Lords Sitting of 12 February 1992

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

Lord Prentice
The Right Honourable Sir Reginald Ernest Prentice, Knight, having been created Baron Prentice, of Daventry in the County of Northamptonshire, for life—Was, in his robes, introduced between the Lord Hesketh and the Lord Lane of Horsell.
Lord Rix
Sir Brian Norman Roger Rix, Knight, MBE, having been created Baron Rix, of Whitehall in the City of Westminster and of Hornsea in Yorkshire, for life—Was, in his robes, introduced between the Lord Allen of Abbeydale and the Lord Renton.

Science and Engineering Research Council: Funding
3 p.m.
Lord Peyton of Yeovil Lord Peyton of Yeovil asked Her Majesty's Government:
Whether the Science and Engineering Research Council has sufficient funds to carry out the purposes for which it was established.
Baroness Denton of Wakefield: My Lords, government grant-in-aid to the Science and Engineering Research Council for 1992–93 is £520.8 million. This represents a real terms increase since 1979–80 of 16 per cent. This will enable the council to continue to fund a programme of high-quality research, much of it world class, in accordance with its Royal Charter.
Lord Peyton of Yeovil: My Lords, will my noble friend try to persuade the Treasury that arbitrary interruptions, particularly reductions in funding, can be particularly damaging—indeed crippling—to scientific research? In particular, can my noble friend shed any light on why the council has failed to make any progress at all as regards the very helpful agreement made with the Russians in 1990 for collaboration in molecular electronics?
Baroness Denton of Wakefield: My Lords, I suspect that the Treasury is more likely to tremble at the prospect of a visit from my noble friend Lord Peyton than from me. However, in this instance I cannot be described as the guilty party. The interruption in spend to which my noble friend referred was not caused by the Treasury but by SERC's own shortcomings in financial planning areas. That was confirmed by last year's report by the House of Lords Select Committee on Science and Technology, which
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acknowledged that SERC's difficulties were the result of shortcomings in the council's financial planning. The report states specifically that SERC had, "over-committed its available resources".
As regards the agreement with Russia to which my noble friend referred, there is no question of reneging on an agreement. The agreement on nanotechnology was an enabling agreement signed with the former Soviet Academy and the Soviet Science Society. SERC is not aware of any approaches made by the former Soviet Union for work to be carried out under this agreement. At present all such agreements with the previous Soviet Union agencies are now needing to be renegotiated with the relevant Russian or other agencies. I understand that SERC officials will be visiting Russia shortly to commence the necessary discussions.
Baroness Blackstone: My Lords, is the Minister aware that nearly 50 per cent. of the applications for research grants which are alpha-rated through peer review are actually turned down through lack of funding? Does she agree that that suggests that SERC does not have enough funds to carry out the purposes for which it was set up?
Baroness Denton of Wakefield: My Lords, I believe that the noble Baroness, Lady Blackstone, will agree that the decision as to what SERC funds and what it rejects is very much its decision.
Lord Hailsham of Saint Marylebone: My Lords, purely for information, can my noble friend answer this question? I understand that the Medical Research Council is able to solicit funds from sources other than government. Can my noble friend say whether that is also true of the Science and Engineering Research Council or is it unable to do so?
Baroness Denton of Wakefield: My Lords, I do not know the answer to that question. I shall find out and write to my noble and learned friend.
Baroness Blackstone: My Lords, the noble Baroness did not really answer my question. The point is that SERC would like to fund many more of the alpha-rated proposals but is unable to do so. Is the Minister also aware that there is a Nobel laureate whom the SERC has had to turn down recently for research funding who is also a Member of your Lordships' House?
Baroness Denton of Wakefield: My Lords, I well appreciate that there are difficult decisions to be made. But we have not discovered—I am sure that it applies to SERC too—the bottomless pit which allows every application to be accepted.
The Earl of Halsbury: My Lords, perhaps I may declare an interest as a Fellow of the Royal Society of Chemistry—not a Nobel laureate, I might add. Is the noble Baroness aware of the scoring of only a 20 per cent. success rate? What steps are being taken to watch the liquidity of research councils? I have had 25 years' experience of sitting on them. They must not be allowed to get into a situation in which too few grants are terminating in any given year so as to enable them

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to redeploy their financial resources. They are not chosen for skill in maintaining liquidity. They need help. What steps are the Government taking to give it to them?
Baroness Denton of Wakefield: My Lords, the noble Earl makes a very good point. There was a full review at SERC of the programmes and the operations of its financial planning. I am sure that the lessons from that have been well learnt and account taken.
Lord Peyton of Yeovil: My Lords, I doubt very much if the Treasury is entitled to the white sheet in which my noble friend clothes it. Will she press for some explanation as to why until now the council has taken no initiative of its own under the very useful agreement made with the Russians, welcome as is the news that it is to do so now?
Baroness Denton of Wakefield: My Lords, the political changes within the Soviet Union made the outlook uncertain. The situation has now become clear enough for the matter to be taken up again, and that will be done.
Lord Peston: My Lords, we are all aware of the bottomless pit problem. Is the Minister aware that one of the few things we do in this country which is absolutely world class is research in chemistry? There is not the slightest doubt of our pre-eminence in that area. Can she not at least persuade the Treasury, given the many other crackpot things in which it invests money, that this may be an area for which a good deal more money might be found?
Baroness Denton of Wakefield: My Lords, the Science and Engineering Research Council covers a very wide remit with four broad subject areas: astronomy and planetary science, engineering, nuclear physics, and science. It has very difficult decisions to make in dividing spending between them.

British Technology Group
3.7 p.m.
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
What are their plans for the British Technology Group.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay): My Lords, the Government are proceeding with the privatisation of the British Technology Group by competitive sale. A number of consortia have been shortlisted and are currently preparing final bids. We intend to ensure that BTG is sold to a consortium which will continue BTG's traditional technology transfer business.
Lord Hatch of Lusby: My Lords, can the noble Lord confirm or deny that one of the bidders is Research Corporation Technology of Arizona, the chief competitor of the British Technology Group? Can he also confirm or deny that British Technology Group is now being asked to supply the Arizona
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company with confidential information which, if given, would destroy the trust of British researchers —particularly in the universities—in the British Technology Group?
Lord Reay: My Lords, I can say that a number of consortia have submitted bids. I do not want to go into the details of them because that could prejudice the efforts of some of the leaders of the consortia to finalise their arrangements with their own investors. On the question of confidentiality, the matter here is that all bidders need equal access to information on which they can make their final bids. However, we recognise the importance of the issue of confidentiality to BTG. I am, therefore, pleased to be able to say that we have agreed procedures with BTG to protect the most commercially sensitive information, while at the same time allowing consortia access to information they need on which to base their bids.
Lord Williams of Elvel: My Lords, will the noble Lord address himself to my noble friend's question? Is this American company to be provided with information about BTG simply because it is part of a consortium which may be, and I believe is, on the short list for consideration by the Government? Furthermore, is it the case that this American trust —which certainly does good business in America and is a competitor of BTG—will be allowed in one way or another to gain control of BTG as privatised, or are the Government now sticking firmly and categorically to the assurance that they gave to this House that nobody, directly or indirectly, will own more than 15 per cent. of a privatised BTG?
Lord Reay: My Lords, I can confirm that we stick to the assurances which we gave to the House. No one investor will have overall control; nor will it be sold to an industrial consortium. We have always made it plain that we shall sell BTG to the right consortium, one which will take a long-term view and which satisfies us that it will continue the traditional technology transfer activities of BTG. On the matter of confidentiality, I believe that I answered the question of the noble Lord, Lord Hatch.
Lord Williams of Elvel: My Lords, I am sorry to press the noble Lord but I must do so on this point. Is RCT a member of a consortium which is bidding for BTG? Why are the Government so coy about all this? If the answer is yes, will the Government give us an assurance that, indirectly or directly, there will be no question of this American company trust taking over control of BTG? If the answer is no, will the noble Lord please say so, honestly and plainly?
Lord Reay: My Lords, there is no question of any single company or body taking over control of BTG because it will be sold, as we have repeatedly said to Parliament, to a consortium. It is the case that not all parties have wished their interest to be disclosed while they finalise details of their consortium; and we respect that.
Lord Hatch of Lusby: My Lords, does the noble Lord agree that to use flotation in order to demand

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information that has been supplied to BTG by research scientists all over this country is to betray their trust in BTG?
Lord Reay: No, my Lords, I do not think so. The British Technology Group Act gave authority to the Government to privatise BTG. It is now up to the Government to carry it out. We intend to conduct the negotiating process in confidence in order to ensure an orderly sale process and to maximise competition between the consortia.
Baroness Blackstone: My Lords, has the Committee of Vice-Chancellors and Principals been consulted about this matter?
Lord Reay: My Lords, we indeed consulted the CVCP prior to the sale, following the amendment to the British Technology Group Act passed in this House.
Lord Hatch of Lusby: My Lords, do I understand from the noble Lord's second reply to me that it is the Government who are prepared to give up the confidentiality of research projects submitted to the British Technology Group? Is it the Government's intention during the flotation to compel BTG to surrender the confidentiality of the research with which it has been provided?
Lord Reay: My Lords, as I said, we believe that it is in the best interests of a competitive sale to conduct the negotiating process in confidence. However, we have not sought to prevent bidders from revealing the identity of their own consortium, nor from giving information about the structure of the consortium, nor factual information about the members of their consortium.
Lord Stoddart of Swindon: My Lords, does the noble Lord recall that there was a great deal of secrecy about the sale of Rover to British Aerospace? Does he also recall that as a result of that secrecy a huge scandal blew up? Are we likely to have a similar kind of scandal over this matter?
Lord Reay: No, my Lords.

The Battle of Alamein: 50th Anniversary
3.14 p.m.
Lord Westbury Lord Westbury asked Her Majesty's Government:
Whether they will consider holding a service to commemorate the 50th anniversary of the Battle of Alamein.
The Parliamentary Under-Secretary of State, Ministry of Defence (The Earl of Arran): My Lords, the Battle of El Alamein is commemorated in Egypt each year at a Commonwealth ceremony and an international ceremony held jointly with the Germans and Italians. We recognise the importance of the 50th anniversary and are considering how best to make this year's commemoration special. I shall advise my noble friend of our conclusions as soon as possible.
Lord Westbury: My Lords, I thank my noble friend for his Answer. Does he realise that the three turning points of World War II were the Battle of Britain, Alamein and Stalingrad?
The Earl of Arran: My Lords, we indeed realise that the Battle of Alamein was the decisive battle in the North African campaign. As Churchill himself was later to write:
"Up to Alamein, we survived; after Alamein, we conquered".
Lord Tordoff: My Lords, are the Government saying that they have no intention of commemorating the 50th anniversary of Alamein in this country?
The Earl of Arran: My Lords, this point will most certainly be considered, although I am sure your Lordships will agree that the thrust of our commemoration must take place at El Alamein.
Lord Cledwyn of Penrhos: My Lords, is the noble Earl aware that we warmly support the request of the noble Lord in view of the historic significance of this great battle and in memory of the brave men who fought and died there? Is he further aware that there is no argument against holding a service in this country?
The Earl of Arran: My Lords, I repeat what I said initially; everything will be taken into consideration. The noble Lord the Leader of the Opposition is quite right about the courage, bravery and endurance of the allies. During the 12 days of the campaign some 13,500 either fell or were taken prisoner.
Lord Mottistone: My Lords, does my noble friend agree that, in addition to the three turning points mentioned by my noble friend Lord Westbury, the Battle of the Atlantic, as Mr. Churchill himself said, was an important, if not the most important, turning point?
The Earl of Arran: My Lords, I can say to my noble friend that other commemorative events in which the services are likely to participate apart from El Alamein include the Battle of the Atlantic and the Normandy landings.
Lord Jenkins of Hillhead: My Lords, does the noble Earl accept that it is by no means self-evident that the thrust of the celebration should be in Egypt rather than in this country? While it may be that from a world strategic point of view the Stalingrad battle, with its mixed consequences over the following 40 years, was of more importance, El Alamein was a turning point for British arms. After the victory the church bells were rung in this country for the first time for three years and I believe that it would be appropriate that a further ringing of church bells in celebration should take place on the 50th anniversary.
The Earl of Arran: My Lords, I understand the strength of your Lordships' feelings. I shall pass on the strength of those feelings to my right honourable friend the Secretary of State.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that a major service in this country, either at the

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Abbey or at St. Paul's, would not be inconsistent with the usual one in Egypt and would give an opportunity for tribute to be paid by large numbers of people in this country who realise how decisive this victory was?
The Earl of Arran: My Lords, I understand what my noble friend is saying but I do not think that I can add anything further to what I have already said.
Lord Molloy: My Lords, will the noble Earl be gracious enough to convey to his right honourable friend the fact that the Royal British Legion, of which I am proud to be a president, which represents ex-servicemen, many of whom were at El Alamein, will support those noble Lords who have said that there should be a proper recognition of the gallantry of those who fought and of those who gave their lives? That is the desire of our Royal British Legion. I am sorry that some noble Lords opposite cannot support that.
The Earl of Arran: My Lords, the Royal British Legion plays a prominent part in such activities and I am perfectly certain that it will continue to do so.

Livestock Count: EC Proposal
3.18 p.m.
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
What consultation they have had with the European Commission concerning the proposal that every cow in the EC should have a special identification tag, and every field a specific number, and what is their policy on these proposals.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, the proposal to which the noble Lord refers is known as the integrated administration and control regime. It has not yet been discussed in Brussels but has been referred to a Council working group for detailed consideration. The Government are in favour of measures to fight fraud but have reservations about the cost-effectiveness and practicality of this proposal.
Lord Bruce of Donington: My Lords, I thank the noble Baroness for that reply. Will she communicate with her honourable friend the Financial Secretary to the Treasury in order to see to it that some personal examination takes place of the preliminary draft budget of the Commission for 1993 in view of the fact that expenditure of the magnitude that is required is likely to be spread over a number of titles? It is one way the Commission has of being able to obtain approval, largely unobserved, of the expenditure that it wants to undertake. Will she cause the Commission to be informed that the United Kingdom already has a comprehensive land registry, which is available to everyone including the Commission, and that we are quite capable of counting livestock, even on the move.
Baroness Trumpington: My Lords, I shall be glad to pass on the noble Lord's message to my right honourable friend. I am aware that we have an
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ordnance map that covers fields. However, I am not sure whether our European partners have the same. Frankly, apart from the fraud aspect, I should have thought that the information about cows would only be interesting to a bull.
Lord Hailsham of Saint Marylebone: My Lords, as a former member of the NFU, I should like to ask my noble friend what are the advantages which are supposed to arise from such proposals which many may think slightly ridiculous?
Baroness Trumpington: My Lords, the Commission's proposals for reforming the CAP would replace existing support arrangements by a system of compensatory aid linked directly or indirectly to the cultivated area or the number of animals kept by each farmer. It is because of that new approach and the associated risk of fraud that the Commission has come forward with its proposal for an integrated administration and control system. If my noble friend understands that, he is a better man than I, Gunga Din.
Lord Ross of Newport: My Lords, I have actually looked in the ears of many cows and bulls in my time. Is it not a fact that most of our cattle are already tagged, or have their numbers written on them, so that it would not be quite so difficult to identify them?
Baroness Trumpington: My Lords, I submit that it is a bit more complicated with goats and sheep.
The Earl of Radnor: My Lords, is my noble friend aware that our Ordnance Survey, for reasons of economy, is threatening to withdraw or discontinue the system of OS numbers which effectively numbers fields and outlying acreages? In view of this incomprehensible proposal from Brussels, does my noble friend agree that it is an unfortunate moment to do so? Therefore, will she use all her influence to stop such action because not only might it conform quite simply to the directive which may come from Brussels, but also it is of tremendous use to people in this country, especially surveyors?
Baroness Trumpington: My Lords, the Commission has not yet produced any details. Therefore we must wait for them to emerge when the proposal is discussed in Brussels. With regard to the Ordnance Survey part of my noble friend's question, I can tell him that I shall certainly look into the matter.
Lord Stoddart of Swindon: My Lords, does the noble Baroness not agree that the proposal will make the crazy common agricultural policy even crazier? Further, is it not such nonsense which enables M. Jacques Delors to propose that the British net contribution over the next year or two should double from £2,500 million to £5 billion? Would it not be far better and far cheaper if agricultural policy was repatriated to the individual member states?
Baroness Trumpington: My Lords, I suggest that we keep to the Question on the Order Paper. The Government will continue to make the point in

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Brussels that it would be far better to have simpler, fraud-proof support systems in the first place than this convoluted sort of scheme.
Lord Mackie of Benshie: My Lords, is the noble Baroness aware that about one thousand years ago William the Conqueror assembled the Domesday Book cataloguing all the land and animals in this country—or rather, in England, I should say? Is it not a fact that we in agriculture in this country, whatever the faults of the CAP, suffer from a lack of system, as do those in several other countries, and that it is just possible that a simplified register may help this country?
Baroness Trumpington: My Lords, as I said before, we have no details of the proposal. Therefore, we do not know whether or not it is simple.
The Earl of Balfour: My Lords, in the agricultural negotiations with her European colleagues, will my noble friend encourage the reporting to the police and veterinary surgeons of the death of cattle as is practised in this country?
Baroness Trumpington: My Lords, I believe that that suggestion is something that we can bear in mind.
Lord Gallacher: My Lords, the noble Baroness said quite correctly that the proposal—whether serious or comical, depending on one's point of view—stems directly from the proposals which Commissioner MacSharry has in hand for the restructuring of the CAP. Does she agree that Commissioner MacSharry is approaching the matter as though the GATT negotiations did not exist? Will Her Majesty's Government impress upon the Commission in general, and on Commissioner MacSharry in particular, that when we know the shape of the GATT settlement we shall then be in a better position to restructure the CAP?
Baroness Trumpington: My Lords, it gives me great pleasure to agree wholeheartedly with the noble Lord.
Lord Bruce of Donington: My Lords, in view of the fact that the noble Baroness has not been able to express the opposition of Her Majesty's Government to the whole nature of these proposals, will she ask her right honourable friends to bear in mind the fact that, in its report of about a year ago on the prevention of fraud, the Commission acknowledged that the cost of operations such as aerial photography, and all the associated measures, was not entirely financially satisfactory?
Baroness Trumpington: My Lords, the content of the last report covered work carried out and progress achieved in 1990 in the fight against fraud. A summary of the report is contained in Explanatory Memorandum 5677/91 submitted by HM Treasury on 30th April 1991. The noble Lord may be interested to know that it is expected that the next progress report will be available by Easter.

Business
3.27 p.m.
Lord Hesketh: My Lords, with the leave of the House, I should like to say a word about the two debates standing in the names of the noble Lord, Lord Chalfont, and the noble Lady, Lady Saltoun of Abernethy. 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 short debate in the name of the noble Lord, Lord Chalfont, this means that all other speeches should be limited to a maximum of five minutes and in that of the noble Lady, Lady Saltoun of Abernethy, six minutes. If any noble Lord were to speak at greater length, he would be doing so at the expense of subsequent speakers in that debate. It is probably worth reminding ourselves that when the Clock indicates, for example, five minutes, then we are about to commence the sixth minute and not the fifth.

