price stability, not the status of the Bank of England.
We all know the problems which high inflation causes. It erodes savings. It causes misallocation of resources. By doing so it erodes the potential for long-term growth and is, as the noble Lord, Lord Callaghan, once put it, "the father and mother of unemployment".
That is why the Government have made the control of inflation their priority since being first elected in 1979. That is why my right honourable friend the Chancellor of the Exchequer has set an explicit target for underlying inflation of 1 per cent. to 4 per cent. a year for the rest of this Parliament. It is why in the longer term we want to get inflation down to 2 per cent. or less.
Mr. Alan Greenspan, the chairman of the US Federal Reserve Bank System, has proposed a definition of price stability as being a rate of inflation which is low enough not to influence economic decision-making. Our policies can achieve that.
Some people point to countries such as Germany and claim that they provide clear evidence that an independent bank is better able to deliver low inflation. Others may go further and suggest that bank independence might be a pre-condition for such achievement or argue that it lessens the risks of inflation.
It is certainly true that Germany has over the past 40 years or so enjoyed an enviable record of consistently low inflation. But that is not simply the result of the independent status of the German Bundesbank. Both the noble Lords, Lord Cobbold and Lord Desai, observed that the German people, not surprisingly, are strongly determined to maintain price stability, having lived through the horrific hyper-inflation of the 1920s and the immediate post-war years. What is less often observed is that at the time when German inflation was at its worst— 200,000 million per cent. in 1923—Germany already had an independent central bank. That is not a good record.

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If we look more closely at one of the recent cases where the establishment of an independent central bank has been accompanied by a fall in inflation, we find no magic at work. The noble Lord, Lord Ezra, mentioned New Zealand. New Zealand reformed its monetary system in 1988, and price stability was adopted as the goal of monetary policy. In the following year, the New Zealand central bank was granted independence so that it might pursue the price stability objective. New Zealand's inflation rate has come down from around 6 per cent. to 1 per cent. since then, but it has done so because very tight monetary policies have been applied. But, as my noble friend Lord Boardman reminded us, at the same time New Zealand has suffered a recession lasting six quarters, with a fall in output of 4½ per cent.
Some have claimed that the very act of making the central bank independent can improve credibility and so make squeezing out inflation less painful. The experience of New Zealand is enough to show us that bank independence of itself is unlikely to offer easy and guaranteed solutions.
Nor is low inflation impossible without an independent central hank, if the right policies are pursued. Over the past 20 years Japan has had one of the lowest inflation rates in the Group of 7 major industrialised countries; and more recently France has achieved an excellent record on inflation.
The noble Lord, Lord Ezra, gave an interesting summary of those countries with central bank experience. There is no single and generally accepted notion of independence. It is of course very much a matter of degree. Even for those banks with a great deal of formal independence the division of responsibilities is in practice not a simple matter, and we see hank and government working closely together.
The Bundesbank is often considered the epitome of an independent central bank. Internal monetary policy is indeed a matter for the Bundesbank, but the Bundesbank is also obliged to support the general economic policy of the federal government, albeit without risking the performance of its monetary oversight. When it comes to exchange rate policy, the picture is different. Decisions on exchange rate parities within a fixed rate system are taken by the federal government, but after close consultation with the Bundesbank. For example, Germany's position on ERM parities and realignment is determined by the government. My noble friend Lord Boardman reminded us that at the time of unification it was the federal government that made the final decision on the deutschmark-ostmark exchange rate.
The Netherlands Bank also has a high degree of independence in its determination of monetary policy but, as the noble Lord, Lord Ezra, pointed out, the ultimate responsibility lies with the Minister of Finance and the government retain the right to issue formal directives to the bank. Decision on fixed exchange rates are a joint responsibility of the bank and Minister of Finance in law. Indeed, the law governing the Netherlands Bank is very similar to that governing the Bank of England. The noble Lord mentioned that the Dutch Government have never
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issued a formal directive to the bank, but neither have the UK Government ever used their powers to issue formal directions to the Bank of England.
In Italy, as the noble Lord, Lord Ezra, said, the Banca d'Italia was in January this year given sole responsibility for setting the official rates on discounts and advances. But it is of course far too soon to judge what effect this will have in the longer term, or what additional steps, if any, will be taken to increase the bank's responsibilities. We must remember that the bill is aimed at severing the bank's remaining links with the Treasury. It has not yet been considered by the Italian Parliament and may well not be approved, at least not in its present form.
In the cases of the Dutch, Italian and French central banks, cited by the noble Lord, the freedom of activity of the central hank is firmly hemmed in by the need to meet ERM requirements—a condition set in each case by the government.
As some of your Lordships have pointed out, the UK has not recently enjoyed price stability for more than a generation. Between 1972 and 1982 the rate of inflation varied between 6 per cent. and 27 per cent. The average rate over that period was 14 per cent. But the UK's experience has demonstrated that the right policies get inflation down whatever the institutional arrangements in place. Between 1982 and 1986 we got the rate of inflation down to a low point of around 3 per cent. because we ran tight monetary policies, as the noble Lord, Lord Desai, said, buttressed by firm control of public spending. It is true that we over-estimated the impact of the 1987 stock market crash and underestimated the impact of financial deregulation, and so allowed a build-up of inflation in the late 1980s.
But those misjudgments were shared by all parties, all institutions, and almost all commentators. They were also shared by other countries in similar circumstances. And most importantly, once the problems became clear, we acted to tighten policy. We started to raise interest rates in summer 1988.
Over the past two years, we have brought RPI inflation down from 10.9 per cent. to 3 per cent. Underlying inflation in November was 3.6 per cent., the lowest rate since February 1988. Interest rates fell from 15 per cent. to 10 per cent. between October 1990 and May this year. Those are impressive achievements and they have not come easily.
Since we left the ERM, we have seen a significant but justified easing of our monetary policy. The exchange rate is lower. Interest rates have fallen by a further 3 percentage points to 7 per cent. They are now at their lowest level since 1978. This easing of policy has come about without taking risks with inflation, and my right honourable friend the Chancellor of the Exchequer has left us in no doubt that he will take whatever action is necessary if our inflation objective, and hence our prospects of long-term growth, are put at risk.
In the United Kingdom, the conduct of economic policy is the responsibility of the Government alone. Some noble Lords have argued that this makes it more difficult to get the policy right. But it can make it easier. The Chancellor has been able to balance tight