Business of the House
3.28 p.m.
The Lord Privy Seal (Lord Waddington): 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 Consolidated Fund (No. 2) Bill through all its stages tomorrow.—(Lord Waddington.)
Lord Cledwyn of Penrhos: My Lords, before we proceed any further, I should like to point out that we on this side of the House have noted with dismay that the Government now propose to take the Second Reading of the Further and Higher Education (Scotland) Bill on 13th February; that is, tomorrow. Noble Lords will be aware that the original arrangement was that the debate would take place on Friday, 21st February. It has been brought forward by eight days.
That proposal is not acceptable to noble Lords on this side of the House. I must register the strongest protest against it. There are three very good reasons for that protest. First, as the House knows, the Bill is an important and complex one. It is necessary for noble Lords to have adequate time to study it in detail. A First Reading on Monday and a Second Reading on Thursday does not provide adequate time.
Secondly, the new arrangement departs from our procedure; namely, that two weekends should be the minimal time between the introduction of a Bill or the date when a Bill is brought from the House of Commons, and the debate on Second Reading. That rule is to be found at page 91 of the Companion to the Standing Orders. Thirdly, there has not been adequate consultation or any agreement upon the proposal. The House can only carry out its primary work, which is the revision of legislation, if there is consultation and agreement between the Government and the Opposition. That applies not only to the Official

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Opposition, but also to all parties in the House, including Cross-Benchers, right reverend Prelates and government supporters. That is absolutely essential.
If we depart from that principle of agreement, the House will be in deep trouble, and the Government will have to take responsibility for that. If this party were to form a government, I wish to give a clear undertaking that our intention would be to observe the conventions and the rules and to seek the agreement to which I have already referred. I should be grateful if the Leader of the House would be good enough to explain why this departure from convention is taking place. Is it, for example, related to the date of the general election? I must also ask him to return to the original arrangement and to have the Second Reading on Friday 21st February.
Lord Jenkins of Hillhead: My Lords, does the noble Lord the Leader of the House accept that this is no isolated protest by the noble Lord, Lord Cledwyn? My noble friends and I feel equally strongly about the matter. The noble Lord, Lord Cledwyn, made several powerful points, the most important of which was that the House operates, sometimes arcanely, but on the whole successfully, upon the basis of agreement. Agreement on this issue has not been secured. The noble Lord the Leader of the House would be unwise to proceed on that basis. He can do so if he wishes, but the resentment which will be built up will be out of all proportion to any procedural advantage he may gain.
As we approach a general election, when a great deal of business will have to be tidied up at the last moment, it would be a heavy burden for the Government to take upon their shoulders.
Lord Waddington: My Lords, having heard the remarks of the noble Lords, Lord Cledwyn of Penrhos and Lord Jenkins of Hillhead, I am bound to say that I am grateful for today's psalm:
"God is our hope and strength, a very present help in trouble".
I realise that I owe the House an apology for the shortness of the notice that has been given for the Second Reading of the Bill and the change in the business. I realise full well that I owe the House an explanation. I believe that it is a good one.
Yesterday afternoon there were no amendments tabled for the Committee stage of the Coal Industry Bill, although that was tomorrow's business and it had been estimated that it would last between three and four hours. There seemed a real likelihood that with a great deal of business for the House to do, we should have been rising tomorrow afternoon at 5 o'clock or 6 o'clock. I am bound to say to noble Lords, with respect, that that would have looked very odd indeed. I am not sure how we could have explained it. It has little to do with the general election. Whenever the general election comes, this is a short Session. All noble Lords are well aware that there is a great deal of business to transact.
At the same time, I knew that noble Lords from Scotland have always taken the view that it is not desirable to take important Scottish business on Fridays. I also knew that many noble Lords from
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Scotland would have considered it helpful, rather than the reverse, to have the change of business. It is not right to give the impression that our decision was one wholly adverse to the interests of noble Lords. Indeed, there were many noble Lords who had represented to us that it was undesirable to take the Further and Higher Education (Scotland) Bill on a Friday, and had made it known to us that it would be very much better to take the Bill on a Thursday—and on this Thursday —so that it could be dealt with when all noble Lords interested in the measure would be able to be here.
I hope that, on reflection, your Lordships will not think that tomorrow is too soon to take the Bill. Under the minimal intervals rules, which of course are only advisory, the Bill would, in any event, be right for Second Reading next Monday. There was no other Bill right for inclusion in tomorrow's business.
On the issue of adequate time to study the Bill, the Bill was of course published some considerable time ago and has been available to your Lordships for some time, because we are not the first House to consider the Bill. Furthermore, I believe that all your Lordships would agree that many of the issues dealt with in the Bill have already been canvassed during the passage of the Further and Higher Education Bill for England and Wales which has only recently gone through the House.
It is in those circumstances that I hope that your Lordships will feel that we have not been altogether unreasonable. We tried in fact to fill up the time available to take legislation in this place in a reasonable way. We have tried to avoid the absurdity of finishing up tomorrow with no business, or no business which would occupy the whole of our time, and then require a number of noble Lords who find business on a Friday inconvenient to come down for that business a week on Friday.
I owed your Lordships an explanation. I know that this is an unusual course to take. I should not think of doing anything like this as a matter of course, but we were confronted with an unusual situation early yesterday afternoon. It was in the light of the information received, not any preconceived plan, that we decided to find some business to fill up tomorrow so that we would have adequate work to do.
Baroness Carnegy of Lour: My Lords, is it in order for me to ask a question?
Noble Lords: Yes.
Baroness Carnegy of Lour: My Lords, I was one of those who took a strong line against the only Scottish Bill going through the House in this Session being sidelined onto a Friday. Does my noble friend agree that I made strong representations, believing that Scottish Peers on the other side of the House would be grateful to me? I am surprised that the Opposition are taking such exception to the change, because the issues are well known, and have been well known for some time. I accept that the change does not give us much time to write our speeches. I hope that my noble friend will accept that at least some of us felt that this proposition was a much better idea.
Lord Waddington: My Lords, my noble friend asked me a question. The facts she gave are correct.
Lord Stoddart of Swindon: My Lords, is the noble Lord aware that many of us on this side of the House are puzzled by his explanation, although of course we are grateful for it? He appears to be saying that if business suddenly becomes light on a particular day, and the House is likely to go up early, he has to find some business to put in its place so that we can have a full day.
Noble Lords: No.
Lord Stoddart of Swindon: My Lords, that is what the noble Lord the Leader of the House appears to be saying. I must point out to him that during the eight or nine years that I have been here we have often finished at 6 p.m. or 6.30 p.m. or perhaps even 5 o'clock. It has not apparently been necessary to push forward some business to fill up the number of hours left in that day.
As my noble friend the Leader of the Opposition pointed out, Standing Orders have not been complied with to enable us to have the new Scottish business tomorrow. Many of us are very worried that in the future, if this were to be taken as a precedent, we should find the same kind of thing happening with other Bills if we had two or three hours left between 6 o'clock and 9 o'clock which had not previously been foreseen. That is a serious issue. It is something we cannot allow. I hope that the noble Lord the Leader of the House will be able to retract his proposition, because it has serious implications.
Lord Waddington: My Lords, with the greatest respect to the noble Lord, I believe that he has missed the point. It was not just that there would be insufficient business for tomorrow, it was the fact that while there was insufficient business tomorrow, there was a demand to take business from a week on Friday and to put it on tomorrow for the convenience of some Scottish Members.
Lord Tordoff: My Lords, that is not strictly accurate. There was a demand to move the Scottish business from Friday which one well understands. When that business was put down for a Friday, I made a complaint about it as part of the usual channels. The complaint is not that the business has been moved from Friday but that it was brought forward eight days to a day when the party Whips indicated that no such debate would take place.
The noble Lord must understand that there may well be people in Scotland whose first indication that the matter would be debated tomorrow was when they received the Minutes of Proceedings today, if they received them today; they may not receive them till tomorrow. It is grossly unfair to Members of your Lordships' House who come from Scotland and who may wish to be present for the debate to have only 24 or 30 hours' notice, or even less. That is the complaint that the Opposition Whips, the usual channels and others make.
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We were told about this yesterday afternoon and we immediately objected. As my noble friend said, unless we can run the House through consent and through the usual channels we are on a slippery slope.
Lord Carmichael of Kelvingrove: My Lords, I try to be as helpful as possible to the noble Lord the Leader of the House. When it was announced that the debate would be on 21st February I was reluctant but accepted it, knowing that an election was coming and that the Bill would be rushed through. With respect to the noble Lord, it was not correct to say that the Bill was published a week or so ago and that we knew all about it. A number of amendments were made to the English Bill in your Lordships' House which had a strong effect on the Scottish Bill.
When I discovered last night that there had been discussions through the usual channels over moving the debate forward to Thursday, again in order to accommodate the House I reluctantly shrugged my shoulders. But I then discovered that I had a great deal of rushing around to do in order to obtain information about the effects of the English Bill on the Scottish Bill. I had to go back to source, to the vice-chancellors and principals in Scotland.
I did not like the idea of staying here on a Friday but I had adjusted to it. Now as well as having to adjust to having a Scottish debate today, I shall have to put another towel around my head tonight to prepare for a second Bill tomorrow. Helpful though I wish to be, I believe that that is not treating the House as well as it should be treated.
The Earl of Halsbury: My Lords, all a CrossBencher can do in these circumstances is to enter a plea for a little tolerance and express the hope that in arranging the business of the House the usual channels will remember an old nursery rhyme:
"Monday's child is fair of face,
Tuesday's child is full of grace,
Wednesday's child"—
That is the noble Lord, Lord Cledwyn, today—
"is full of woe,
Thursday's child has far to go"—
all the way from Scotland—
"Friday's child is loving and giving".
I hope that we shall never have sittings on Saturday or Sunday. If Friday's children who favour that day could be loving, giving and understanding, it would improve the atmosphere in which we exchange our views.
Lord Rochester: My Lords, is the noble Lord the Leader of the House aware that, although it is no doubt true that early yesterday afternoon no amendments had been tabled to the Coal Industry Bill, since then I believe that eight or 10 amendments have been tabled? I learned that from the Printed Paper Office this morning.
3.45 p.m.
Lord Hughes: My Lords, does the noble Lord the Leader of the House know at what time he expects the start of discussion on the Bill tomorrow? I gather that

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only the Government Whips know at this point how many people have put their names down to speak. Does he know?
I ask because I agree that few Scots in the House would welcome discussion of major Scottish business on a Friday. However, in getting away from the Friday the noble Lord may have moved from one difficulty to another. The Scots in this House are not enthusiastic about discussions taking place on a Thursday, which means that they cannot catch the last plane back to Scotland.
Lord Graham of Edmonton: My Lords, before the Leader of the House replies, perhaps I may remind him that what he indicated to the House about the absence of amendments to the Coal Industry Bill was absolutely correct at 12 noon. However, as soon as I was advised that amendments would be put down, I immediately informed his private secretary and subsequently confirmed shortly afterwards that amendments were being put down. I did so knowing that the situation that brought about the possibility of the change had itself altered during the course of the day.
Lord Waddington: My Lords, perhaps noble Lords will forgive me if I rise to answer the points which have been made, the importance of which I do not underestimate. I appreciate the point made by the noble Lord, Lord Tordoff. He expressed the view that it was undesirable to have Scottish business on a Friday and he was not entirely happy therefore about the business set down for next Friday. However, if one is not happy about such business being set down for next Friday, one must consider what alternatives are open to us. The noble Lord will freely admit that we have heavy business planned. I am sure that it would not have been possible to reach agreement on a change in the business next week to accommodate the Further and Higher Education (Scotland) Bill earlier in the week.
The noble Lord, Lord Carmichael, said that there were difficulties over people preparing adequately if the Bill is taken tomorrow. However, I emphasise that to the best of my knowledge this Bill, which started in the other place, has not been significantly amended. Therefore the text has been available for a considerable time.
I am extremely grateful to the noble Earl, Lord Halsbury. I cannot ask people to be loving but I hope they will be understanding in the circumstances. I must tell the noble Lords, Lord Rochester and Lord Graham, that although amendments were put down later in the day, there are still only four. It is inconceivable—bearing those amendments in mind and the indication which had been given to us earlier by the Opposition—that that would have filled our work tomorrow. I am sorry if I am wrong, but I understand that there are only four amendments down.
I was grateful for the remarks made by the noble Lord, Lord Hughes, who reinforced my case by saying that few Scottish Peers welcome Scottish business on a Friday. I appreciate that neither do they welcome
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our sitting late on a Thursday. But my understanding is that there is no fear of our having to face that situation tomorrow.
I am told that there are now nine amendments to the Coal Industry Bill, the earlier business. However, so far as I can see, that would nothing like fill up our time tomorrow afternoon.
Lord Cledwyn of Penrhos: My Lords, before we finish the discussion, is the noble Lord aware that he is avoiding the central issue—namely, the failure to seek agreement on the way in which a Bill is to be conducted in the House? As the noble Lord, Lord Jenkins of Hillhead, said, if we proceed along these lines we are in danger of running into serious trouble.
If I may say so to the noble Earl, Lord Halsbury, it is no lack of tolerance on my part. I hope that I am a reasonably tolerant man, but this is not a matter for nursery rhymes. I am not full of woe. I am concerned about the future of the House and the conduct of business in it.
Viscount Whitelaw: My Lords, perhaps I may ask my noble friend the Leader of the House a question. Not having known anything about all this, I have listened and I fully understand all the arguments. However, I feel deeply, as I know he does, and so does the noble Lord, Lord Cledwyn, about the need for consultation over business in the House. Without such consultation I do not believe that the House can survive in its present state. I have a deep regard for the survival of the House in its present state. I wonder whether it would be possible for the discussion to be conducted privately through the usual channels rather than continuing on the Floor of the House. I believe that it would be possible to do that and it seems to be the best way of proceeding; otherwise it does not seem that we shall reach a reasonable solution.
Lord Waddington: My Lords, I could not possibly ignore such a suggestion from my noble friend. I have listened to all that has been said by noble Lords this afternoon. Obviously I shall ensure that the matter is discussed through the usual channels. That must be done at once because time is pressing on us. If we were to go into reverse, we would be in a bigger muddle than ever. I shall certainly ensure that such discussions are initiated forthwith.
Lord Stoddart of Swindon: My Lords—
Noble Lords: Sit down!
Lord Stoddart of Swindon: My Lords, it is no good noble Lords shouting at me to sit down because I shall not do so. I may well wish to divide the House on this matter. I have a question that needs to be answered before I make a decision on that matter. I am perfectly entitled to divide the House if I wish to without consulting my noble friends on the Front Bench.
The noble Lord the Leader of the House has said he will initiate discussions after we have concluded our discussion in the House today. However, any discussions he may have can only go one way because if we agree to his Motion there is no going back. Will

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he advise me whether he would be prepared to withdraw the Motion at this point so that realistic consultations can take place?
Lord Waddington: My Lords, I must point out to the noble Lord that when I moved the Business Motion the noble Lord, Lord Cledwyn of Penrhos, quite rightly used that as a vehicle for discussion on an entirely separate matter. The Business Motion which is before the House has nothing whatsoever to do with the issue of whether the Further and Higher Education (Scotland) Bill should be taken tomorrow or Friday. I am sure the noble Lord will appreciate that.
Lord Jenkins of Hillhead: My Lords, while the noble Lord, Lord Stoddart, was mistaken on a point of form, he was in a way right on a point of substance. To conclude this matter satisfactorily the noble Lord the Leader of the House should assure us that, following the powerful intervention of the noble Viscount, Lord Whitelaw, he will approach these immediate discussions through the usual channels with an open mind rather than with a view to forcing upon the House the decision he has already arrived at.
Lord Waddington: My Lords, I can certainly give the noble Lord that assurance.
On Question, Motion agreed to.

Local Government Finance Bill
3.53 p.m.
Earl Howe: My Lords, on behalf of my noble friend Lady Blatch, I beg to move the Motion standing in her name on the Order Paper.
Moved, That the amendments for the Report stage of the Local Government Finance Bill be marshalled and considered in the following order:

Clauses 1 to 19

Clauses 70 to 83,

Clause 97,

Schedules 1 to 6,

Schedule 8,

Clauses 20 to 69,

Clauses 84 to 96,

Clauses 98 to 102,

Schedule 7,

Schedule 9,

Clauses 103 to 118,

Schedules 10 to 14.—(Earl Howe.)

On Question, Motion agreed to.

Weapons of Mass Destruction
3.54 p.m.
Lord Chalfont Lord Chalfont rose to call attention to the potential dangers to the security and stability of the world posed by the spread of weapons and technologies of mass destruction; and to move for Papers.
The noble Lord said: My Lords, I apologise to the House for returning to this matter so soon after it has recently been discussed. It was discussed most recently when an Unstarred Question was tabled by the noble Lord, Lord Kennet. However, I believe this to be a matter of great importance which has not yet been sufficiently discussed in your Lordships' House. Therefore I hope noble Lords will not feel I am imposing too much of a burden upon your Lordships.
Before I begin my speech I must say how much I look forward to hearing the maiden speech of the noble Lord, Lord Vivian. The noble Lord brings to your Lordships' House a wealth of military wisdom and experience which I am sure will be enjoyed and appreciated. I must ask for the indulgence of the House in proposing this Motion as I shall have to speak fast to cover the topics I want to cover in the 15 minutes at my disposal.
First, I wish to review the threat that is posed to the stability of the world and to our security by nuclear proliferation, by the spread of chemical and biological weapons and, perhaps most importantly, by the spread around the world of ballistic missiles. I shall then consider how we might combat those threats. I wish to ask the Government whether they are thinking in terms of the non-proliferation treaty with its International Atomic Energy Agency safeguards as being an adequate safeguard. Would the Government contemplate military intervention in certain circumstances to back up UN sanctions? Have the Government thought of engaging in some form of ballistic missile defence preparations? How do the Government think this affects the status of our own nuclear deterrent?
I shall briefly discuss nuclear weapons. Originally five countries were regarded as nuclear weapons powers; that is, the five permanent members of the United Nations. It is worth noting here that one of those, the Soviet Union, is now being replaced by a number of countries, each of which is, in its own right, a nuclear weapons power. Instead of having five nuclear weapons powers we now have perhaps seven, eight or nine.
India and Pakistan have already declared that they have, or are about to acquire, a nuclear weapons capability. I believe most of us would estimate that South Africa already has a nuclear weapons capability. Israel, too, probably has such a capability. Then there are the near nuclear powers. There are many countries which will soon have the ability to acquire or make nuclear weapons. I need only mention Iraq. As long as Saddam Hussein is in power, we can never really be sure that that country is not pursuing a nuclear weapons programme. We know that Iran has a neutron source reactor and electromagnetic isotope separators from China. I cannot believe that they are entirely required by the Iranians for peaceful purposes.
Syria is in negotiations with China for the purchase of a reactor. Algeria has a reactor acquired from China. North Korea has a complete and independent technical infrastructure plus two reactors. Despite the agreement between North and South Korea that has recently been announced, I believe the proliferation

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situation there is an extremely disturbing one. We can add to that the dangers of proliferation from the Commonwealth of Independent States, (the former Soviet Union) and the existing proliferation from China which is exporting nuclear technology and other missile technology in large quantities. There are also dangers inherent in the behaviour of certain Western commercial companies which, despite the dangers involved, are already exporting nuclear weapons and missile technology. One might reasonably conclude from that that by the early part of the next century, which is only a few years away, there may well be 20 countries which are either nuclear powers or near nuclear powers, or have a nuclear capability of some kind.
If we compare the instability that that position poses with what we were faced with in the days of the cold war, it almost makes one yearn for the cosy stability of the East-West confrontation. That is disturbing enough, but we have to add to it the possible spread of chemical and biological weapons. For obvious reasons I shall not go into too much detail on that subject but we know, for example, that before the break-up of the Soviet Union and before the events of the past two years had occurred, the Soviet Union had the most advanced military chemical capability in the world. There are something like 75,000 tonnes of chemical stockpiles now in existence. The Soviet Union claims it has 50,000 tonnes, but Western intelligence considers the figure is more like 75,000 tonnes.
We know that material was deployed to forward units of the Soviet mechanised infantry in the days before the break-up of the union. All over the Commonwealth of Independent States there is chemical material which is dangerous in its present form. It is also difficult to destroy and, by most expert judgment, will take at least 10 years and several billions of dollars to remove. At the moment it poses an actual threat.
There are 15 to 20 third world countries which in many cases have used chemical weapons either in war or in the process of internal security. There are many others which have developed biological agents. We know, for example, that Iraq acquired microtoxins in 1989. Those form the raw material of biological warfare. Iran also attempted to purchase one of the ingredients of microtoxin technology in 1989. We also know of the Libyan facility at Rabta and that it is dangerous.
At the beginning of the next century there will be 15 to 20 third world countries with a nuclear capability, a chemical capability or a biological or germ warfare capability, and in some cases all three. Some of those countries are erratic and unpredictable and under fanatical and dangerous leadership. The question is: if they have that material, how do they put it to military use? We should not need to be too disturbed if all they had lying around were agents of mass destruction but no means of delivery. That is no longer so. That is the development which is beginning to worry most of us who are involved in the problem.
Proliferation of ballistic missiles is the one aspect which brings the threat from the back of our minds to the front. Here a similar pattern emerges. There are 15 third world countries which now have ballistic missiles in their possession; 15 countries which will quite soon own their own ballistic missile production facilities. They will be able not only to construct ballistic missiles but also, if they wish, to export them. Most intelligence assessments suggest that by the end of this century there will be 24 countries, many of them third world countries, which will have the capacity to make, acquire or use ballistic missiles.
That is the picture which emerges. There is no need to labour the point. There is a growing number of countries, among them Middle Eastern and third world countries, many with unpredictable and fanatical leaders, which possess nuclear, chemical and biological weapons and the means of delivery by ballistic missile. I have no desire to make the flesh creep, but Western Europe and the United Kingdom are within the radius of action and range of some of those ballistic missiles.
What is the strategy of the West, and in particular the strategy of this country, to deal with what I regard as the most important single danger facing the world in the period following the collapse of the communist empire? At the moment the strategy is unclear. I hope that when he replies the noble Earl will be able to give some guidance. For example, have the Government accepted that the non-proliferation strategy based on the 1967 treaty has failed? A number of important countries have not signed or ratified the treaty 25 years after it came into force in London. Proliferation has taken place. What steps are the international community and Her Majesty's Government taking to contain it?
Are we taking steps to strengthen the powers of the International Atomic Energy Agency in Vienna? Are we prepared, as I suggested in a recent debate in your Lordships' House, to supply the agency with our own national intelligence, in a suitably sanitised form, which often indicates to us the truth of matters which may not be entirely clear to those in Vienna? Are we prepared to contemplate the use of force, perhaps under the aegis of the United Nations, as the ultimate sanction in bringing about a halt to the spread of weapons of mass destruction? Would we use force in certain circumstances even to destroy the facilities of those making and stockpiling those weapons if no other means of doing so existed? Are we taking steps to prohibit commercial concerns from exporting sensitive material, as we did in the days of what used to be called the COCOM agreement? There may be a case for having a global COCOM agreement to prevent the export to countries of the kind of materials which are specifically connected with the acquiring of the technology to make and use weapons of mass destruction.
I recognise that efforts are being made. There is the missile control technology regime and there is the Australia group, which has been formed to combat the spread of chemical and biological weapons. I recognise also that Her Majesty's Government are playing a leading role in many of those negotiations

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and are responsible for a good deal of the intellectual content of the proposals which have been put forward. It seems to me that we cannot rely entirely on arms control to ensure our national security in this very dangerous environment.
What should we be doing, then, in the context of national defence? There is one matter which I should like to bring to the notice of your Lordships' House. It is a concept which is known by one of those terrible acronyms so favoured in the world of strategic analysis—GPALS (global protection against limited strikes). That is a concept which derives from the Reagan idea of the strategic defence initiative. It is designed to protect the countries not only of the West but also of the former Soviet Union against limited strikes by maverick leaders who might acquire nuclear, biological or chemical weapons and use them either to threaten or destroy our countries. It is a US concept, accepted by both sides of the political spectrum there, and a great deal of money has been voted by Congress in pursuing it. When President Yeltsin went to Camp David he agreed with President Bush that the two should get together to see whether they could collaborate on the project. A book by Dr. Keith Payne, the president of the US National Institute for Public Policy, has been published this very day. It sets out the case for that new concept. Therefore I shall not go into the matter further now.
However, I should like to ask the Minister whether Her Majesty's Government are in consultation with the United States on GPALS—I am sorry about that acronym but there is no quicker way to say it—and what is their attitude towards it. It would be very foolish if we allowed ourselves to deploy against GPALS the same arguments which were deployed against the strategic defence initiative. It is a new concept in a new strategic environment.
In the last minute at my disposal I should like to refer to our own nuclear deterrent. It seems to me that in this context the maintenance of a fully effective nuclear deterrent in this country is of the utmost importance. The Government have decided to base our deterrent on a submarine-launched strike force. As I always do on these occasions, I declare my interest as the chairman of VSEL. I make the point strongly nonetheless that in my view we can use the Trident force when an arms control environment is right in this country, in other words when the United States and the former Soviet Union have so reduced their capability that it begins to affect our own. We can do that without arguing about the number of submarines at sea. However, I shall not embark on that argument at any length.
Finally, I should like to seek the reassurance of Her Majesty's Government that our protection against this appalling new threat will not rely entirely on international agreements, which are not universally adhered to and which have been broken before and will be broken again and which can in any case, under their own terms, be repudiated at a few months' notice. I beg to move for Papers.
4.8 p.m.
Lord Vivian: My Lords, I am more than grateful and suitably humbled to have been given this opportunity to make my maiden speech in a debate which draws attention to probably the greatest threat to the security and stability of the world, that of the spread of weapons and technologies of mass destruction. However, before I associate myself with the debate I should like to pay a tribute to my father, who was a regular attender in your Lordships' House from the time he took his seat in 1966 to his final few years when ill health intervened. He held the traditions and customs of the House in the highest possible esteem, as he did your Lordships, the door attendants and the staff that he knew so well.
In this debate I should like to draw your Lordships' attention to some of the dangers from proliferation and some of the ways of preventing the spread of these weapons and technologies of mass destruction. Information has been published that in 10 years' time an additional number of countries will have a nuclear offensive capability. It has been reported that the former Soviet Union possesses some 30,000 nuclear warheads with about 1,376 strategic missiles. It may take well up to 10 years to dismantle those weapons, which would allow the former Soviet Union to retain its vast superiority in these weapons during the next decade.
I turn now to some of the dangers that arise from proliferation. First, the Moscow Institute of Geography has estimated a possibility of up to 76 border disputes within the former Soviet Union and serious trouble may break out between Ukraine and Russia. If those border disputes start, it is highly unlikely that the republics will hand over their nuclear weapons to Russia. It is more likely that they will retain them and build up strong forces to protect themselves and their ill defined borders.
A further danger will arise if third world countries develop or acquire their own nuclear offensive capability. The southern Moslem bloc of 90 million people, linked together by a common religion, in possession of weapons of mass destruction will cause serious concern to the West. There is also a danger that smaller weapons could fall into the hands of terrorist organisations such as Abu Nidhal or the IRA.
If we are unable to stop proliferation, what are the steps that we can take to minimise its effects? First, we should ensure that the former Soviet Union's nuclear scientists and the rumoured sales of nuclear weapons are not exaggerated stories as part of a policy to ensure that the West is panicked into hasty actions and one sided treaties. That would allow the former Soviet Union to achieve in months what it was unable to achieve in 40 years of perpetrating the cold war. Secondly, it is vital that we increase our intelligence gathering systems and organisations to provide more accurate and timely information about countries that already possess or are about to possess nuclear weapons. Thirdly, the requirement exists to strengthen and ensure sufficient inspection and verification teams from the International Atomic Energy Agency and authorise them to carry out unannounced rapid spot

737
checks on those countries. Fourthly, the existing regulation prohibiting suppliers from providing likely components to such countries should be urgently and carefully reviewed and where necessary amended to avoid making further mistakes.
We must press the former Soviet Union to accept our proposal to send it nuclear weapon disposal teams who would verify stocks and report progress on the dismantling of weapons and the destruction of launchers with their associated command and control systems. This is a matter of some urgency. Unlike wine, which should improve in the barrel, Russian-made nuclear weapons deteriorate in their canisters and enough seepage could occur to cause many Chernobyls.
In conclusion, I feel that the West is reacting too quickly. We should take a more measured view and carefully examine the existing evidence emanating from the former Soviet Union. We have heard that there are serious doubts about control of the weapons. It may be true to say that they are under the control of the military. But who controls the Red Army and the other servicemen today? There is much confusion over that question and the answers are not at all clear.
In addition, there have been disputes between Yeltsin and Kravchuk over the control of the Black Sea fleet. There has been fighting in Georgia, bloodshed between Azerbaijanis and Armenians and a likelihood of more serious fighting to come over border disputes. The economy is in shreds. Starvation is likely to happen in about two weeks when food stocks run out. The Red Army is very bitter, seething with discontent and suffering from poor discipline and low morale. Yeltsin's fall from power cannot be ruled out. Add to that gloomy picture the spread of nuclear weapons and the defection of scientists and skilled nuclear technicians and the situation becomes of even greater concern.
Now is not the time to lower our guard, nor to proceed with our proposed defence cuts. It is not the time to question our minimum nuclear deterrent, which is the keystone of our defence policy. With all the instability and uncertainty in the world and with the continued spread of nuclear weapons, now is the time for the United Kingdom to be increasingly vigilant, to maintain our present force levels until the situation becomes clearer and to remain as robust as ever. I am grateful for your Lordships' attention and I thank noble Lords for their courtesy in listening to my maiden speech.
4.15 p.m.
Lord Kagan: My Lords, first I should like on behalf of the whole House to offer congratulations to the noble Lord, Lord Vivian, on his maiden speech. We are fortunate to have among us this noble Lord who has so much practical experience and has commanded in the trouble spots of the Mediterranean. I hope that we shall hear often from him.
We are also grateful to the noble Lord, Lord Chalfont, for alerting us to the potential danger to the security and stability of the world. There has never been more opportunity to create a new, peaceful world
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order and we have never been in danger more mortal if anything goes wrong. The responsibility of us all, but particularly of our leaders and statesmen, is awesome. One false step and the history of our planet will have been written.
We are in the middle of a global revolution. We are threatened not only by the proliferation of weapons but by a population explosion, mass migration and unprecedented economic aspirations raised without real foundations, particularly in eastern Europe. We have witnessed national disintegration. We face scarcity of resources and are watching relentless environmental decay. All that has surfaced and climaxed with the fall of the Soviet Union.
As the noble Lord, Lord Vivian, pointed out, the situation is very serious. How bad it is can be judged by the words of Mr. Yeltsin, who when he was in Paris said:
"Dictatorship will return if the reforms fail".
Simultaneously, the chairman of the Russian state bank said that the economic measures have led to anarchy and chaos. Georgi Matjuchin, a leading economist in Mr. Yeltsin's government, is on record as having said that the reforms are doomed. His Deputy Prime Minister has again questioned all those measures. If a playwright had tried to create a tragic scenario he could not have improved on what is happening there.
In 1945, after the Second World War, there was also a situation of anxiety, opportunity and chaos. At that time it was suggested that perhaps the United Nations should be enabled to maintain a standing international military force, subject to the command of a man appointed by the United Nations, which could step in and intervene if trouble started somewhere. Alas, it was not possible to do that because the stalemate between the United States and the Soviet Union and their ritual position toward each other prevented it. But now it could happen.
The noble Lord, Lord Cheshire, to whose speech I am very much looking forward, has suggested in this House that an international military police force should be set up which owes allegiance only to its commander. Because of the few minutes left to me, I shall rush through this: I think we have one in the Gurkhas. The Gurkhas have a tradition of loyalty and obedience to their superiors and, provided they are backed logistically and as regards infrastructure by the United Nations and provided the United Nations is empowered to intervene if a conflagration threatens, it could be a first step. I am afraid I do not want to be reprimanded again and so I will stop.
4.21 p.m.
Lord Carver: My Lords, it is a pleasure to follow, although a little way behind, the noble Lord, Lord Vivian, who made his maiden speech. It is particularly appropriate since his regiment was one which had the particular task of leading the way in the Gulf campaign.
I share the concern of my noble friend Lord Chalfont about the potential proliferation of nuclear, chemical and possibly bacteriological weapons. They are weapons that, by all the laws and usages of war,

739
should not be used. They breach both the principle that the degree of force to be used should be proportional to the issue for which the war is fought and that, so far as possible, non-combatants should be protected from the fighting.
There is no doubt that many parts of the world today face actual and potential dangers to stability and to the preservation of the security of the existing political structure, but I think we need to remind ourselves that that does not come primarily from the proliferation of these sorts of weapons. It comes more from proliferation in the numbers of independent states and from proliferation in the conventional arms which have been supported so irresponsibly by the international arms trade.
The noble Lord, Lord Chalfont, came to certain conclusions. First, he came to a conclusion with which I totally agree: that the most energetic possible action needs to be taken to be able to inspect and control the proliferation of these weapons. I do not think I am too keen on GPALS because most of these weapons are designed to fire at people's neighbours, and I am not sure GPALS would help a great deal in that connection. However, I am not an expert on that.
In the short time available to me I should like to concentrate on my disagreement with the noble Lord's last point regarding the maintenance of what is called our own minimum deterrent. He and the noble Lord believe that the danger of proliferation reinforces the need for us to have what is called a minimum deterrent which involves having ready to fire 24 hours a day, 365 days a year (366 this year), a weapon system capable of penetrating an anti-ballistic missile system more sophisticated than the only one in existence today; that is, the one defending Moscow. It is apparently thought necessary in case any of the existing or potential nuclear powers should suddenly decide to fire a nuclear weapon at this country. That has always seemed to me a very unrealistic scenario—it is more unrealistic now than it used to be—and providing against it is a gross form of over-insurance. If we have to have such a minimum deterrent, why does not every other nation need one? It encourages others to think that they should have one and it is therefore useless —indeed worse than useless—as a deterrent against the danger to which the noble Lord's Motion draws attention.
A much better form of deterrent would be the strongest possible effort through the United Nations Security Council to develop an effective method of inspection and control of these weapons, which must somehow be linked to some form of control of the international arms trade in other weapons. The Government pay lip service to that but undermine it by blithely proceeding with a significant increase (although they refuse to say by how much) in the number of warheads for the Royal Navy's strategic strike force, and with the development or purchase of a new nuclear weapons system for the RAF. If the Government are serious in their support of international action against the proliferation of these weapons, which everybody seems to agree is a great danger—indeed, the Prime Minister himself said so on 29th January—they should at least defer the order for
740
the fourth Trident submarine and the plan to order a new warhead for a tactical air-to-surface missile for the RAF.
Three things should be done. First, we should give every support to the United States in its negotiations with the former republics of the Soviet Union in reducing their nuclear arsenals and establishing a secure regime to control them. When those negotiations have produced a reduction to a level at which the British and French arsenals become significant, they also should be involved, but meanwhile they should not be increased. Secondly, we should put all our weight behind developing an effective United Nations inspection and control mechanism to cover as wide a field of armaments as possible, a satisfactory outcome of the Iraqi situation being a vital test of progress in that direction. Thirdly, we should not consider becoming engaged in hostilities against a nuclear power without the support of the United States. I do not believe that that last item would be very difficult. We have been prepared to accept it in Europe for some 45 years, and I cannot see why it should not apply elsewhere.
4.26 p.m.
Lord Boyd-Carpenter: My Lords, it is ironic that after all the rejoicings and the talk of "peace dividend" when the Soviet Union collapsed two years ago it is now realised that the situation is rather more dangerous than it was when NATO and the Warsaw Pact were in balanced opposition. If I may, I should like very quickly, and with the very greatest respect, to differ from the noble and gallant Lord who has just spoken about our major reaction to this situation. I think it would be a fatal mistake to drop Trident and the British nuclear deterrent.
The noble and gallant Lord asks: why should we have it and not other people? The answer is that we in this country have very great responsibilities throughout the world, and we have accepted those responsibilities. We were in fact the only people to fight all through the last war with success, and indeed it was our resistance to German aggression which enabled the allies ultimately to win. We have a very special responsibility, and to give up the four Tridents would be a most damaging mistake. I am only sorry that so distinguished a figure as the noble and gallant Lord should be advocating this. I do not believe that other people accept it.
However, in the very brief time I have, I want to ask my noble friend the Minister two questions. First, can he tell your Lordships what is the position in respect of the nuclear and other arms which I believe are being prepared by Iraq? There is a perfectly clear United Nations Security Council resolution demanding the clearing up of this investigation and the cancellation of these various apparatuses. But what is happening? There seems every reason to believe that Saddam Hussein is continuing with the research and development of nuclear weapons and probably also of chemical weapons. I should like my noble friend to say whether Her Majesty's Government are going to move the United Nations Security Council to secure the implementation of their decision. Simply to wait and

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hope would be an extraordinarily dangerous thing, because the possibility of someone of Saddam Hussein's already proved tendency to aggression being equipped with weapons of this sort is an extremely dangerous one, and it should be gripped at once.
The only other point I wish to have a little advice upon concerns the standing down of the enormous number of weapons which the Soviet Union has, particularly of a nuclear kind. What is it proposed should be done? As I understand it, you cannot just take nuclear weapons and dump them on a rubbish heap. To demobilise them and take away their destructive power is a long, difficult and technical job. Are we assisting Russia to do that?
Also, are we dealing with the other problem, that the Soviet Union has a number of highly expert scientists and research workers who understand nuclear weapons, how they are made and how they should be handled? What will happen to them when the Soviet Union reduces, as we hope it will, its nuclear capacity? Will they be employed in countries such as Libya, Iraq or half a dozen other countries which are seeking to develop those weapons? Will the Russians take steps to secure that their scientists and technicians are not used in that way, but are given decent and responsible employment at home? That will prevent them being seduced away by high salaries for that purpose. I should be grateful if the Minster will answer those questions when he replies to the debate.
4.30 p.m.
Lord Jenkins of Putney: My Lords, faced with a new danger, those of us who regularly concern ourselves with the safety of our people and of the world are showing signs of coming together. Although we use a different language the noble Lord, Lord Chalfont, and I are unusually at one in our anxiety about the development and spread of weapons of mass destruction. My support of his Motion is wholehearted.
That is not to say that I agree with every word that he said, but in general I share his anxiety although we may have slightly different attitudes to the conclusion which we finally reach. Perhaps I may say in brackets that there is no time to pay an adequate tribute to the maiden speech which we have just heard from the noble Lord, Lord Vivian. Perhaps he will have time to express himself at greater length in the future and we shall be able to congratulate him properly then.
Although, as I say, we use a different language, we reach the same conclusion, that the situation is extremely dangerous. The defence analyst Frank Barnaby gave authority to the obvious when he observed recently that the nuclear disarmament on which the great superpower, the United States, and the successors to the Soviet Union are currently engaged does not of itself make the world a safer place. That is the problem.
I shall be able to keep my speech within the five minutes because the noble Lord, Lord Chalfont, made one or two of the points which I should have made and
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he made them much better than I could have done. However, we must ask ourselves what action we can take to improve rather than worsen the situation. It seems to me there is coming about a general view that in our determination to increase the number of nuclear weapons, at a time at which everybody else is trying to decrease them, we are in danger of making the situation worse rather than better. That is now becoming the consensus of opinion on this matter.
The situation is not helped if nuclear reduction by the United States and Russia is accompanied by horizontal proliferation to other countries and by vertical proliferation by Britain. The reason given by our Defence Secretary for the enormous leap upwards in mass destructive power from Polaris to Trident is that we need it to maintain a minimal deterrent. Is it possible for him to believe that a megatonnage of 3,000 or 4,000 Hiroshima bombs is minimal in the face of a collapsed, dispersed and almost disappeared enemy? Seldom in the field of human communication has so lame an excuse been given for such indefensible action. Wittgenstein should be alive to excoriate that. However, even if he were, he could not do much in five minutes.
A number of people from opposite sides of the same problem, equally concerned about it, are coming together and are beginning to move towards a common ground. I found myself in complete agreement with the noble and gallant Lord, Lord Carver, on several points and I hope I shall not embarrass him by saying that. I am fairly sure that I shall not.
Another point about the concentration on Trident is that it destroys the credibility of our Government's adherence to the non-proliferation treaty. In the eyes of non-nuclear nations Prime Minister Major is merely absurd when he ignores Article 6 of the treaty which obliges nuclear nations to reduce and eventually disarm nuclearly. In effect, the Prime Minister says, "Do not do as I do, do as I say".
There is still more that I should like to say but perhaps we shall be able to discuss this subject at greater length on another occasion. I hope that we shall because I can think of no subject which is more important.
4.35 p.m.
Lord Zuckerman: My Lords, if this debate does no more than underline the facts which are common knowledge—namely, that the dangers of proliferation are greater than they have ever been—we shall have achieved very little this afternoon.
It seems to me that the basic problem is to restore to the United Nations the authority which was taken away from it in 1946 when the USSR rejected the Baruch proposal, prepared by Dean Acheson, who was then Deputy Under-Secretary of State, and David Lilienthal. That proposal gave the United Nations the authority to control the development and use of nuclear power for any purpose.
Once the USSR recognised that that would leave the United States with a monopoly of nuclear power it rejected the plan. Once rejected, proliferation began. One of the first proliferators was the United Kingdom

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and the next proliferator was France. The story about the reasons why we decided to become an independent nuclear power is, I assure your Lordships, extremely interesting.
The effects of the USSR's rejection was, first, the arms race as we know it, and, secondly, the race between the build-up of nuclear weapons and the attempt by technological means to achieve a defence against nuclear attack. The failure to achieve a CTB at the end of the 1950s and early 1960s was due to the fact that the American people had not heeded General Eisenhower's warnings about the increasing strength of the military industrial complex. That prevented President Kennedy from giving the support which he should have given to Mr. Harold Macmillan, then Prime Minister, who was passionately concerned that there should be a successful outcome to the CTB negotiations.
The partial test ban treaty which was achieved in 1963 did little to prevent the build-up of nuclear armaments. Testing increased at a rate which no one had previously expected was possible.
Simultaneously and paradoxically, we worked our way through a non-proliferation treaty to an anti-ballistic missile treaty, to the SALT treaties and, unfortunately, on the other side of the coin, to MIRVs—ballistic missiles which carried up to 15 independently targeted missiles.
The attempt to achieve a technological defence was a romantic myth from the start. SDI achieved nothing but a waste of money. All that has come out of the presumed defensive work that has been done since the 1950s are the Patriots of the Gulf War, whose effectiveness against the enemy Scuds is now a matter of debate. Any argument is now used—a matter on which my noble friend Lord Chalfont and I differ —to keep the SDI going in another form. It is a will-o'-the-wisp. The latest reason put forward by proponents of defence is that a proper SDI system could protect our globe from meteorites.
The offers made to President Yeltsin, who probably knows almost nothing about any of these things, are appalling. Offers that he should join the US in keeping the armaments industry alive are made in the pursuit of an unachievable defence. It is easier to build nuclear weapons—to devise new ones—than to achieve any kind of defence.
Unless authority is restored to the UN, proliferation is bound to occur. Measures must be found to prevent that. We must strengthen, as several speakers have already said, the IAEA. It cannot be strengthened unless new powers are agreed for the UN of which it is the instrument. We should throw open all our nuclear installations rather than a few. With the Russians and the Americans now sharing their secrets, what do we have to lose? It would help to give some moral authority to the IAEA.
The other matter for which the Government should press, as Sir Anthony Parsons said in a recent newspaper article, is a comprehensive test ban treaty. The problem is not to continue with vague concepts of mutual deterrence, but to make as a primary goal the deterrence of proliferation.
4.42 p.m.
Baroness Park of Monmouth: My Lords, I shall confine myself to the threats posed by the former Soviet Union. They are both strategic and tactical. The strategic threat is that we shall eventually be confronted by a modern streamlined military force designed to carry out the Soviet policy of "defence sufficiency", especially if the CIS presidents accept the armed forces package of proposals on 14th February. That is not purely defensive. It will be served by a defence industrial complex which remains part of the command economy and represents 50 per cent. of the whole industrial capacity of the former Soviet Union, and probably a larger proportion of Russian industry. It produced up to capacity in 1991, including a new aircraft carrier and, according to the chairman of the State Committee for Conversion, will determine the level of defence sufficiency before conversion. He said,
"The policy is to attract foreign partners".
Both Bazhanov, the chairman, and the deputy director of the Kurchatov Institute evidently want to solve the problem of the possible brain drain of nuclear and other scientists by setting up joint projects with the US and Russia. That is an excellent way of securing access to Western technology. There are contradictory statements made about the brain drain. Sometimes we are told that nuclear scientists will be driven to accept work elsewhere unless we share our secrets; sometimes we are assured that they will not be allowed to leave for at least 10 years.
On the question of Libya the Kurchatov Institute director made the interesting statement that the Russians set up a nuclear centre in Libya at Tajurah for strictly peaceful purposes some time ago. There were some Russians there; there had been up to 100. The head of the USSR's nuclear programme, Professor Mikhaylov, denied any brain drain. He gave a figure of over 100,000 working in nuclear arms development,
"of whom 10,000 to 15,000 possess real secret information".
The main object seems to be to give the West good reasons to share technology and set up joint projects. The third strand of Soviet strategy is to disarm NATO as far as possible politically as well as militarily while themselves destroying their obsolete weapons to create a modern high tech army. Verification is rapidly being forgotten, but we must surely take note that contradictions between what Boris Yeltsin says and the facts are frequent. As recently as 8th February the Belarus Defence Ministry, quoting statements made both by Yeltsin and Kravchenko that the withdrawal of all tactical nuclear weapons from Kazakhstan and Belarus to Russia was completed on 1st February, said that that,
"did not accord with the real situation".
That is one example.
Equally, despite the fact that the defence/industrial complex continues under state control, military helicopters are being sold to China, and Ldmurtia—a major centre of the military and industrial complex —after a visit from the conversion committee was authorised to produce not consumer goods but arms for sale abroad.