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control of public spending with a relaxation of monetary policy. This contrasts with the recent experience of Germany where divided responsibilities have meant that the inflationary consequences of reunification have had to be met largely by higher interest rates, as the fiscal deficit has burgeoned.
Baroness Seear: Would the Minister agree that if, on the famous occasion when the Bundesbank was overridden by the government over the exchange rate between the East and the West mark, the Bundesbank's advice had been taken, the position not only in Germany but throughout the Community would today be a great deal better.
The Earl of Caithness: The noble Baroness may very well be right. But the fact remains that it was the government that decided. The government have the power to decide, not the Bundesbank. It comes back to the point that I was making earlier. It is a matter of the degree of independence. That varies from situation to situation. In the case of Germany, the federal government made the decision. I share some of the thoughts of the noble Baroness as to what the consequences might have been had the Bundesbank had the power. The trouble was that the Bundesbank did not have the power.
What I have said does not mean that there is no room for improvement. We have now an explicit inflation target, which we are determined to hit. We have explained the way in which we will monitor money supply growth, changes in asset prices, the relationship between market interest rates, and other indicators of the monetary stance.
In the past we have not sought to explain the progress of our monetary policy in detail in the way we will now do. But my right honourable friend the Chancellor of the Exchequer has recognised, now we are outside the ERM, that the need for confidence in the Government's judgment is greater and that we need, therefore, to explain clearly what we are doing. In future, that is precisely what will happen. I was grateful for the welcome that the noble Lord, Lord Cobbold, gave to that. The Treasury has now published for the first time its monthly monetary
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report, which is the document that the Chancellor and the Governor of the Bank of England have in front of them at their regular monthly meetings.
As your Lordships know, the last two interest rate cuts have been accompanied by detailed accounts of the analyses which led to the decisions. In future each change in interest rates will be accompanied by a point-by-point account of our reasoning. The Bank of England will soon begin to publish quarterly inflation reports, setting out the progress being made towards the Government's inflation objective.
The noble Lord, Lord Cobbold, raised the question of the European Central Bank and the Maastricht Treaty, which will come before your Lordships in the not too distant future. We need to distinguish between the current position and Stage 3 of the Maastricht Treaty. Under Stage 3 of the treaty Article 107 provides for an independent European Central Bank. In the event of a decision to move to Stage 3, the Bank of England, like other central banks, would become part of a system of central banks. But I have to remind the House that the United Kingdom has no commitment to move to Stage 3. At present, the Government are responsible for monetary policy. Again I come back to the point: what really matters is that the right policies are being pursued.
I have taken note of the many points that have been made in our discussions this evening. I will draw them to the attention of my right honourable friend the Chancellor of the Exchequer.
What matters for long-term price stability is that the policies pursued by the monetary authorities are right, not who decides those policies. In the United Kingdom we have a long tradition of ministerial accountability to Parliament for the discharge of economic policy, including monetary policy. We have the right policies and we have no plans to abandon our traditions or the Government's accountability.

Civil Service (Management Functions) Bill [H.L.]
Returned from the Commons agreed to.
House adjourned at seventeen minutes past eight o'clock.