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Russian strategy is clearly to end up with a lean, mean army; a defence industrial complex drawing in Western technology and maintaining its nuclear capacity and a climate calculated to disperse NATO's defence capacity. The tactical threats to stability are internal and largely unpredictable. If the armed forces obtain the right answers from the CIS presidents on 14th February, a strong central strategic force and delegated conventional forces, and the necessary budget, one threat will be averted—not the threat of a coup but of uncontrolled and spontaneous demonstrations by the troops. Those are only too probable if they see no prospect of housing, good pay, career prospects and good resettlement terms upon being demobilised.
The disorder would be turned to good account by the right wing opposition to Yeltsin led by Rutskoy, a war hero and vice-president and representing powerful elements of Russian chauvinism. That group would appeal to both injured Russian pride and to fears of Islamic fundamentalism. Rutskoy spoke recently of around 376,000 officers without a flag and deplored the dreadful conditions and the poor pay of the armed forces.
The other most serious tactical threat is the unstable and potentially dangerous condition of many tactical nuclear weapons, even if they have been moved back to Russia. They are badly stored and not yet dismantled. There is an equally dangerous threat to safety posed by obsolete nuclear power stations which have never met Western safety standards. According to a Finnish statement Sweden has been pressing for the closure of several such stations. But the Finns felt that the Russians were unlikely to agree as they needed the cheap energy.
There are all too many examples of high radiation levels about which nothing is done. I believe, with the noble Lord, Lord Vivian—whose maiden speech I heard with great admiration—that it is vital for us to make no serious and irrevocable changes in our defence until the situation in the former Soviet Union is stabilised and we can identify the threat more accurately. And we must retain our deterrent. We are not dealing with ordinary Soviet people but a sophisticated and determined establishment. The KGB in particular is alive and well.
4.48 p.m.
Lord Judd: My Lords, Presidents Bush and Yeltsin are right to come to grips with far-reaching disarmament and arms control measures. As the noble Lord, Lord Chalfont, suggested, the concept of an effective global collective defence system based on the strategic defence initiative and built jointly by Russia and the United States at least deserves constructive analysis. It will not be possible to lose the ability to manufacture weapons of mass destruction even when we eliminate existing stocks, as should be our firm resolve. There is evidence that a bright undergraduate with access to all existing publicly available information could, within months, design some sort of nuclear device.
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Collective security with an enhanced role for the United Nations, the Secretary General, the Security Council and its own forces, can no longer be regarded as an idealist pipedream. It must become the absolute priority goal in any realistic foreign policy. Trident may be needed to replace the ageing Polaris—but surely it must be Trident pro tern as part of the context for building collective security and moving to collective disarmament, not as a substitute. But why more warheads than Polaris when Bush and Yeltsin are moving in the opposite direction? Is it still to be 300 additional warheads? If not, how many more? Why any more? If Polaris can cope with the updated ABM system round Moscow, what is the new factor to justify more warheads on Trident?
Furthermore, why, in the new political situation, do we continue to target Moscow at all? Without Moscow and its ABMs as a target we could do with fewer and not more warheads than on Polaris. It would always be possible to increase the number if, sadly, any adverse developments necessitated that.
I believe that we can make a powerful contribution to strengthening the cause of non-proliferation if we come out firmly for a strengthened non-proliferation treaty with a more intrusive verification process, backed by tough UN sanctions, against those in breach. But we must understand that our credibility in arguing for that will be related to our own self-restraint on Trident.
We live in an age of cold-blooded, sophisticated terrorism. The crude nuclear bomb, assembled in an urban area from parts brought together in packages, is not an impossibility; nor is the bomb in a container or in a container ship in port; nor even is some device on a civil airliner flying a regular route. Our traditional strategic analysis must not be at the expense of facing the grim but unorthodox as well. We need to consider radical means of controlling all fissile material and its movement around the world.
But, more importantly, we have to recognise that the new hellish dangers that we have been debating this afternoon underline the policy imperative of striving for a fair and just world in which there will be little climate of sympathy for the terrorist. That means the highest priority for draconian control of the arms trade; fair terms of trade in general; space for economic development; debt alleviation; effective and generous aid policies; sane management of the environment; the protection of human rights and, perhaps above all, the promotion of good governance. It is by these positive social and economic policies in the age in which we live that the surest way of building peace and stability for humanity can be secured.
4.52 p.m.
Lord Cheshire: My Lords, the point that I wish to make comes from the very depth of my heart. I was not expecting that the noble Lord, Lord Judd, would make my central point. I thank him. I was not expecting the noble Lord, Lord Kagan, to say that he was looking forward to my speech. I fear I shall let him down. In my mind I go back to that day 47 years ago when I was sent as an official observer to watch

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the dropping of the atomic bomb that ended World War Two. I had to report back on the implications for the future of air warfare as I saw it.
There was one central point in my mind: that the key to the future lay in the delivery system. It seemed obvious to others and to me that the day would come when any nation with the political will and the money would acquire a nuclear device or something equally bad. Who knows what is coming? What would really count would be the delivery system. Then I saw that coming through space. When I reported back, that opinion was not very well received. People's minds were on peace-time and not on that kind of thing.
The world has now changed with the East-West confrontation gone and with it the military world has changed. But that central point of the delivery system still holds good. While I applaud practically everything that has been said today, and support it, there is one factor that worries me. We have been looking in one direction only; namely, the military means of delivery. That is likely to be a thing of the past. If there were a nation, perhaps a fundamentalist regime, that had a real reason for wanting to hurt us, it possesses the delivery system. As the noble Lord, Lord Judd, indicated, we have civil airlines coming over our airspace every day. One can deliver bacteria in a container and put it in the drinking supply. There are all kinds of undercover ways in which lethal weapons, not just nuclear weapons, can be delivered.
It seems to me that there is only one basic answer. That was pointed out by the noble Lord, Lord Vivian, in his excellent speech, which I much enjoyed. I refer to enhanced intelligence gathering. I know that in this House the noble Earl, Lord Ferrers, was asked what precautions he had taken to prevent a disabled Soviet spacecraft falling out of space and landing on the Palace of Westminster. His reply was on the lines of, "The same as I am taking against a number 73 bus crashing into Nelson's Column".
We were warned of that possibility, but we are not being warned of the other possibility of a deliberately lethal cargo being brought here under cover. It follows from that that, if we need global, enhanced intelligence gathering—I say humbly—our intelligence services need bettering. Not only that, but the people who listen to what the intelligence is bringing in need to have open minds. Plenty of intelligence came in in 1938 and 1939, but it was not listened to because people did not believe that that kind of thing could happen. All I am asking is that, whatever our party, whether we believe in abolishing all nuclear weapons or whatever is our position, we should stand together and think in radically new ways about the danger of undercover delivery of a lethal cargo.
It is a privilege for me to take part in this debate, which I believe touches fundamentally the future of the children whom we leave behind us in the new world to come. I end by saying that the noble Lord, Lord Judd, is right that we must build a better society. However, we must also have enhanced global intelligence gathering.
4.58 p.m.
Lord Kennet: My Lords, the prospect for nuclear non-proliferation is not everywhere so dark as it was three months ago. In the two Koreas the US "sunshine" policy has secured the aim of the whole civilised world. US nuclear weapons were withdrawn and both Koreas are now on their way into the IAEA regime and nuclear-free status. I use the word "sunshine" in the Aesopian sense; the sunshine will get the overcoat off your adversary quicker than a strong, cold wind. Yet, oddly enough, President Bush continues to abuse North Korea as if he had not noticed his own success as a sunshine merchant.
The situation as regards India and Pakistan is bad, but not that bad. Pakistan says that it will give up its nuclear weapons—it is only a screwdriver away—if India, which tested a bomb in 1974, does the same. But India will not do so without China, and so forth, as Mr. Hurd found out. In the Middle East itself, Dr. Blix of the IAEA has just been in Syria which has agreed to accept full IAEA safeguards. He and the Syrian Government have espoused the idea of a Middle East nuclear-free zone. Iran has had a visit from Dr. Blix's number two. He has commended its choice of nuclear power for electricity. Iraq is being expensively forced to submit to proper inspection. Here we must note that some of the inspectors have been discovered exaggerating their findings. They are US national inspectors, not IAEA ones.
So where is the real seat of trouble in the Middle East'? Over the years our Government here have denied all knowledge of Israeli nuclear capability. Now they know a great deal. Seymour Hersh's book The Samson Option has now told them, and all of us. It is a remarkable book and is accepted by the knowledgeable, despite one passage added to the British edition, which was wrong, and caused a minor fuss. In previously denying knowledge, Her Majesty's Government were merely doing a good turn towards previous US administrations, going along with their 35 years of silent acceptance of Israel's nuclear capability, which was completely incompatible with their public anti-proliferation policies. US administrations had steered themselves into a cleft stick. They could neither approve in public nor, for several reasons—both honourable and dishonourable—disapprove. So they kept quiet while American millionaires privately paid for Israel's now massive nuclear capability and individuals passed secret information, and perhaps material, and what they did not, Israeli intelligence took, sometimes with strange ease.
The US taxpayer funded the nuclear delivery systems and the US Government provided targeting data so secret that neither NATO nor even this country was allowed them—data which were used by Israel to destroy the Iraqi reactor in 1981. The US taxpayer is now funding an anti-ballistic missile system, or perhaps two, from behind which Israel can only present a yet more alarming aspect to all her neighbours. The possibility of Mr. Sharon succeeding Mr. Shamir will make blood run cold in many neighbouring places.

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It is this independent nuclear capability of Israel that stands in the way of a livable Middle East and a livable 21st century. Israel, backed by the United States, remains totally defiant of world law, defying the Geneva Conventions, defying countless Security Council resolutions, standing in military occupation of the territory of its neighbours which it has invaded, and in some cases annexed, and adamant in continuing just like that.
The other Israel must be found. An Israel that can re-enter international legality by returning territory, accepting the resolutions, joining the toughened IAEA which we must now build up in destroying its nuclear warheads, and all the rest. But it will not be found as long as the United States continues to arm it to the teeth, conventionally as well as nuclearly. Meanwhile, successive British governments have trotted obediently behind the regime of connivance in Washington.
However, we have only to say things like that in this House, and ostrich heads opposite go down and from under the sand come mumblings about America-bashing.
5.2 p.m.
Lord Thomas of Swynnerton: My Lords, I listened to the speech of the noble Lord, Lord Chalfont, with pleasure and appreciation as always. However, I felt that we were beginning to live in a rather surreal world if the noble Lord, Lord Chalfont, of all people said that he was almost beginning to yearn for the cosy stability of the cold war. A number of other noble Lords have expressed the same thought. I should not be here making a contribution to this debate if I did not appreciate that we live in a dangerous world. But surely we cannot be living in a world as dangerous as that in which we lived between 1948–49 and 1988, when the two most powerful nations that the world has ever seen had pointed at each other 20,000 nuclear warheads, and, with their allies, were living on a knife edge. The dangers of that are bound to seem overwhelming and extraordinary to future generations.
I return to the present difficulties. I hope I may be forgiven if I devote my speech to a point which was raised by the noble Lord, Lord Zuckerman, when he recalled the efforts made immediately after the war under the name of the Baruch plan to secure international control of nuclear energy. I do this without apology. I mentioned the subject in a defence debate in this House two or three years ago. I would not dream of mentioning it again had it not been for the fact that at a recent discussion on defence in Munich no fewer than three speakers suggested that we should turn our attention back to the idea and the spirit of the Baruch plan. One of those speakers in Munich was Dr. Teller, the father of the H-bomb, the other two were on the one hand a French Gaullist, the other a German Christian Democrat.
The concept Baruch plan is perhaps a misnomer —the noble Lord, Lord Zuckerman, mentioned that. Baruch was the United States financier who President Truman rather unwisely asked to be the chairman of
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the United States delegation to the first meetings of the United Nations Atomic Energy Commission. The plan was devised in a committee chaired by Dr. David Lilienthal. The core of the scheme introduced was devised by that brilliant and misunderstood scientist Dr. Robert Oppenheimer. It is worthwhile reflecting that, had it not been for the cold war, the disappearance of which we are all aware, we should have lived in a world in which the Baruch plan, the Oppenheimer plan, the Lilienthal plan —whatever you may call it—would have applied to us.
What was the core of the plan? It was that all nuclear development and exploitation should be internationally controlled and that there should be a monopoly of nuclear development. The brilliant element of the scheme was that there would have to be inspectors who, like the International Atomic Energy Agency, would be concerned to detect illegal activity. But also they would be involved in the production and development of the nuclear industry throughout the world so that—and Dr. Oppenheimer made this point extremely strongly—we would have had people conducting the inspection who were as intelligent as those who might be thinking of carrying out a breach of the arrangements.
I believe that in the present circumstances we should go back to look at those schemes of 1945–46 in the new climate and wonder whether we could not see, with the changes in the United Nations, whether they might not again be effectively applied.
5.8 p.m.
Lord Cocks of Hartcliffe: My Lords, I should like to thank the noble Lord, Lord Chalfont, for introducing this debate. It was certainly a chilling prospect of proliferation which he presented. I was particularly struck by the statistic of 15 third world countries possessing ballistic missiles. The whole question of proliferation was excellently portrayed by the noble Lord, Lord Vivian, in his maiden speech which gave such enjoyment to us all.
I was interested in the remarks of the noble and gallant Lord, Lord Carver, and particularly his comment regarding British nuclear weapons that people will say, "If us, why not others?" I must tell the House that in the 1950s I was a member of the Campaign for Nuclear Disarmament. It seemed to me at that time that a perfectly good intellectual case could be made that while Russia and the United States had nuclear weapons they could be trusted not to use them indiscriminately or to have serious accidents. The great problem was to stop the spread. Therefore, Britain, being the only other nuclear power, was in a unique position to take a lead in the matter.
In fact, I am able to tell your Lordships that I left the Campaign for Nuclear Disarmament as a positive measure. My membership did not lapse. My decision to leave the movement was triggered off by the behaviour of some of the supporters of CND at a meeting which Hugh Gaitskell addressed in Gloucester. I was one of the minor acolytes on the platform. Their behaviour towards Hugh Gaitskell so disgusted me that I decided to leave the movement. I now believe that we should retain our deterrent.

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I echo the sentiment expressed by the noble Lord, Lord Boyd-Carpenter. He pointed out that, had it not been for the stand made by this country against Hitler in 1940 before others rallied to our cause, the whole map and ethos of the world today would be extremely different. I was surprised that he had to try to generate a little interest today on the part of the Government in celebrating the 50th anniversary of El Alamein in this country as opposed to the country in which the battle took place.
I was interested in the remarks of the noble Lord, Lord Kennet. He said that he would be accused of US bashing, an accusation made in a previous debate. I do not think that he was US bashing. I think that he was Israel bashing. However, we are improving matters in your Lordships' House. The noble Lord was the eleventh speaker, and for Israel not to get a caning before the eleventh speaker in a debate of this nature is progress. What he omitted to mention to your Lordships when discussing the possible existence of an Israeli nuclear weapon was the minuscule size of the country and its population in a large hostile area and also the series of attacks which have been launched over the years against the state of Israel.
I conclude by joining the noble Lords, Lord Judd and Lord Cheshire, in speaking about the need for extreme and heightened vigilance against terrorism. I refer not simply to the indiscriminate—or possibly not indiscriminate—and comparatively small incidents but to the possible major intrusions of hidden nuclear weapons into countries by means which noble Lords have already described. We need to upgrade our attitude towards terrorism: it sometimes seems to be lukewarm. If hostages are released after several years of completely unjustified imprisonment, we find people falling over themselves to thank those who deprived them of their liberty for all that time. If the IRA declares that it will have an amnesty on Christmas Day or during the festive season we are supposed to be thankful; in fact, some people do express thanks. The whole thing is abhorrent, and we should upgrade our response to it.
The noble Lord, Lord Kagan, encapsulated the situation that we are in. We have, he said, the best chance of constructing a new world order to deal with these problems but at the same time, and hand in hand with this, we are probably facing one of the worst periods of mortal danger that the world has ever known.
5.14 p.m.
Baroness Strange: My Lords, we are all grateful to the noble Lord, Lord Chalfont, for initiating this debate, which comes at a most timely moment, and for giving us such a comprehensive review. I should also like to congratulate my noble friend Lord Vivian on his most excellent maiden speech.
The break up of the Soviet empire and the change from one large clear nuclear threat to 100 separate sites in 13 different republics is very reminiscent of Hans Andersen's fairy story, The Snow Queen, whose icy mirror splintered into thousands of little pieces which flew about the world doing far more damage than the single mirror.
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The heads of Belarus, Ukraine and Kazakhstan agreed last December to act unilaterally with the Russian president as regards their nuclear weapons, and last month Belarus sent off its first assignment of nuclear weapons to be decontaminated in Russia. The United States of America has already offered 230 million dollars to help to disable weapons and we have offered technical advice. There is much to be done. It is possible that some nuclear devices may be capable of conversion for domestic electricity. All that is good, because it is the enormous quantity of the Russian nuclear weapons—27,000 of them—which is so frightening. Once in the wrong hands, there might be no world left for anyone to debate about.
The current suggestion from President Yeltsin is that President Bush should in some way pay and employ the Russian nuclear technicians—at least 100,000 of them, according to Professor Valeri Mikhail, director of Russia's nuclear programme— and so possibly prevent their services being offered to countries such as Iraq. However, many of the Russian installations are less well insulated and maintained than Western ones and, with lack of finance, could deteriorate. Weapons can seep and become environmental hazards. There is much cause for concern here.
Perhaps the most worrying factor is the severe food shortage in Russia and the growing discontent of the people—and perhaps disenchantment with democracy as they find it. It is a country where prices have shot up, but wages have not. When I was in St. Petersburg last year people were queuing everywhere. "What are they queuing for?", I asked my guide. "In case there is something they can buy", she told me. And when we left, the waiter in the hotel said, "It is sad you are going now. There has been a delivery. Tomorrow you could have had a piece of fresh cucumber."
The situation with the army is worse. Its soldiers are still in East Germany and the Baltic countries in great numbers, because there is nowhere for them to go. There are not enough barracks, not enough houses, not enough jobs; and there is not enough food. It is a situation in which anything might happen; and a very dangerous one.
All we in Britain can do is continue with our Trident system, which will update the current Polaris and give us a very real nuclear deterrent of our own, and at the same time give all the help we can to the Russians to decrease their 27,000 nuclear weapons and help to make their country into a prosperous and peaceful democracy.
5.17 p.m.
Lord Orr-Ewing: My Lords, I am sorry that I was not in my place earlier. I should like to add my congratulations to the noble Lord, Lord Vivian, on a very constructive, courageous and well delivered speech. We hope to hear from him on many occasions in the future.
I should like to deal briefly with some of the reasons why, in contrast to the noble and gallant Lord, Lord Carver, I believe that we should keep and update our nuclear deterrent. The noble and gallant Lord has not changed his view and is always consistent. The first reason is the dangers of a disintegrating Russian

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empire and the growing capability of third world countries. Every speaker has underlined the dangers, not least the noble Lord, Lord Chalfont, who introduced the debate. He was marvellously constructive in putting forward his views. Gorbachev has gone and Yeltsin has told us that he has his own problems. Meanwhile there are 27,000 nuclear weapons—roughly half of which are ICBMs and the rest IRBMs —to be dismantled. That in itself is a terrific problem. There are 3 million Russian troops to be sent home and found jobs and houses. By Russian estimates that will take 10 years. Why then is it suggested that we should not retain our deterrent?
When I was a civil Lord of the Admiralty 30 years ago we were launching the Polaris programme. It was one of the few estimates that I have ever made that has continued to be correct. I said then that it would cost 2.5 per cent. of our defence budget. That is true today. It is 2.5 per cent. so it is not keeping out of the budget other items which would be more useful at the present moment. We are saying that we should have one nuclear submarine at sea at any time which would carry 125 nuclear warheads. The French have five nuclear submarines, not four which is the number that we are planning to have. They deploy over 500 nuclear warheads in them. People forget that fact.
I should also like to suggest that there is one other weapon which can be used against proliferation: we must build up and spend money on the most sophisticated intelligence that we can provide. It was the disintegration under the Freedom of Information Act in America which cost the lives of hundreds of American agents, after many of them had been tortured for information. That had a spin-off for us here at Langley. I believe that we have still not built up Langley to what it was before that time.
I was sorry to see—and I believe that I am right in saying this—that the Labour Party and the Liberal Democrat Party have a freedom of information Act in their manifestos, or at least an intention to introduce one. I ask them to consider most carefully the repercussions that could arise among the 20 or so third world countries which are developing these sophisticated weapons of mass destruction. I personally think that it is unwise to have a freedom of information Act, but there is a huge media boost attached to it. I see that the noble Lord, Lord Williams of Elvel, wishes to intervene. I gladly give way; but I thought that that proposal was in the Labour Party manifesto.
Lord Williams of Elvel: My Lords, it is all subject to security aspects.
Lord Orr-Ewing: My Lords, the Labour Party should come out firmly and take it out. The world would be a better place. We must build up our information services, not do away with them.
In reply to the remarks made by the noble Lord, Lord Cocks, who is a very old friend of mine from cricketing days, I must say that I am sorry to see that the Leader of the Labour Party has still not pulled out of CND. I understand that he is to let his membership lapse. There are between 100 and 130 existing Labour
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MPs who are still members of CND. That does not apply to this House. They have a very strong Left Wing and potentially sympathetic crowd down the Corridor. Resignation from the CND would not do any harm.
I return to my original message. I plead with the Government to build up the intricacies, the professionalism and the research in intelligence so that we may know what countries are involved. Perhaps we could have stopped Iraq from doing what it did if our intelligence services had been better and had not been destroyed by the Freedom of Information Act.
5.23 p.m.
Lord Mayhew: My Lords, I imagine we would all agree that the major reason why a country declines to renounce weapons of mass destruction is the possession of such weapons by another country. North Korea agreed to renounce nuclear weapons only when it had been assured that the United States was withdrawing its nuclear weapons. Pakistan has hesitated to renounce them because India has them. Iran and the Arab world would certainly be ready to consider renouncing such weapons but for Israel's nuclear monopoly. Thus the cause of nonproliferation lays responsibilities on the "have" as well as the "have-not" nations; indeed, perhaps more on the "have" nations because they have set the pace. If proliferation is a sin, they are the primary sinners.
During the previous debate on this subject I spoke of the need to strengthen IAEA, the need for better intelligence, and so on. I have just enough time to follow the lead of the noble and gallant Lord, Lord Carver, and other speakers in referring to Britain's record on non-proliferation. We were undoubtedly right after the war to decide to produce our own nuclear weapons. But that was an act of proliferation —indeed, of horizontal proliferation. When the Government now increase the firepower of our deterrent and acquire a new and more powerful sub-strategic nuclear missile system, that again will be an act of proliferation—of vertical proliferation. It may not seem so to us because we do not threaten anyone. But what is meant as a deterrent by one country is habitually misinterpreted as a threat by others.
We could perhaps construct a table of honour measuring a country's commitment to nonproliferation. There would be three stars for countries with no nuclear weapons which have pledged themselves not to have them; there would be two stars for countries which have no nuclear weapons but have not yet taken the pledge; there would be one star for nuclear countries which are disarming; and, finally, no stars at all for nuclear countries which are increasing their nuclear weapons. According to such a table of honour, this country would be in the bottom group, along with, probably, China, Israel and France.
Let us take another test of a country's commitment to non-proliferation. It is generally agreed that a classic advance towards a non-proliferation regime could be achieved with signature of a comprehensive test ban treaty. But which countries are obstructing that aim? It is not Israel, France or China; the two

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countries concerned are the United States, which is disarming, and Britain. To a detached observer, Britain's record on non-proliferation is deplorable.
In his very informative speech the noble Lord, Lord Chalfont, set out the case for discouraging the spread of nuclear weapons in every country except Britain. He defended the full nuclear programme of the United Kingdom. That is a strange position. Once again, and quite rightly, the noble Lord declared his interest, which we all understand, as chairman of VSEL. I believe that that enables me to say without the slightest ill will that, if the proposal in his speech was carried out, increases in nuclear weapons would be discouraged in every place in the world except Barrow. I believe that that is correct.
Lord Chalfont: No, my Lords; that is not correct. Perhaps I may give the noble Lord the reason. The missiles and the warheads on Trident submarines have nothing to do with Barrow. We make the submarines.
Lord Mayhew: My Lords, I am talking about the increase in nuclear weaponry, in which I include submarines.
Finally, when the Minister replies, perhaps he will be able to tell us about the dangers of proliferation and about the Government's determination to end it. I hope that he will also say that as a first step the Government propose to put their own house in order and that they have decided not to escalate the firepower of our deterrent and not to continue to obstruct negotiations for a comprehensive test ban treaty.
5.27 p.m.
Lord Williams of Elvel: My Lords, it would be difficult for me, as I am sure your Lordships will understand, to make a comprehensive wind-up speech from the Opposition Front Bench in five minutes, especially on a debate as important as the one introduced today by the noble Lord, Lord Chalfont. However, I have noted one or two points that I should like to put to your Lordships.
First, in his introduction the noble Lord, Lord Chalfont, spent a certain amount of time talking about chemical and bacteriological weapons. To my knowledge, no speaker has actually concentrated upon that point. I hope the noble Earl will be able to address it in his reply. I say that because in many ways those weapons are just as important and destructive as the nuclear weapons upon which most speakers have concentrated. The problem of nuclear proliferation arises—as I think the noble Lord, Lord Thomas of Swynnerton, recognised, although perhaps in passing—not because we wish to go back to the old regime but because under that regime there was at least a clear identifiable control of these major nuclear arsenals. We may not have liked the form of control, but at least we did not have the chaos that reigns in the former Soviet Union at present.
I turn now to my second question for the noble Earl. I hope that he will be able to tell us what will happen to the tactical nuclears which were in the former Soviet Union. I believe that we are aware of what will happen to the intercontinental ballistic
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missiles, but it seems to me that the tactical nuclears are spread all over the place. We do not know the Government's view on that aspect of the matter.
As my noble friend Lord Jenkins of Putney reminded us, we must look very closely at Article 6 of the nuclear proliferation treaty. It enjoins us to act "in good faith" and pursue negotiations,
"on effective measures relating to cessation of the nuclear arms race at an early date".
That is a treaty to which we are signatories. I agree with the noble Lord, Lord Mayhew: it is very difficult for our Government to go to any other government in the world, be it India, Pakistan, China or any other country, and say, "You have got to accept that you are a non-nuclear country and do not have a deterrent, but we are going to increase our deterrent while we are persuading you to abandon yours".
The things that we have to do: we have to strengthen the non-proliferation treaty. We have, as the noble Lord, Lord Mayhew, said, to support a comprehensive test ban treaty. That will give us some leeway. We must—here I refer to the interesting speech of the noble Lord, Lord Cheshire—try to guard against what I called the other week the nuclear mercenary with the briefcase—the man who just happens to walk across a frontier and into Whitehall and deposits a briefcase with a nuclear device inside. That will happen unless we can guard against it. How we do it, I know not. I hope that the Minister will be able to help us on that point.
If we are to make progress—I agree with the noble Lord, Lord Zuckerman—we must be prepared to accept intrusive verification by the United Nations or the IAEA, whichever body is appropriate.
I agree too with my noble friend Lord Kagan: there are opportunities, but we face enormous dangers. I believe that the Minister is, by now, aware of my party's position on Trident, and so I shall not repeat it. The noble and gallant Lord, Lord Carver, was slightly misrepresented, if I may say so, by the noble Lords, Lord Boyd-Carpenter and Lord Orr-Ewing. I do not believe that he was saying that we should immediately give up the deterrent. He was merely saying that perhaps we should look again at the fourth boat. That is what we wish to do.
This has been a quick, sharp, machine-gun type debate. Many important points have been made. It is now for the Minister to sum up where the Government stand. We hope that when he has done that we shall be much clearer as to how we can get out of the appalling situation in which we are at the moment.
5.32 p.m.
The Earl of Arran: My Lords, we are grateful to the noble Lord, Lord Chalfont, for bringing this matter to the attention of your Lordships' House this afternoon. It is a subject to which much attention has been paid lately in the media, in the House and in another place. It is understandable that my noble friend Lord Vivian should choose this subject for his maiden speech. I believe that your Lordships will agree that his knowledge and interest in the subject will serve us well in the future.

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As the terms of the Motion for debate themselves make clear, weapons of mass destruction represent some of the most serious threats to world peace and security. It is therefore not only right and proper that we should devote as much attention as we can to such issues, it is indeed imperative that we do so. The Government are doing so and will continue to do so.
Our resolve can be seen in the outcome of the recent high-level meeting of the UN Security Council, convened and chaired by my right honourable friend the Prime Minister. British efforts ensured that a substantial part of the statement issued at the meeting concerned issues of arms control and weapons of mass destruction. The statement records the council's view that the proliferation of weapons of mass destruction is a threat to international peace and security. The members of the Security Council committed themselves to working to prevent the spread of technology related to research or the production of weapons of mass destruction. We believe that the Security Council is uniquely placed to help prevent the proliferation of weapons of mass destruction. As a permanent member of the council, we have a special responsibility to see that it is successful.
Of all the weapons of mass destruction, nuclear weapons are the most chilling, given their almost infinitely vast destructive potential. In recognition of that, efforts to restrict their proliferation have been under way almost since they were invented. The treaty on the non-proliferation of nuclear weapons is the most visible of those efforts and is the cornerstone of present efforts to prevent nuclear proliferation. The noble Lord, Lord Chalfont, was concerned that the treaty had failed. With nearly 150 states parties, the treaty remains the most successful arms control treaty in existence. It is the only global instrument through which states can make a formal commitment to nuclear non-proliferation, and it represents the international political consensus against the proliferation of nuclear weapons. It is, furthermore, the political vehicle which legitimises action against those, such as Iraq, who seek to break that consensus. The statement issued by the UN Security Council on 31st January recognised its importance and welcomed the recent decision by many countries to accede. The United Kingdom, as a depository for the NPT, has a special responsibility for it and has long championed its cause.
The UK is seeking to combat nuclear proliferation in various ways. The first and most "traditional" way is by seeking to persuade non-states parties to the NPT to accede to the treaty. We have worked hard at that task. The spate of accessions to the treaty since the Gulf War is welcome reassurance that for its part the international community continues to place faith in the treaty. The accession of South Africa and the decisions to accede of France and China are particularly welcome. The United Kingdom will continue to do what it can to persuade other non-states parties to follow suit. We still believe that the best way to achieve a universal nuclear non-proliferation regime would be for all states to accede to the treaty.
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Nonetheless, it would be foolish to deny that the experience with Iraq has highlighted certain shortcomings in the workings of the non-proliferation regime which have to be examined urgently if the NPT is to continue to maintain international credibility. I can assure the noble Lord, Lord Chalfont, that the United Kingdom, together with other like-minded states, is addressing those shortcomings. Together with our EC partners, we have made a series of proposals to the IAEA for a strengthening of its safeguards regime. We have supported, in particular, greater use of special inspections which would allow suspect but undeclared sites to be visited. We have, by the way, been advocating the use of such inspections since before the Gulf War. We hope that in that way we can prevent other states party to the NPT from emulating Iraq. We stand ready to do everything we can to make such a system work. I am grateful to my noble friend Lord Thomas of Swynnerton for the remarks he made.
I can also assure the noble Lords, Lord Chalfont and Lord Zuckerman, that the NPT is not without teeth. It requires all parties to implement the safeguards agreement with the IAEA. If safeguards are violated, the IAEA statute requires the violator to be reported to the Security Council and the General Assembly. It is then up to the Security Council to take appropriate action.
The disintegration of the former Soviet Union has created new challenges for the non-proliferation regime which require new thinking. The Soviet Union had, after all, the largest nuclear arsenal of them all. There is a clear danger that some of the huge reservoir of now redundant nuclear materials, technology and scientists it has bequeathed may find their way into the wrong hands. My noble friend Lord Vivian emphasised that point.
Clearly, the responsibility for combating the risk of proliferation caused by that situation lies first and foremost with the states of the former Soviet Union themselves. We have encouraged them in that task and have made clear to them consistently the significance we attach to their commitment to non-proliferation in developing bilateral relations with them. My right honourable friend the Foreign Secretary underlined that concern personally last month on his visit to Russia, Ukraine and Kazakhstan. But, clearly, we must also do more than just urge good behaviour from the sidelines. And we are doing more than that, in close consultation with our allies.
When President Yeltsin called on the Prime Minister on 30th January, they discussed those ideas. They agreed the offer which my right honourable friend the Secretary of State had made to Marshall Shaposhnikov at their earlier meeting, that the United Kingdom should send a team of experts to Russia to identify where the West might be able to assist in the process of eliminating surplus nuclear weapons, of interest to my noble friend Lady Park. That team led by the Ministry of Defence's principal technical adviser on nuclear matters has been in Moscow this week. The team also included experts in the storage and handling of nuclear warheads and materials, and in nuclear fuel technology. Their task was essentially

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fact finding: to establish Russian requirements at first hand. I understand that the discussions have been constructive. We shall be considering what assistance we may be able to offer in the light of their report, and consultations with allies. My noble friend Lord Boyd-Carpenter referred to that point.
The Prime Minister and President Yeltsin also discussed the risk of the proliferation of scientific expertise in the field of weapons of mass destruction and the steps the Russians are taking to prevent it. They agreed that we should have further discussion on how best we can help the Russian Republic and the other states of the former Soviet Union to use the talents of their scientists in the cause of peace. We shall follow up those discussions vigorously.
Given the uniquely destructive nature of nuclear weapons, it is sometimes easy to overlook the dangers of chemical weapons and biological weapons. That point was brought up by the noble Lord, Lord Williams. It would be wrong if we were to do so.
The Government currently estimate that 20 countries possess or are seeking to possess a chemical weapons capability. As noble Lords will be aware, the Gulf crisis added further impetus to our efforts to prevent the proliferation of chemical weapons.
One of the ways to prevent this proliferation of chemical weapons is through an international treaty to ban them. It is one of this Government's arms control objectives to secure a global and effectively verifiable ban on chemical weapons. The UK has made a major contribution to the negotiations for a chemical weapons convention at the Conference on Disarmament in Geneva, and we will press for the convention to be concluded in 1992. The importance of securing a convention was emphasised in the presidential statement made by the Prime Minister at the Security Council Summit on 31st January, in which all Security Council members reiterated their support for efforts to complete the negotiations in 1992.
Biological weapons are also of great concern. The Government currently estimate that 10 countries possess or are seeking to possess a biological weapons capability. A treaty banning biological weapons does already exist. The Biological and Toxin Weapons Convention of 1972 was the first multilateral arms control treaty aimed at the complete elimination of an entire category of weapons. The convention has not eradicated the threat posed by biological warfare, as events demonstrated in the Gulf.
The Third Review Conference of the BTWC took place in Geneva from 9th to 27th September 1991. The UK played a major role in the negotiations and achieved two of our objectives at the conference strengthening the convention. The first was a decision to establish an ad hoc group of experts to identify and examine potential measures of verification. The second was to make major improvements in the confidence building measures, which provide for the exchange of information between states parties to the convention.
It is also possible to prevent the proliferation of chemical and biological weapons by the implementation of export controls. The international forum for
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co-ordinating action on national export controls against the proliferation of chemical and biological weapons is the Australia Group, a point brought out by the noble Lord, Lord Chalfont. It was set up in 1985 under Australian chairmanship. It comprises EC member states, New Zealand, USA, Canada, Japan, Norway, Switzerland, Austria, Sweden and Finland. Meetings are informal and controls agreed by member states are implemented on a national basis. As the Prime Minister said in New York recently, the United Kingdom has decided to apply controls over specific biological materials as a further strengthening of our control system.
We are already seeking meetings with the Commonwealth of Independent States on export controls on proliferation. We welcome the Russian announcement that they will introduce export controls and that they support the efforts of the Australia Group.
The threat posed by weapons of mass destruction such as nuclear, chemical and biological weapons, depends also on the means of delivering them. I think it therefore appropriate to say something about the British Government's efforts to control proliferation of ballistic missiles.
The attempts by some countries to buy or produce weapons of mass destruction have been matched by equally disturbing attempts to acquire ballistic missiles. These systems are uniquely destabilising. Their use against civilian targets by Iraq has further underlined the need to prevent their proliferation.
That is why we and our G7 partners set up the Missile Technology Control Regime (MTCR) in April 1987. Members now meet more frequently to exchange information and to take stock of current performance. The effectiveness of the regime has also been enhanced by the adoption of an updated and expanded annex detailing the equipment and technologies covered by the regime. We are looking too at improving harmonisation of implementation by all member countries.
I should now like to address points raised by noble Lords this afternoon. The noble Lord, Lord Chalfont, asked for our views on GPALS. The United Kingdom approach to anti-ballistic missile defences remains based on the six points agreed by the then Prime Minister and President Reagan in 1984 and 1986. Recent announcements have been related to defences against limited ballistic missile strikes, as President Bush said,
"without undermining the credibility of existing deterrent forces."
We now come to Trident. The noble and gallant Lord, Lord Carver, questioned the need for the capability which Trident will provide, but we will need to bear in mind that the development of an anti-ballistic missile defences amendment to the 1972 ABM treaty so as to allow an increase in size of ABM defences seems increasingly probable. President Yeltsin spoke of the possibility of a global defence system.
The noble Lord, Lord Jenkins, as is his wont, questioned Trident, but I say to him that our commitment is to maintain a minimum deterrent. We

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shall deploy no more warheads than are necessary to achieve this. It is entirely consistent with our obligations under the nuclear non-proliferation treaty which does not prohibit the maintenance of an effective and up-to-date deterrent.
Polaris came in in the mid-1960s; Trident will take us well into the next century. That is the point I wish to make to the noble Lord, Lord Judd, and which was totally understood by my noble friends Lady Strange and Lord Orr-Ewing.
The noble Lord, Lord Zuckerman, mentioned the issue of a comprehensive test ban. The United Kingdom's position continues to be that as long as our requirement for a minimum nuclear deterrent remains, we will need to undertake underground nuclear tests from time to time, to maintain the effectiveness and safety of our nuclear weapons.
The noble Lord, Lord Kagan, and the noble and gallant Lord, Lord Carver, as well as my noble friend Lord Boyd-Carpenter, referred to the role of the United Nations, especially in Iraq, in international police or monitoring forces. The Government not only support but in many cases have led efforts in the United Nations in the non-proliferation field. The UN register of arms transfers, the special commission in Iraq and the resolve on arms control and proliferation displayed by the Security Council at the meeting presided over by my right honourable friend the Prime Minister last month come immediately to mind.
The noble Lords, Lord Kennet and Lord Cocks, commented upon Israel's nuclear programme. We have no firm evidence, either to confirm or deny the rumours that Israel may have nuclear weapons. There have been repeated assurances from the Israeli Government that they will not be the first to introduce nuclear weapons into the Middle East. We wish to draw attention to the support which we have given to the proposals to create a Middle East free of weapons of mass destruction.
The noble Lord, Lord Cheshire, and my noble friend Lord Orr-Ewing commented upon the requirement and necessity for intelligence. Clearly, in the fight to combat proliferation, reliable information is a key asset. Noble Lords would not expect me to comment in detail upon this issue.
The noble Lord, Lord Mayhew, talked about non-proliferation. The non-proliferation treaty is the cornerstone of the international nuclear nonproliferation regime. The NPT enhances the security of parties by constraining the acquisition of nuclear weapons by other countries. This will continue to be the case, whether or not the CTB is agreed. We do not believe that a ban on testing would change the policies of states not currently parties to the NPT or that current parties would abandon their treaty obligations because a comprehensive test ban was not in prospect. A test ban would not stop proliferation. Iraq came close to achieving a nuclear capability without testing.
I can say to the noble Lord, Lord Williams, that regarding tactical weapons, it was agreed at Alma-Ata and Minsk that tactical weapons outside Russia would be transferred to central facilities by 1st July this year for dismantling.
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In conclusion, I sum up by saying that I believe that what I have had to say tonight on behalf of the Government represents the clear proof of the urgency with which the British Government are tackling the issues on non-proliferation of weapons of mass destruction. I can assure your Lordships that the British Government for their part will not slacken in their efforts to combat the menace presented by these weapons. We are confident that they will have the support of all those in your Lordships' House in their endeavours.
5.48 p.m.
Lord Chalfont: My Lords, there are many points in the interesting debate tonight that I should like to take up, but of course this is not the time to do it. I was not especially enlightened by the noble Earl's comments on GPALs. I had hoped to obtain a little more from him about the Government's attitude, but perhaps we may return to that at a later date.
I wish to set the mind of the noble Lord, Lord Thomas of Swynnerton, at rest. Irony is a fragile rhetorical device and it usually comes to pieces in one's hands. It came to pieces in mine today. I certainly did not wish to give any impression that I should like to see the cold war back and I hope that he will accept that from me.
I am grateful to all noble Lords who took part in the debate. The noble Lord, Lord Jenkins of Putney, had me worried for a while, but we ended up far enough apart to keep us both happy. I wish also to express my appreciation to the noble Earl for the full and informative way in which he replied to the debate. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Business
5.49 p.m.
Lord Waddington: My Lords, it might be for the convenience of the House if I make a short business statement. In accordance with the wishes of the House, the Further and Higher Education (Scotland) Bill has been the subject of discussion through the usual channels. As a result of these discussions we have decided that, in spite of the inconvenience this may cause to some noble Lords, it is better, on balance, to revert to the original plan and take the Second Reading a week on Friday.
I wish to add that I thought my original proposal would be to the convenience of most noble Lords who had wished to take part in discussions and that it was right to fill an apparent gap in tomorrow's business. Those were the only considerations I had in mind. However, there are obviously many in this House who feel it is better to keep to the original programme. I am quite content that we should now take that course.
Lord Cledwyn of Penrhos: My Lords, we on this side of the House warmly welcome the Statement which the noble Lord the Leader of the House has just made. We strongly believe that the rearrangement of Business is very much in the long-term interests of this House.
Lord Jenkins of Hillhead: My Lords, we on these Benches are also grateful to the noble Lord the Leader of the House for responding to the expressions of view that have been heard all around the House this afternoon. Of course there are inconvenient aspects to dealing with Scottish business on a Friday. There are inconvenient aspects to taking Scottish business at 36 hours' notice. However, the important matter that the noble Lord has recognised is that it is much better to do these things by agreement.

The Scottish Economy
5.51 p.m.
Lady Saltoun of Abernethy Lady Saltoun of Abernethy rose to call attention to the economy in Scotland; and to move for Papers.
The noble Lady said: My Lords, in moving this Motion I must say how delighted I am that so many noble Lords have decided to speak in this debate. I am particularly delighted that my noble friend Lord Kintore, the noble Lord, Lord MacFarlane of Bearsden, and the noble Earl, Lord Dundonald, have chosen to make their maiden speeches on this occasion. I look forward to hearing their contributions. I myself made my maiden speech exactly 12 years ago today almost to the hour. I well remember how nerve-racking it was. I also wish to record my gratitude to my noble friend Lord Chalfont for reducing the time allocated to his debate to two hours to allow this debate to run for three hours.
The economy in Scotland is suffering because uncertainty regarding the shape of the future government of Scotland is not conducive to that increased investment in Scottish industry which would hasten the end of the recession. In that context we should listen carefully to the views of the CBI and the Institute of Directors on the effect of the various options which have been suggested. However, despite black spots such as Ravenscraig, it is important to remember that all is not gloom on the economic front in Scotland. The Scottish economy is growing faster than the economy in the United Kingdom as a whole. There are particularly bright spots such as oil, North Sea gas, electronics, food processing, the order for frigates to be built at Yarrow's shipyard, the timber processing industry and plans to create jobs in the Holy Loch area after the departure of the United States Navy.
Having said that, there are steps which the Chancellor of the Exchequer might take in his Budget to stimulate investment. He could temporarily reinstate the 100 per cent. capital allowances that were abolished in 1984 by Nigel Lawson. Provided a tight time limit was imposed—say, six to eight months—an immediate upsurge in capital expenditure by companies would be virtually guaranteed and the extra economic growth generated would make the cost negligible. Next he could boost the sale of new cars by abolishing the 10 per cent. sales tax. The VAT on the extra cars sold would go a long way towards paying for that. At the same time he could reduce the road
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fund tax on new cars using lead free petrol, so creating a real incentive to change polluting old bangers for new cars.
Finally, the Chancellor could stimulate the housing market by increasing mortgage tax relief for first-time buyers—thereby following the example of President Bush—to be funded by reducing mortgage tax relief for existing home owners. Surely it is wise to spend money on stimulating the economy and thus increasing employment even if that means income tax cannot be reduced at present.
I now turn to various aspects of the rural economy where the Government could perhaps take positive steps to stimulate growth or alleviate problems. Modern society makes demands upon rural industry, particularly with respect to environmental considerations, animal welfare and other such matters, for which it is not prepared to pay. Those demands impose a heavy extra burden on industries such as farming and forestry which are already struggling. The possibility of unhelpful changes in the common agricultural policy and an unsatisfactory outcome to the GATT negotiations have created uncertainty and a rural recession and investment blight which may well last beyond the end of the general recession. How then can investment be attracted into an area which regulations, restrictions and conservation politics among other factors are making less and less attractive for the investor who has a world of less risky and more hassle free options to choose from?
The processing sector of the timber industry is undoubtedly suffering from the recession. Margins are tiny or non-existent and the market depressed. Yet the wood processors are increasing their demand for home grown timber, of which the supply to our mills has increased by 35 per cent. between 1987 and 1990, with a further growth of up to 25 per cent. predicted for 1990 to 1993. Despite the recession, production is up and the share of the market captured by our industry is increasing dramatically.
All that is good, but the sawmills are working on trees planted about 50 to 60 years ago. The supply of home grown timber is due to peak in 2025 and is expected to fall away after that. There is concern that the 20 million tonnes of home grown softwood timber required to keep the processors going will not then be available. There has been a dramatic fall-off in new planting since the abolition of Schedule D in March 1988. In the year ending 31st March 1991 new planting accounted for less than half the Government's target of 33,000 hectares. Will the Minister say whether the Government have any plans to reverse that trend? Helpful measures might include extending tax exemption to corporate owners; exemption from inheritance tax; tax relief on loans to buy land and increased planting and management grant rates which should be index linked.
The problems of farming in Scotland are perhaps even more severe than in the United Kingdom as a whole. The National Farmers Union of Scotland believes that many aspects of the so-called accompanying measures to the European Commission's proposals for CAP reform could mitigate the pressure on Scottish farm incomes which will intensify as

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market support diminishes. The encouragement to extensify production methods foreseen in the agricultural/environmental proposals could help towards reducing supply to markets and work in line with increasing consumer interest in the way food is produced.
In a recently published booklet entitled Our Farming Future the Government have said that their proposals for CAP reform envisage a greater role for environmentally targeted policies. The NFU would like to see the Government translate that sentiment into cash support for the accompanying measures. The proposals for pre-pensions will need to be more flexible to be of potential use in Scotland because it is envisaged that eligibility would be tied to an increase in the size of holding. The Government are about to announce improvements to the farm woodland premium scheme. Perhaps, with the support of Community funding, the Government could increase incentives in this area.
In recent years diminishing stocks of fish have made conservation measures and a reduction in the total allowable catch a necessary part of European Community and United Kingdom fishery policy. The Scottish Fishermen's Federation accepts that. The problem lies in deciding which measures will be both most effective and least damaging to the industry. The fishermen are disappointed that the Government have not seen fit to take advantage of the generous grants available from the European Community towards a decommissioning scheme for fishing boats with a view to reducing by 30 per cent. the size of the fishing fleet and thus the effort put into catching fish. I cannot understand why the Government will not take advantage of that measure. I do not believe their arguments against such a scheme are valid.
As a result the fishermen have been obliged to accept the 135-day tie-up rule, with an alternative of using 110mm. mesh size nets and half the number of days' tie-up or 120mm. mesh size nets and no tie-up. While on the east coast of England, where the principal fishery is for cod, that may be a viable alternative, in northern Scotland, where the fishing is mainly for haddock and whiting, it is not a viable alternative because they are smaller fish than cod and with 110 mm. mesh nets one would catch few haddock and no whiting. Thus fishermen are forced to opt for the 135 day tie-up scheme.
Last September the Scottish Fishermen's Federation proposed to Ministers an alternative approach to decommissioning to that provided under the European Community regulations. I wonder whether in his winding-up speech the noble Lord will tell us whether progress has been made along those lines. The Scottish White Fish Producers' Association believes that a combination of a decommissioning scheme, the introduction of a one net rule, a ban on industrial fishing and the licensing of all salesmen and buyers of fish would be so effective as to make the restrictive tie-up unnecessary.
Both the Scottish White Fish Producers' Association and the Scottish Pelagic Fishermen's Association have expressed interest in the proposals in
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the European Commission's 1991 report that consideration be given to introducing multi-species total allowable catches. Whereas now they are fixed on a species by species basis, fishing in a mixed stock fishery such as the North Sea and west of Scotland commercial fisheries may have to be halted because the quota of one species, is used up, or, if fishing continues for other species, discarding will have to take place if fishermen are to abide by the rules, or sales to the black market if they do not. Discarding is not only wasteful and inimical to conservation but, since most of the fish are dead, leads to pollution and possible risk to the health of stocks.
In that context it might be helpful if the minimum landing size for whiting were to be the same as the minimum landing size for haddock. The associations have also expressed interest in the Commission's proposals that total allowable catches might be fixed on a multi-annual basis. That would bring an element of stability to the industry as well as doing away with the intense negotiating round at the end of every year.
The Scottish Pelagic Fishermen's Association is unhappy that the arrangements for landing and transhipment of catches require to be designated by the Scottish Office Agriculture and Fisheries Department. It considers that where the fish are caught should have no bearing on where they are landed and that arrangements for landing should depend entirely on commercial and practical considerations. White fish catchers can catch white fish off the west coast of Scotland and land them at ports on the east coast and vice versa if they wish. Can the noble Lord say why there should be a different rule for pelagic catches? The pelagic fishing industry is beginning to suffer from the lack of mackerel klondikers waiting to buy their catches due to the economic problems in the Russian commonwealth. Would it be possible for aid to Russia to take the form of helping their klondikers to continue to buy our mackerel? On the credit side, fish and prawn processing plants are on the increase, and that is good news.
The distilling of whisky is another very important industry in rural areas. The industry believes that it would be very much in the national interest to end the present discrimination against spirits in favour of treating all alcoholic drinks on the same tax basis, which should be based on alcohol content. Perhaps the noble Lord will put pressure on his Treasury colleagues to be more sympathetic to the whisky industry's desire for a level playing field. I think that my noble friend Lord Palmer will say more about that and also about tourism, which has grown vastly in recent years despite a set-back last year.
Tourism is of course an industry which is very much at the mercy of the exchange rate. One small worry is that the imposition of commercial rates on bed and breakfast landladies who put up more than six people, and also food hygiene regulations, may drive many bed and breakfast landladies out of business. Can the Government help with that problem?
Good public transport is also crucial for the tourist industry. Can the Government give any assurances as

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to the future of passenger rail services north of Edinburgh and Glasgow and say whether there is any prospect of electrifying the line from Edinburgh to Aberdeen in the foreseeable future?
The upturn in the oil industry in recent years has ensured the prosperity of Aberdeen and a wide area surrounding it. Here the worry must be that eventually, possibly in about 30 years' time or perhaps longer, the oil will run out, with dire consequences for Aberdeen. I believe that it is not too soon to start trying to plan for that sad day. Perhaps the noble Earl, Lord Lauderdale, and the Minister will have views on that subject.
Finally, I should like to say a word about the plans of the Cowal peninsula task force for developing the area in the wake of the departure of the United States Navy from Holy Loch. They make inspiring reading, with their emphasis on helping the local people to help themselves and their aim of encouraging small businesses so that the area shall never again be dependent on one large employer. Perhaps something on the same lines might be done in and around Motherwell in the wake of the closure of Ravenscraig, and in other areas when the necessity arises.
I have said enough. I beg leave to move for Papers.
6.4 p.m.
Lord MacFarlane of Bearsden: My Lords, I am a businessman and a lover of things artistic, unreservedly so in both respects. I would, however, seek your Lordships' indulgence on this special occasion to speak about another subject which is dear to my heart.
I wish to speak about an entity which has enjoyed greatness in the past, has gone through the depths of decline and has emerged in a manner which promises its restoration to greatness in the future. It is an entity which has enjoyed the highest reputation among its customers, and which extended its influence to almost every part of the globe.
Times changed, however. Turnover fell; customers disappeared; reinvestment did not take place on a sufficient scale; able people left and competitive pressures arose. The decline and the necessary restructuring were painful. However, through it all a confidence in the future was retained, and now it has emerged with a powerful sense of mission and a corporate culture which encourages freedom of action, initiative, collaboration and, most importantly, partnership.
The entity to which I refer is not a commercial company, but a city. A city, however, which increasingly thinks, acts and responds like a business and knows what it takes to be successful in the business of cities. I am, of course, describing Scotland's largest city, Glasgow.
Glasgow's economic base is being transformed by the injection of modern value-added service activities and, wherever possible, by the modernisation of the manufacturing sector. Glasgow is now recognised internationally as a market leader in urban regeneration. Forewarned by the seemingly irreversible decline experienced in many other cities throughout the world, innovative policies of partnership have attracted city centre and other planned
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investments amounting to nearly £2 billion, the vast majority of which is arms length profit seeking, private sector investment.
Glasgow now stands on the threshold of once again becoming one of Europe's great cities;: great in the sense not only of prosperity but of completeness as a city, a city of opportunity, a city of environment, a city of culture and a city of real community.
Glasgow is a city which has literally got its act together. Partnership has been the crucial factor in the regeneration of Glasgow. The Scottish Development Agency was established in 1975 and from its loins Glasgow Action emerged. Glasgow Action was private sector led and it provided the necessary catalyst between the public and the private sectors in the city. Since then the still private sector led Glasgow Development Agency has been set up, taking over from Glasgow Action and furthering the close and necessary relationship with Glasgow City Council, Strathclyde Regional Council and every other major institution in Glasgow.
Political, religious, ideological and bureaucratic prejudices and differences have been set aside in the interests of the greater good of the city. All the organisations which can make a contribution to the process of regeneration in Glasgow are being encouraged to work together for the common good.
However, Glasgow has by no means solved all its problems. We have 25 per cent. of Scotland's unemployed in the city, and the concentration of unemployment and other aspects of deprivation in the outlying housing estates is still an enormous challenge. Almost 50 per cent. of the population of Scotland is dependent on the economic performance of Glasgow, so we must get Glasgow right if the Scottish economy is to flourish.
Investment is required from both Government and business, but that investment will reap substantial rewards because Glasgow is not only a city of great need but also a city of great opportunity. It has the potential to become a major asset and contributor to the economic and cultural base of our country. This is true not only of Glasgow, although Glasgow is at present showing the way for other major British cities to revive, regenerate and play their full part in the economy of the country.
To encourage that process I would suggest that a recast regional and urban policy must look beyond the excitement of the East Thames corridor and London Docklands and aim at the economic revival of the United Kingdom's proud provincial cities. A national programme is needed for the revival of the provincial cities which can be the economic powerhouses of the 1990s. It could be piloted in Glasgow which has a long and innovative record of regeneration.
Perhaps I may seek the forbearance of your Lordships for this personal commitment to the future of my own city, but it is difficult for me to be other than enthusiastic having lived through Glasgow's decline and witnessed and participated in its renaissance and seen the potential of its future. I would invite your Lordships to ensure that the most worthy goal of realising the full potential of the country which we serve embraces not only the

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concentrated and congested area of economic activity in the South East but includes the great cities of the United Kingdom such as Glasgow which offer the potential to become even greater major national assets in the future.
6.12 p.m.
Lord Macaulay of Bragar: My Lords, I welcome the debate and thank the noble Lady, Lady Saltoun, for giving us the opportunity to discuss Scotland's economy. I also thank the noble Lord, Lord MacFarlane of Bearsden for the very informative speech he has just made. In view of the short time I have available I cannot go much further than to say that we in Scotland know that Lord MacFarlane is a great Scot in his own time and, if I may say so, is very worthy of his place in your Lordships' House. We look forward to hearing a lot more from him in future.
The Motion draws attention to the economy of Scotland, to which the cynics (or perhaps nowadays the realists) would respond, what economy? What was once a rich nation—Scotland—has been ravaged, first, by the rapid and massive decline of its heavy industries, the final nail in the industrial coffin being the rape of Ravenscraig by British Steel, whose reasons to justify the closure remain obscure. But enough has been said about that and I shall leave it for the time being.
Secondly, successive recessions under this Government have probably affected Scotland more than any other area of the United Kingdom, apart perhaps from the Midlands. Perhaps the Motion should have drawn attention to the state of the Scottish economy and posed these questions. Is it in a good state? Is it in a bad state? Is it in no state at all? Having heard the noble Lady introduce the debate, it is clear she would not have had to make the suggestions she did make if the Scottish economy was not in a bad state.
I do not wish to talk down Scotland or its people, but it can be fairly said that Scotland has nothing more than a patchwork economy with no shape or pattern. That is not to ignore the new contracts which we hear about from time to time such as those won by the Yarrow shipyard. But the fact that each new contract is welcomed with a fanfare of government trumpets indicates the state of the economy. There is no sense of direction and no structured investment in the working of the economy. It is being left to float in the market and as far as the Government are concerned the industries, companies or firms can sink or swim.
The figures for 1991 are startling. A recent report showed that more Scottish businesses failed in 1991 than ever before. Over the past 12 months 7,950 firms collapsed. That is an average of 32 for every working day of the year and represents an increase of 76.9 per cent. over 1990. That demonstrates that Scotland is now catching up with the rest of the United Kingdom. Of course the Grampian area is wealthy and is becoming wealthier, but if one takes Grampian out of the Scottish equation, the country faces a pretty gloomy prospect. One asks, how can the country
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survive on that basis? The answer is that it cannot. It is difficult to find anyone to give a hopeful forecast. As recently as January 1991 the Scottish Chambers of Commerce said there were no signs of recovery and,
"There is no tangible evidence that the Scottish economy started to move out of the recession in the fourth quarter of 1991",
No one knows when it is going to move, if it is going to move at all. What is required—as the noble Lord, Lord MacFarlane, perhaps hinted at—is a more structured approach to industry and the rest of it and the establishment of proper development agencies bringing everyone together, looking at the country and the area as a whole and asking, where are we going? If it is necessary for the Government to restore regional grants to revive the economy, that must be the price the country must pay to restore the Scottish economy. In any economy the strong should look after the weak and if that means government help, it should be given.
I should like to say a special word about the Western Isles. The Western Isles have the most fragile economy. I say nothing about the BCCI affair because enough has been said about it already and I do not think it matters any more. But I urge the Government to take a close look at the economy of the Western Isles independently of the BCCI liability. There has been a fivefold increase in the community charge; it has gone from £26 to £122. But in an economy like that that means a lot of money.
In every aspect of economic life the Western Isles are below the UK average in GDP, per capita income and unemployment, which at 13 per cent. is the highest in Scotland. Because of the heavy input of the local authority into the economy, the area must be looked at in a special light independent of the BCCI affair. The local authority is responsible for 22.4 per cent. of household income and 27.4 per cent. of full-time equivalent jobs in the Western Isles. If that base is wrecked the economy is wrecked. The textile industry, fishing and fish farming are under pressure and the Harris tweed industry is in decline.
The Government must recognise that unless something is done the economy of the Western Isles will go into terminal decline and we may as well shut the doors. The Western Isles cannot benefit from economies of scale. They have no manufacturing base. They must be treated as a special case. Since 1976 when it was established the Western Isles council has done a lot to stabilise the economy of the islands with further education and so on, but they have a declining population. In the 10 years up to 1991 the population declined by 8.7 per cent. If the disaster which is hitting the Western Isles continues, there will be a haemorrhage of young people from the islands. If the young and the skilled leave the islands because there is nothing for them to do, the islands will die.
Before I sit down perhaps I may ask the Government the following question. If they are prepared to put £100 million into the Stirling area—the cynics will say that it may have been done for a political reason—is there no money left in the kitty for an in-depth look at the Western Isles on a purely

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objective basis to decide what must be done for the economy of the islands, whether it be tourism, fishing or other industries?
Perhaps the state of Scotland at the moment is best summed up by the words of Mr. Bill Anderson, Scottish secretary of the National Federation of Self-Employed and Small Businesses. He has described the recent figures as "frightening". I close by quoting his words:
"I knew that they were going to be bad, but never for a moment did I think they were going to be anything like this … In Scotland, we are no longer cutting into the fat, we are now into the bone".
6.19 p.m.
The Earl of Kintore: My Lords, I am grateful to my noble friend Lady Saltoun of Abernethy for introducing this important debate and thus giving me the opportunity to make my maiden speech, for which I crave the indulgence of the House, and to thank her for all her kindness and guidance since I have been a Member of this House.
My forebear was so against the Union that he petitioned Parliament to try to prevent it. Parliament paid no attention to him. I trust I shall not suffer a similar fate this evening.
I should like to concentrate on one agricultural matter and hope the noble Lord will give a positive reply when he winds up the debate. It concerns the continuing ban on the export of live pedigree cattle because of BSE. I speak in particular about pedigree Highland cattle and possibly I should declare an interest. My wife and I farm in partnership. She has a small fold of Highland cattle. It is an ideal arrangement: she organises for all the hard work to be done and I share in the profits.
However, profits are getting much harder to come by. For example, the average price achieved for a typical export animal—a two year-old heifer—at the autumn sale in Oban in 1989 was £2,421, falling in 1990 to £1,962 and falling again in 1991 to £1,498. The home market can absorb so much but for any real recovery we need to get back into the continental markets, particularly Germany, Austria, France and Holland. The known value of exports of pedigree Highland cattle before the ban was approaching £100,000. Galloway cattle, another native breed exported in the last pre-ban year, had a value of just over £750,000. Although small beer compared with some of the amounts mentioned in debates in this House, £850,000 is a significant amount of money to hard-pressed Scottish beef breeders.
Speaking at the dinner in Oban to celebrate the 100th spring show and sale of Highland cattle on 25th February 1991, the Minister said:
"I turn now to the BSE issue and the export ban. I have considerable sympathy with the Highland Cattle Society's desire for a derogation which would allow the resumption of live pedigree cattle exports to member states. I acknowledge that the incidence of confirmed cases of BSE among the Highland cattle breed has been very low. Indeed there has only been one case in a pure bred animal and one in a cross-bred. Other pedigree societies—the Galloway, Luing, Aberdeen Angus and Shorthorn—have a similar low incidence of BSE. Against this background I can understand your frustration at the halt to export trade. However, I have to stress that BSE has been an extremely sensitive issue for
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some member states. To achieve a derogation for pedigree exports we shall need to marshal the scientific evidence in support of our case and address the concerns of the likely importing countries. It is the Government's view that the timing is not yet right".
That is from a speech made almost a year ago. The ban remains and the frustration continues.
A press report in my local paper a fortnight ago indicated that Irish farmers, following diplomatic and commercial lobbying, were about to get back into their traditional Middle East and North African markets. If the Irish story is true, I hope that following similar initiatives Scottish beef farmers will also shortly be allowed back into their traditional markets.
6.24 p.m.
The Earl of Glasgow: My Lords, it is a very special privilege for me to be in a position to congratulate the noble Earl, Lord Kintore, on his interesting and extremely important maiden speech. I am sure the House will join me in hoping that we shall hear many more speeches of that calibre from him in the future.
I should like to speak about tourism in Scotland. Like many others in my position, I have converted part of my estate into a country park or leisure centre. We get about 75,000 visitors a year and are always trying to think up ways of getting more. This year in our craft shop we are selling a badge in the shape of a crocodile which states: "Send us more tourists; the last lot were delicious". As noble Lords may know, tourism is Scotland's single largest industry. According to the Scottish Tourist Board over 9 per cent. of the population are employed in tourism—about 160,000 employees and 25,000 self-employed.
Scotland has a lot to offer the visitor. Yet, despite its many natural attractions, its ability to attract tourists is not much better than average. For instance, only 10 per cent of overseas visitors to Britain come to Scotland. That is not particularly impressive. Of course, Glasgow airport has only recently been enlarged and more overseas carriers now fly direct into Scotland rather than going first to London. We hope that that will result in improving the statistics.
There seem to be two particular problems facing Scottish tourism. The first is the short season. Most visitors come to Scotland in July and August. Some come in May, June, September and October. But the number of holidaymakers who come in other months is negligible. Therefore many hotels and tourist attractions not in the central belt (which is slightly different) must close down or run at a loss for six months of the year. That means that many tourist-related businesses have to make enough money in the six good months to sustain them for the rest of the year—rather like squirrels before going into hibernation. In that sense, tourism in Scotland is a very odd industry. Attempts are always being made to extend the season but so far they have not been very successful.
The second problem is the cumbersome way in which tourism is managed in Scotland. In theory, the Scottish Tourist Board is meant to be responsible for promoting tourism and improving visitor facilities. In practice, the Scottish Tourist Board has only limited

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power over tourism. Many other government and local government bodies as well as quangos have their fingers in the pie.
For instance, there is Highland and Islands Enterprise, formerly the HIDB, which is largely responsible for tourism in its territory. That territory includes most of Scotland's wildest and most dramatic scenery. There is the British Tourist Authority, which has the statutory responsibility for promoting Scotland abroad, although the STB also has some resources for overseas marketing. There are the 30 or more area tourist boards set up by the Scottish Tourist Board which tend in practice to be controlled by the local district councils. Perhaps inevitably they stick jealously to their own district or country boundaries which do not necessarily coincide with natural tourist areas. There are the district and city councils themselves which are responsible for planning and encouraging tourist development in their areas. Then there are the regional councils which, although not directly responsible for tourism, have, for instance, the power to set up regional parks. There are now the new local enterprise boards which have money to invest and are actively attempting to develop the tourist potential in their areas.
Then there is the Countryside Commission, soon to become part of Scottish National Heritage, which is responsible in particular for visitor centres and the countryside ranger services. There is the Forestry Commission and the National Trust for Scotland which own some of Scotland's most popular tourist attractions. Then there are privatised one-off bodies such as the Greater Glasgow Tourist Board. One of the reasons that that has been so successful is that, with the backing of Glasgow City Council and Strathclyde Regional Council, it is big and powerful enough to do its own thing without having to be dependent on other government bodies. In five years tourists to Glasgow have increased from 700,000 to 3 million. Following the Glasgow experience, we now have Edinburgh Marketing setting itself up in healthy competition.
My point is that tourism in Scotland is being administered by so many bodies and quangos, some jealously guarding their own territory or sphere of influence, that it is difficult to identify any coherent national tourist policy and very difficult for potential investors to know with whom they should be dealing. The Scottish Office has set up a Scottish tourist co-ordinating group which meets twice a year, under the chairmanship of the noble Lord, Lord Strathclyde. This suggests that the Government recognise the need for co-ordination but they are a long way from solving the problem.
It seems to me that we need one powerful unifying body, which the STB should be but is not, responsible for marketing Scotland through Great Britain and the world, and under it a dozen or so tourist boards representing identifiable and marketable tourist areas or focal points such as the Firth of Clyde, Loch Lomond, Edinburgh, the Western Highlands or the east coast golf courses—areas not dictated by district or county boundaries; in fact with no definite
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boundaries at all because each tourist board should bleed freely into its neighbours' territories. Of course each of the boards would need to work and co-operate with local government and other bodies, but they must also be wealthy and powerful enough, like the Greater Glasgow Tourist Board, to work independently if necessary.
Tourism is vitally important to Scotland's economy and it is going to face ever-increasing competition from other parts of the world. It has to be managed in the most efficient way possible, and that must be done with flair and imagination.
6.31 p.m.
The Earl of Dundonald: My Lords, I am grateful and very honoured to be given this opportunity to make my maiden speech. I am acutely aware of the great experience many of your Lordships are able to bring to bear on all the subjects that are debated in the House. I hope your Lordships will forgive my inexperience and that I shall be able to contribute to the debate in a positive way.
This debate could not have been tabled at a more appropriate time. Scottish devolution or independence is being actively debated in all quarters of the United Kingdom, and for once these discussions are not merely being confined to the more interesting drinking establishments of our native cities. The Scottish media, I am glad to say, are focusing on the more important issues, as opposed to the mere romantic notion of Scotland's independence; namely, that of the economic cost to Scotland if the Union were to be permanently severed. The economy of Scotland fares rather better than some other parts of the United Kingdom, but we are faced with one of the world's worst recessions this century and, in the words of some economic commentators, the worst for 60 years.
Many parts of the Scottish economy are doing well. The oil and gas business, despite the relatively low price of North Sea oil, fares better than most and, as a result, the economy of the city of Aberdeen is buoyant, in marked contrast to its southern counterparts. The whisky business has not been so healthy for many decades and as the quality end of the market expands so will the profitability of the industry. Our businesses—those that have survived the recession so far—are more competitive than ever, but times are very tough for many companies in many sectors of the Scottish economy. The construction industry expects to have shed 250,000 jobs in the United Kingdom over the course of the last two years and during 1992. Many employers in the industry are seriously concerned that this will produce a "skills vacuum" in years to come, when the recession does end.
The hotel and tourism industry, so important to the economy of Scotland, is suffering its worst slump in memory. The North Americans who have graced our shores for so long have stayed at home. Economic woes in the United States and Canada, together with the punitive exchange rate, have nailed the coffin lid shut. The continental tourist market, which to a certain extent has taken up some of the slack, is

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showing signs of slowing as the world recession starts to affect the economies of our neighbours. Even mighty Germany shows signs of faltering, and Japan has issued directives to its banks not to invest in overseas property-related projects until times are more stable in the economic powerhouse of the world.
Despite well-reported Japanese hotel investments related to golf in Scotland, there have been no investments made in this sector during the last 12 months and there are not likely to be any during the next 12 months. On a lighter note, your Lordships might be interested to know that there are no fewer than 13 million registered Japanese golfers. These golfers pay an average of £200,000 each to become lifetime members of golf clubs in Japan. In an interesting extrapolation of the figures it might be possible to attract each golfer to the cultural home of Scotland at least once in his or her lifetime. If one assumes a generation lasts 20 years, that would mean half a million or more Japanese golfers visiting Scotland every year. Just think what this could do for our economy if it could be realistically tapped!Perhaps this will give my noble friend Lord Strathclyde food for thought when the Japanese are allowed by their government to invest in Scotland.
It is my hope that the economic recovery, when it does come —and I can say now that I see no sign of it arriving this year—will start in Scotland and the North of England, where the average citizen is less indebted than his southern counterpart and therefore is more likely to start spending sooner. For this recovery to take place it is critical that not only company managers should feel confident, but also that employees and their families should feel confident. In other words, they feel that they have money to spend and will continue to have that money to spend in a years' time or maybe two or three year's time.
Let us examine the meaning of "confidence" for a moment. It is derived from job security and therefore economic security and political security. We have only to look at present-day Russia to see what lack of confidence on a massive scale can do. How can we possibly secure this confidence in Scotland while in the background a debate on the country's political future is under way? Quite rightly, both companies and individuals are worried about the cost of a separate Scotland. If it could be proved conclusively that Scotland would be financially better-off on its own, do your Lordships not think the opportunity would have been grasped earlier? Instead, Scotland may lose its opportunity to come out of the recession faster than its English neighbour because some of its leaders insist on introducing additional "wild cards" in our country's future. I urge your Lordships to persuade yourselves to think of Scotland's economic well-being first and foremost and to put head before heart, to enable Scotland to come out of this recession first, and not last, among equals.
If there is to be a debate about Scotland's political future, let that be a full and frank debate with hard economic facts to support each major party's view; but let us put this to one side until economic recovery is well under way. We shall otherwise put a major
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question mark over further organic growth and future inward investment in the Scottish economy. I thank your Lordships for your time and the courtesy you have extended to me in listening to my maiden speech.
6.36 p.m.
Lord Palmer: My Lords, as a comparative newcomer to your Lordships' House, it is a great honour and pleasure for me to congratulate, on behalf of the whole House, the noble Earl, Lord Dundonald, on his well-informed and amusing maiden speech. The thought of these thousands of Japanese running over the whole of Scotland is indeed daunting. I am sure we shall all greatly benefit from his wide experience, especially on Scottish affairs, and we look forward to hearing from him on many occasions in the future.
I am sure that all Members of your Lordships' House are greatly indebted to my noble friend Lady Saltoun for introducing this debate. Each time I have had the honour of addressing your Lordships I have concentrated on the serious problems facing agriculture. These problems, I am sure, especially where Scotland is concerned, will be well aired by other noble Lords, as indeed was done by my noble friend Lord Kintore, in his excellent maiden speech. I therefore propose, in the brief time allowed, to raise two points both of which concern two of Scotland's major growth industries. First, there is the whisky industry, which now accounts for over one-third of United Kingdom food and drink exports and is Scotland's largest export. These export sales have almost tripled in value in the last decade, and whisky is now exported to over 200 markets throughout the world. At home, the Scotch whisky industry directly employs some 16,000 people and when all the ancillary industries, such as cereal production, advertising, printing, packaging, distribution, retailing and tourism are taken into account, that figure rises to very nearly 1 million people. Nor must it be forgotten that this industry alone makes an annual contribution of around £1 billion to government revenue.
To show real concern for such an important industry with these impressive vital statistics, the Government must ensure that the present tax differentials between wine, spirits and beer are not increased. They must strive to set the lowest possible minimum rate for spirits and for Scotch whisky in particular. This issue is important, indeed crucial, if our Scotch whisky industry is to continue to thrive and to play such a key role in Scotland's economy, with the resultant benefit to the livelihood and prosperity of us all.
The second point which I should like to bring to your Lordships' attention is the vital role which tourism plays in the Scottish economy. I know that the noble Earl, Lord Glasgow, has already mentioned that. I do not share his view that there are too many quangos doing their best to support the Scottish tourist industry. I must declare an interest as I own a small tourist attraction. The additional £1 million financial assistance promised to the Scottish Tourist Board for the coming year is most welcome. I fervently hope that the Government will continue to support

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the tourism industry, which is, despite what the noble Earl, Lord Dundonald, said, now going from strength to strength, as I shall try to illustrate.
Tourism is now Scotland's largest industry, sustaining 185,000 people in full-time employment and generating £1.4 billion in the local economy, which represents about 5 per cent. of Scotland's gross domestic product. Therefore, tourism is a significant enterprise at the heart of Scotland's economy, and it is only right and proper that the Government should support the efforts of the Scottish Tourist Board and others.
Last year was obviously a difficult one, beset by the problems of the Gulf War and the start of the recession. Nevertheless the 10-year figures show a most healthy growth. Employment has increased by 17 per cent., which means 2,500 new jobs each year have been created. With other industries in major decline, as other noble Lords have pointed out, that is a substantial increase.
As my noble friend Lady Saltoun said, undoubtedly there are sectors of the industry that fared less well last year, such as the bed and breakfast category which inevitably suffered due to the drop of some 12 per cent. in overseas visitors. However, I and many of my colleagues in the tourism industry feel that with continued government help the trend upwards of those encouraging figures will continue. There can not be many countries around the world which have such an impressive 10-year record.
The challenges over the next year or two are significant; for example, EuroDisney and the Channel tunnel. Scotland represents the antidote to EuroDisney. Its scenery, its heritage, its environment and, above all, its people cannot be mimicked in theme parks nor packaged and presented as an "experience". Nor, I should hasten to add, would anyone involved in the Scottish tourist industry wish that they could be.
As I have tried to show, all is not gloom and doom on the Scottish front. We must all hope that the Government will continue to support the tourism industry wherever they can, whilst doing everything in their power to ensure that the Scotch whisky industry is not unfairly treated. There are challenging times ahead for us all, and especially for those of us who live and work north of the Border. Let us hope and pray that, with a little bit of luck and continued support from the Government, those two vital industries will continue to grow and prosper well into the next century.
6.45 p.m.
The Earl of Selkirk: My Lords, I congratulate the noble Lady, Lady Saltoun, for initiating the debate. I suggest that we should have a similar debate every year. There is great advantage in having the views of Scotland brought to bear in this House so that we can know what the Government have in mind.
I enjoyed hearing what my noble friend Lord MacFarlane had to say about Glasgow. There have been great changes there. It is 50 years since I saw much of Glasgow. One loss has been the big liners. I do not know whether the noble Lord saw the "Queen
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Elizabeth" and the "Queen Mary" being launched in the early 1930s. Such ships are not being produced today. P&O goes to Germany for ships of that quality which is very sad. At present I cannot suggest how the situation could be changed. We have lost that quality of workmanship and somehow it should be restored. I do not know whether the loss is due to the nature of the training now available; it is nevertheless a very sad situation.
I was glad to hear about the tourist industry. Many people from North America think they must travel to London to be anywhere near Scotland. One lady from Canada wanting to reach Prestwick was told that she must go to London. As we all know, that is sheer nonsense. It is a matter about which those in charge of the tourist industry should be kept fully informed.
There are things which I believe should be done. Today we have motorways. They were invented by Hitler who had them 20 years earlier than we did. We were slow to get going but today we have motorways to most corners of England and Wales: Northumberland, the West Country, Cardiff, Exeter, and Southampton. However, there is no road from the capital of England to the capital of Scotland. Why is that? It is a grave error of considerable economic importance. If one wishes to deliver goods, one must have a means of doing so. There is no motorway to Glasgow. I am told that the roads to Glasgow are being improved, but there is a long way to go.
The debate which preceded this one was on the subject of methods of modern warfare. The safest answer to the atomic bomb is good government. It is curious that where one finds bad government—for example, Yugoslavia—the people are now fighting. In contributing to the good government of this country, we make use of the atomic bomb less likely.
When one looks at the Commonwealth, which Scotland and England have produced, there are 50 countries which gaily and happily meet every year without dispute and which enjoy one another's company. We have made a great contribution by allowing people to live in peace and quiet in their own countries. That is a tremendous contribution. We shall see if Russia can achieve a commonwealth like that. I am extremely doubtful.
It is important that we should have proper roads in Scotland. Although I have not been to the Highlands recently, I have heard a good many complaints about the state of the roads there. Apparently, they are deteriorating. We must remember that Parliament is responsible for the structure of Scottish government. When the union took place, as most of your Lordships probably know, the government of Scotland was literally destroyed. There was no known form of government throughout the whole of the 18th century. There were people called managers. I do not know who they were. It was only at the end of the 19th century that Lord Rosebery, supporting the Prime Minister, who at that time was Lansdowne, persuaded the Government to appoint an officer for Scotland. About 20 years later a Secretary of State was appointed and 10 years later after that he was given a

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house in which he could work. We can improve on that situation today and we have the responsibility to do so.
I believe that my noble friend Lord Polwarth did a tremendous job in Scotland in the early 1960s. Someone should be in a position to look at industry to see where improvements can be made. That would be a contribution of great value.
6.49 p.m.
Baroness Elliot of Harwood: My Lords, I should like to thank the noble Lady, Lady Saltoun, for inaugurating this debate at an important time in Scottish politics. I speak today as someone who has spent more of my life in Scottish local government and Scottish agriculture than almost anyone in this House. I am not in favour of home rule for Scotland. Scottish MPs have always taken an active part in UK politics. Scotland has provided the United Kingdom with no fewer than five Prime Ministers since 1902—Balfour, Campbell-Bannerman, Ramsay MacDonald, Harold Macmillan and Alec Douglas-Home. In the House of Lords we have provided many Peers to take an active part in the UK Parliament. All that would end if Scottish Parliament divided the United Kingdom and would be a great loss to both countries.
Scotland still has a great shipbuilding industry and, as has been said, an enormous agricultural industry. In the shipbuilding industry, apart from the great liners of history—the "Queen Mary" and "Queen Elizabeth"—we are building for the Navy and the Air Force. That is important at the present time.
Many noble Lords have spoken about agriculture. It is an important industry. Two-thirds of the land is known as less favoured areas. We provide sheep and cattle which are sold all over the world to the advantage of farmers. The fact that today there is a serious slump in sales and prices is producing a serious effect and we urge the Government to take a more positive part in the farming industry.
People living in towns and cities urgently require farms to keep the agricultural land in good condition; to enable them to walk upon the hills with no great difficulty and allow them to enjoy the country. It is the farming industry that can keep the land in such condition, to everyone's benefit, for what are now known as the "greens".
The form of a common agricultural policy is at present a difficult subject. But there is no doubt that it must be discussed and agreed before things will get any better. The present proposals are not acceptable either to farmers or to the Department of Agriculture. I have a list of farm returns which does not make good reading. The return to land, labour, capital and managerial skills fell by 11 per cent. in 1991. The total income returns have fallen by 4 per cent., and the farming income to families has dropped by 27 per cent.
There is hope that sheep prices may rise a little, due to the sheep annual premium and the LFA supplement. As store cattle and sheep are the biggest users of the Highlands in Scotland, in Wales and the North of England, it is vital that the right policy must
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be pursued. The Government can act. Scottish MPs and Scottish people must remain as part of the United Kingdom where they play an important part.
Those things are all quickly said because of the five minute time limit. But the importance of Scottish politics cannot be exaggerated. I support those who are anxious to do all they can to enable the Government to preserve the importance of Scotland.
6.53 p.m.
Lord Stodart of Leaston: My Lords, one of the most impressive points in the speech of the noble Lady, Lady Saltoun, was its well-informed nature. I must say to her that she would help us enormously in Sub-Committee D where we are trying to examine in detail the complexities of the common fisheries policy. We would certainly welcome her. The other impressive point has been the speeches by the maiden speakers, particularly because they, unlike the old hands, have taken their guidance from the clock whereas most of us—one hopes—are taking our guidance from the Lord.
The only point I wish to make on the subject of what is known as the "Scottish Question" is this. I remember in another place, some 30 years ago, the all-party enthusiasm, the waving of Order Papers when it was announced that the motor car industry was going to Bathgate, followed by more motor cars to Linwood; then came the pulp mill at Fort William and the smelter at Invergordon. Alas, they all failed. The only question I ask myself is whether they would have succeeded; would they even have got there if there had been a Scottish Parliament or Assembly rather than the dynamo of the Macmillan government?
Having brought in 57 harvests it would seem rather foolish for me not to say a word on agriculture. One thing is absolutely certain; that change is unavoidable. The wheel has turned full circle. I must confess that the free market in 1934 when I started was not much fun. Uncertainty was the name of the game. One never knew what prices were going to be like from one year to the next. Today, however, we have better skills in the industry than we had then. What is of the greatest importance is that business mentality was almost totally lacking in those days. Nobody had heard of cost accounting. Gross margins and fixed costs—I always think that is a stupid description because they never are fixed—had never been heard of. Today, all that forms an important and recognised part of the farming industry.
I believe many young folk are keen to have a go, and it is essential that new blood should be more easily enabled to enter the industry. That touches upon the difficult subject of the landlord and tenant system. I know the heartbreak of going out of a farm; it is not easy. Yet to hand on a farm from generation to generation is not the way to obtain the best from it.
All in all, I am reasonably optimistic about the future of farming. It has again what we lacked all those years ago. Thanks to the tourist industry, which has been mentioned several times already, a wonderful market is brought to our doorstep—hoteliers in Scotland, excellent chefs, visitors coming up from

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England, if only for the lobsters which cost half the price that they do in London. All that causes me to say that, although the wheel has gone full circle, I am reasonably optimistic.
6.59 p.m.
Lord Gray of Contin: My Lords, like other noble Lords I should like to thank the noble Lady, Lady Saltoun, for giving us the opportunity this evening to discuss the Scottish economy. It is perhaps ironic that at a time when the economic situation in Scotland is much better than in many other parts of the United Kingdom, there should be a sudden or reasonably sudden turn towards total separation among those who have been polled in Scotland.
The recession has bitten less savagely in Scotland. No less than £4.2 billion worth of inward investment has been attracted to Scotland during the past decade. Government expenditure in Scotland has reached a higher level than ever before. Per head of population Scotland is receiving more than any other part of the United Kingdom, with the exception of Northern Ireland. The industries are doing well; whisky, tourism, oil, gas and financial services are all established and doing very well in Scotland.
It saddens me when I hear Scotland being talked down as we have heard a little this evening. Scotland is a good place; it is a great country and a fine place in which to live and work. So why should there be discontent? It is possible that there is frustration of the kind that hits the English when they have to suffer a Labour government elected by Scottish and Welsh votes.
However, the main reason, in my view, is that the case for the Union has been allowed to go by default. It is only in recent months that a real attempt has been made to focus on the great benefits which we enjoy from our membership. I congratulate the Secretary of State for Scotland on the very brave stand which he has taken in leading the way, ably assisted by my noble friend Lord Whitelaw, who took the same line recently at a conference at which he spoke in Scotland.
If the people of Scotland really want separation then they must vote for it. It is essential that they have set before them, first, in detail and in clarity, the consequences of such action and the alternatives. The policies of the Scottish National Party matter little to its supporters. They are voting for total separation —nothing more and nothing less. Sometimes it is suggested that, because the Conservative Party of Scotland does not support a Scottish Assembly, we are losing out so far as votes are concerned. I suggest that if one goes to socialists in Scotland and asks, "Why do you not vote Conservative?", one will be given a dozen reasons why they do not, but one of them will not be that we are not in favour of a Scottish Assembly.
The debate this evening does not permit a detailed discussion of the proposals of the Scottish Convention. Sufficient to say that I see that as a major step towards separation and the break-up of the United Kingdom. It has another great disadvantage in that it would become a breeding ground for discontent and bickering between Edinburgh and Westminster.
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However large the block grant to Scotland might be, it would never satisfy the appetite for funding of that potential bureaucratic monster.
As regards tax raising powers of its own, that would make Scotland the most highly taxed part of the United Kingdom. Inevitably that would lead to a reduction in Scottish representation at Westminster. It is inconceivable that English Members of Parliament would go along with the idea of a Scottish Assembly with tax-raising powers and the kind of powers that that would give, and at the same time accept the same number of Scottish Members here participating in affairs which are purely English.
Recently, an interesting series of articles appeared in the Scotsman which asked businessmen what their opinion would be of independence or a Scottish Assembly. In almost every case the answer was that from choice they would have status quo. It is sad, at a time when Scotland has so much to offer and when it has the opportunity of becoming one of the leading participants in the Union, that there should be this distraction creeping in of independence and separation.
I do not believe that the Labour Party itself is wholly dedicated to separation. I accept that, but where it has got things completely wrong is that by going along with an assembly with the powers that it proposes, it is taking the first step on that slippery slope which would lead ultimately to separation. I cannot forget that when I entered Parliament in 1970, the leader of the Labour Party was one of the most anti-devolutionist Members of Parliament at that time. There were in that camp a great many Scottish Labour MPs who shared the same views. I would like to say more but my time is up. Again I thank the noble Lady for giving us the opportunity to talk about Scotland.
7.5 p.m.
The Earl of Lauderdale: My Lords, in addition to congratulating the three excellent maiden speakers we have heard, it would be a pity to allow tonight to pass without a "Happy Birthday" greeting to my noble friend Lady Elliot who very recently entered her 91st year and who is speaking with all the vigour of the girl whom we have known and loved for so long.
We all enjoy the occasional Scottish debate. We are very grateful to the noble Lady, Lady Saltoun, for introducing this one. I certainly echo what my noble friend Lord Selkirk said. Perhaps she will get it started every year.
At all costs on a Scottish occasion let us maintain our sense of proportion and our traditional realism. The Financial Times is from our point of view an outside observer. On 13th December it said that the world recession hit Scotland later and less than the rest of Britain. The only part of Britain to see a fall in long-term unemployment in the six months to last July was Scotland. The number of self-employed people is up 50 per cent. since 1979 after no less than 30 years of no increase at all.
The Observer is another outside English newspaper observing Scotland. It said the other day that there is now a nimbleness and dynamism in the Scottish

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economy unseen for many years. There are various reasons, but one is the offshore oil and gas industry sending ripples right through the economy. About 100,000 jobs—that is, 5 per cent. of the number of people in work in Scotland—are either directly or indirectly in or related to the offshore industry. Last year more than £4 billion worth of developments were authorised and approved for the North Sea offshore industry as against £2½ billion the year before.
I have an interest to declare. I am a director of the French company ELF Aquitaine which, true to the old Franco-Scottish alliance, is becoming more and more interested in Scotland. In a decade we have provided about a third of all the United Kingdom's natural gas. We have interests in more than a dozen fields offshore for oil and gas, partly in production and partly being explored, to say nothing of the new Piper platform.
But as with coal, so with oil and gas: both are extractive industries and so the quarry becomes harder to get the further you go. There are thus two big anxieties overhanging this industry just now. The first is the oil price at about 17.75 dollars or £10 a barrel. That is not a great reward when North Sea costs are higher than in many other geographically attractive parts of the world. But those costs are counterbalanced, in the judgment of the world oil industry, by a stable political environment. Here I would like to echo what my noble friends Lord Dundonald and Lord Gray of Contin said earlier.
Stability of the political environment is critical to attracting overseas investment. Nothing would discourage heavy long-term investment in the North Sea more than a separatist challenge to the UK sovereign right to issue licences and draw revenue. Yet, amid the illusions of the separatists, it is worth recognising that a separate Scotland could not by international law claim title to anything south of the Forties Field. It would have to forfeit Nelson, Elgin, Franklin and everything to the south.
If the fragmentation syndrome now popular spread from Scotland to Orkney and Shetland, as might well happen, then a separate Scotland must say farewell to all the offshore north of the Pentland Firth. A constitutionally separate Scotland could throw away nearly all the offshore benefit enjoyed today.
7.11 p.m.
The Earl of Lindsey and Abingdon: My Lords, I begin by joining with other noble Lords in congratulating the three noble Lords who have made their maiden speeches today.
I am one-quarter Scottish and my wife is three-quarters Scottish. By choice we live in Scotland when I am not working in London. We moved to Ayrshire from the south east of England some 12 to 13 years ago. It was most noticeable then how depressed that part of Scotland was after the previous depression of the mid-seventies. For those of your Lordships who are not familiar with that area, it consists mainly of arable farming and golf links on the coastal belt and hill farming inland. That was interspersed with coal mining which was being run down together with the traditional heavy industries.
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Since then in its place have come new light industries of high technology, such as electrical and computer manufacturing which have gone a long way to solving the serious unemployment problem and contributing to a greatly improved standard of living. So far as concerns the economy of Scotland that must be tied to any future political developments and any further taxation proposals that may arise. I am personally for retaining the status quo so long as politicians from London stop using Scotland as a testing ground for possible legislation that might be introduced into other parts of the United Kingdom.
I turn now to the main reason for putting my name down to speak in today's debate. It is to bring your Lordships' attention to British Coal's policy of granting licences to private mining companies to carry out opencast mining in Scotland and elsewhere. There seems to have been a mushrooming of these sites in recent years following the closing down on economic grounds of the old deep underground coal mines. My research reveals that though strict guidelines on working hours and noise levels are laid down by local councils they are in some cases overlooked.
Employment is another matter of interest. The equipment used is so large that one man can operate a piece of machinery which can do the work of 30 men. Those employed on site are not necessarily redundant coal miners. They belong to another union. But that is another story.
In summing up I should like to ask my noble friend the Minister, who knows well the area to which I am referring, whether any serious research has been carried out into the long-term environmental and health effects on the local communities of this type of mining, not to mention the upheaval caused to wildlife and vegetation. Does it contribute in any great way to the economy of Scotland when we seem to be importing cheap subsidised coal from abroad?
7.15 p.m.
Lord Selsdon: My Lords, we have had three outstanding maiden speeches. It makes me realise that this is the first time that I have spoken in a Scottish debate. With a name like Selsdon of Croydon I feel something of an interloper, although my family name declares that I have some chill blood within me. I remember once when I was on a train, I went into the loo. There was a sign there saying "Do not pull the chain when the train is standing at a station". Someone had written underneath "Except at Croydon". I must be the Croydon of your Lordships' House and I therefore have a duty to behave rather like a latter day Tony Hancock of East Cheam Cuttings.
There are serious sides to this debate, but in a few short moments it is difficult to deliver a lot of serious information. Therefore I took the liberty earlier this afternoon of conveying a missive from the City of Glasgow to my noble friend Lord Strathclyde. More will follow.
I echo in particular the noble Lord, Lord MacFarlane. It was because of his initiatives with Glasgow Action that I suddenly found myself going back to Glasgow, realising that there was a city that

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was due to restore itself. I found too that I was a Unionist. My grandfather, whose father was Provost of Edinburgh at the turn of the century, thought that "Glasgow was better" and stood as a young man in North Lanark, overthrowing a Labour majority. He lost his seat fairly quickly thereafter but managed to return to Maryhill. I researched it through. I wanted to know what a Unionist was, but I am still not quite sure.
I went back to look at the treaty of union, which was concluded about the time that Queen Anne sent a spy called Daniel Defoe up there to look at Scotland and to see what was going on. He wrote describing Glasgow as the paradise of Scotland and one of the cleanliest and best built cities in Britain. We know that images of Glasgow change but your Lordships probably do not know that a recent quality of life study put Glasgow way above every other city in the United Kingdom in terms of quality of life.
I thought that maybe the gap between Whitehall and Westminster and Scotland had widened so much that I might try to become a form of spy for Scotland down here in Whitehall and Westminster. I find there are some strange things going on. On the Benches opposite, where there is meant to be considerable interest in Scotland and considerable support for Scotland, there are not many people. On these Benches, there are lots of people. In another place, the best Front Bench spokesmen for the party opposite all seem to come from Scotland. The break-up of the Union could be disastrous for the Labour Party. However, the Union will not break up because what we are seeing at the moment is a protest from Scotland.
The important thing about the original Treaty of Union is that it gave a great benefit to Scotland that many of us have forgotten about. It opened up the trade with the English colonies to the Scots, who took rapid advantage of the opportunity. Before long they had stolen the tobacco trade away from Bristol because their ships could get to the colonies quicker. They could get to Maryland, Virginia and even the Carolinas. Then they found that they were competing with their own people downstream at Greenock. So they hired some engineers—Golborne, Smeaton and later Sir Thomas Telford—and said, "Look, this river is so shallow that at low water we can't get the ships up here". They put in 117 piers and then more and before long ships were coming up to Glasgow, which ended up building ships.
Even in 1776, when the War of Independence came along and we lost the tobacco trade to Amsterdam, people said, "There's a new trade". They went out to the West Indies. Over time one found that the strength of the city was the people in that city and not the people outside. We see in my noble friend Lord MacFarlane a Scot who is rebuilding his city, but rebuilding it with considerable difficulties because the resources may well not be there. Unionist though I am, I am not—to quote Scott—one of those "Unionist courtiers, that have bought and sold old Scotland". I
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would remind your Lordships, and particularly my right honourable friends in another place, at this time of the English proverb:
"He that will England win must first with Scotland begin".
There are now many opportunities that we come across, but Scotland is being penalised and it needs more support. I wrote to my noble friend about the problem of business rates. He will have seen the press reports showing that Scotland has the third highest business rates in the world. Business rates in Scotland are 50 times higher than they are in Berlin.
I sit down happily and pull the plug on Croydon by reminding myself again of these words:
"The Scots give oats to their people; the English to their horses;
The Scots have good people; the English have good horses".
Please will my right honourable friends in another place give more oats to my right honourable friend the Secretary of State for Scotland?
7.20 p.m.
Lord Lyell: My Lords, it will not surprise your Lordships that earlier today I was watching Olympic skiing on television. The speech of my noble friend who has just spoken would be given the new "best time." I congratulate the three noble Lords who in their various ways made excellent and memorable maiden speeches. My thanks are due to the noble Lady, Lady Saltoun, for giving us this marvellous debating opportunity, which has been amply rewarded by the attendance of an enormous number of noble Lords from Scotland.
I hope that my noble friend the Minister and his colleagues will continue to push, to lobby and to fight for Scottish farmers—being one myself, I declare an interest—in Brussels, throughout Europe and all over the world and will do all they can to support our agriculture, food industry, forestry, fishing and sport. My noble friend Lady Elliot and others have drawn attention to the enormous importance of the Scottish rural economy.
Scots everywhere are famous. Indeed, it is said that many a true word is spoken in jest. I regret to say that for better or worse throughout the world we tend to be famous for the way in which we deal with money—our competence and our prudence. I understand that the latest figures show that nine out of the 15 largest corporations in Scotland are in the financial sector employing 10 per cent. of the Scottish workforce and producing 15 per cent. of the identifiable gross domestic product of Scotland. To me those figures are something of an agreeable surprise. They will not be a surprise to my noble friends Lord MacFarlane and Lord Polwarth, and certainly not to my noble friend the Minister. I wonder whether non-Scots outside Scotland believe us to be more canny, more professional and perhaps even more trustworthy, or merely better in the long term at managing savings, pensions and investments.
The first outward sign of the Scottish financial sector is our excellent banks. The Bank of Scotland was founded in 1695. That is also a special date in the family history of my noble friend Lord Kintore. I believe that something concerning the Earl Marshal

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happened in that year. The Royal Bank of Scotland, in which I declare an interest as a client, looks after me and an enormous part of Scottish industry and agriculture. It was founded in 1727. The Clydesdale and Northern Bank, which alas is no longer represented—I do not know why—in my home town of Kirriemuir, was founded in 1838. A strong, excellent and professional institution is the TSB Scotland which is the fourth major performer among the clearing banks in Scotland. These major institutions control £50 billion of assets.
Another arm of the Scottish financial industry is pre-eminent not just in Scotland and the United Kingdom but, I am happy to say, in Europe. The nine life offices—the enormous companies that look after our pensions and our savings—control funds under management of approximately £60 billion. The population of Scotland is around 5.5 million. Your Lordships' arithmetic will be quicker than mine but that shows the trust that is placed in the financial industry of Scotland by outsiders, let alone Scots. Scottish Widows, the company which we see advertised beautifully, dates from 1815, a great date in British history. The Standard Life Assurance Company is the largest mutual life assurance company throughout Europe. It is based and centred in Scotland.
Until I studied for this debate I had no idea that the Scottish banking and insurance industry had increased the number of its employees from around 18,000 outside Scotland in 1987 to around 30,000 at the end of 1990. Pure Fund Management—investments and savings for us all—was started by a remarkable man and a remarkable family in my home city of Dundee in 1879. The movement goes from strength to strength. Total funds managed in Scotland have risen from £12 billion in 1986 to around £30 billion today. It seems that the financial sector in Scotland must be doing at least one thing right.
I hope that there is no complacency. I read one report which showed that Scottish firms have a little way to go to catch up in this sector. If any noble Lord believes that there is complacency I can use two letters of the alphabet to demonstrate that there is no complacency. The Institute of Chartered Accountants of Scotland was founded in 1854. That is why my noble friend Lord Polwarth and I have two letters after our name, and not three, like the other institutions that have sprung up throughout the world. It is admitted that the institute has the best training and standards. The training is professional, tough and flexible. The economy of Scotland is evolving and developing in this apparently unlikely but most successful sector. I hope that my noble friend the Minister and the Government will give it all the support they can.
7.26 p.m.
The Viscount of Oxfuird: My Lords, with the leave of the House, I shall take the place of my noble friend Lord Dulverton in the debate as I understand that he is not able to speak and, inadvertently, my name was left off the list.
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We are indeed fortunate with our three maiden speakers. I hope that we shall not have to wait too long before we have the opportunity of listening to them again. The issues raised by the debate are of great importance not just to Scotland but to the United Kingdom as well. I wish to make a short contribution and I must thank the noble Lady, Lady Saltoun, for giving me the opportunity to do so.
As I listened to the issues raised by noble Lords, a real fear hit me that we could, perhaps unconsciously, be projecting a wrong and inaccurate image of Scotland to the world at large. I acknowledge that the Scottish economy, like most economies in the world, is facing up to some real problems. I sense however that we are in danger of exaggerating the negatives and understating the positives. We have heard some remarkable facts and figures. There has been reference to the analysis by the Financial Times in December which indicated that in recent years the Scottish economy has grown faster than that of the United Kingdom economy as a whole. To me it is quite remarkable that Scotland's exports of manufactured goods per head are greater than those of Japan. Perhaps for the cynics among your Lordships I should say that it is not just because of the Scots whisky industry, employing 15,000 people and exporting £1.7 billion of whisky in 1990, an increase of 14 per cent. over the previous year.
What is perhaps far more important is the electronics industry in Scotland, which now employs 46,000 people. Nine out of 10 of Europe's personal computers are made in Scotland. Positive internal investment in Scotland's electronics industry has now been attracted from nearly all of the major international electronics firms. That is a singular achievement.
In seeking the reason for these positive trends, we can draw some conclusions that go beyond Scotland and might well be applied universally to the whole of the United Kingdom economy. Scotland has only succeeded so well in the electronics sector because of a commitment to flexibility on the part of the workforce and because of a respect for, and dedication to, training and retraining in the broadest sense.
When I was fortunate enough to contribute to your Lordships' debate, initiated by my noble friend Lord Caldecote, following the publication of the Select Committee's report on Innovation in Manufacturing Industry, I drew attention to the respect with which both the education process and the engineering profession are held north of the Border. That has to be contrasted with the less satisfactory position in the United Kingdom as a whole.
The report concluded that skill shortages are a problem at all levels in manufacturing industry. The more positive attitude, endemic in the whole of society in Scotland, to education, retraining and the engineering profession should be emphasised and re-emphasised and used as a positive selling point to encourage an even higher level of internal investment in the Scottish economy.
In the same debate, I spoke of that legendary fellow, the Scottish engineer, one of our nation's more positive exports. The brain drain of Scottish enterprise

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has certainly enriched the global environment. I understand that there are over 25 million people of Scots descent in the United States alone. We should give more thought to how we might make Scotland itself an environment and a society where more of the skilled workforce are keen to stay.
A good deal has already been done in that direction. Those of your Lordships who, like me and my noble friend Lord MacFarlane, who spoke earlier, have been fortunate enough to visit Glasgow, cannot have failed to notice the transformation of that great city in recent years. It now offers its inhabitants an environment that many of us in London envy together with a rich variety of cultural opportunities that would be hard to match anywhere in the world. Such changes, which should be fostered and encouraged, must be positive and must encourage a reverse of the Scottish brain drain.
But, in addition, I hope that such changes will also engender a more positive attitude towards Scotland from those on the outside looking in. A good start has already been made in that direction. As my noble friend Lord Lauderdale said, since "Locate in Scotland" was established in 1981, £4,200 million of inward investment from abroad has been made in Scotland and the figures for last year show that the process is accelerating.
All of that is positive. But my real point is this: a message will go out from the House today to the whole of the United Kingdom, to Europe and to the world. It will help to project Scotland, a land of rich cultural heritage, with a well-educated and well-motivated workforce and an ability to operate in the forefront of many new and emerging technologies. I suggest that that approach is the right way forward to attract skills and investment, and to enhance the dignity of a country which is beloved and an essential part of our great union.
7.33 p.m.
The Earl of Dundee: My Lords, I should like to join other speakers in expressing my thanks to the noble Lady, Lady Saltoun, for introducing the debate. It is not often that extra time is awarded on a Wednesday. That certainly reflects the keen response of your Lordships to the subject before us. We have also heard today three very fine maiden speeches. I warmly congratulate my noble friends Lord Dundonald, Lord Kintore and Lord MacFarlane. All three speeches were well informed and well delivered. It is to be hoped that my noble friends will manage to come here very often to speak.
My noble friend Lord Gray in particular and other speakers pointed to the measure of success already in Scotland and how, not least, this has been brought about through policies of reduced taxation and lower inflation. As we have heard, inward investment has accrued to £4.2 billion and a continuing pattern of growth has spread to many parts of the economy. More predictably affected are the oil and gas industries. Less predictable perhaps are the achievements that we find in the service sector, providing 1.34 million jobs, in electronics, which employs 11.5 per
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cent. of the total in Scottish manufacturing, and with shipbuilding, which in recent years has often been consigned to the deep by economists and popular forecast but which is now happily once more buoyant and afloat.
Another traditional endeavour always supported in your Lordships' House in a moderate and patriotic way is the whisky industry. That was clearly demonstrated by a record level of exports of £1.7 billion in 1990. It is now fully recovered from its previous hangover and is currently in excellent spirits.
Therefore, the questions we now ask are how to conserve and improve upon all those results, which new directions should we also take and how far can those aims be assisted and directed by government. Here I should like briefly to mention two aspects. The first is the need to take more steps to strengthen our entrepreneurial base in Scotland; and the second, in order better to facilitate trade with Europe and elsewhere, there is the case for beginning straightaway a proper programme of investment into those parts of the infrastructure concerned.
On the first point, one problem of which we are all aware is that, compared with the South East, Scotland has a far weaker entrepreneurial base. Mergers and company takeovers move headquarters, R&D and support services to the South, while multinationals take them overseas. However, without having to interfere and meddle with commercial decisions, clearly there are a number of ways in which government can help. Privatisation is an obvious area and that of Scottish Electricity a particular example where companies and their headquarters can be located in Scotland.
Nor, clearly, is every single proposed takeover desirable. In fact, although hardly ever used, there is an enabling provision of protection in the Act concerning monopolies and mergers. I wonder whether my noble friend agrees that that provision should be employed rather more than it is. Can he also say what plans there are to help increase the number of Scottish-based companies through further measures of privatisation or through some other means?
A direct lead which the Government can give is with the Civil Service. Some civil servants have to be in London. Most, however, do not. If recruitment down here with ever-rising wages proves difficult, then there is surely a solution by relocating the job to a part of the country where higher salaries are not needed. In East Kilbride we already have the ODA and elsewhere there are a few other minor examples. However, there is no good reason why even more of the DSS could not be moved to the North of England or the Department of Energy to Aberdeen. Dispersal along those lines would encourage the private sector to look beyond the South East and north of Watford for its development, investment and centres.
A connected matter is infrastructure and what government can and should be doing now to help facilitate Scottish trade over the years ahead. My noble friend Lord Selkirk emphasised the importance of roads. There is a strong case for building a new motorway, possibly financed on the toll principle, extending the whole way down the east coast of

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Scotland and England from Edinburgh to the Channel. To date it seems that plans to upgrade what is there address only the existing level of use on certain sections of road. That premise is rather like saying that we should not have opened the Suez Canal because previously there may not have been much traffic there except for a few camels.
Other aspects of long-term planning, so far apparently lacking, concern Hunterston and Scottish ports in general. Will my noble friend concur that, while the running of those ports should be left to private enterprise, it is the job of government to help provide co-ordination between Scottish ports and a proper strategy for trade, encompassing many opportunities—whether it be the import of cheap coal from South Africa and Australia to Hunterston or traffic of various kinds between Scottish ports and western and eastern Europe?
Certainly the current level of progress in Scotland may cause us to take heart. We must continue with fiscal and monetary policies which give maximum encouragement to inward investment, business and industry. However, in the interests of competitive trade a far-sighted strategy of investment is now needed, as is also for a sounder more confident economy, a far stronger Scottish entrepreneurial base.
7.40 p.m.
Lord Polwarth: My Lords, the Scottish Council Development and Industry, to which other noble Lords have referred, flourished and did its best work about 25 to 30 years ago. It is remarkable to remember that all that it did was done without a penny of public expenditure. It was all done on funds raised voluntarily. It attracted industry. It went out to America, hurried around and persuaded industry to come to Scotland. It did many things. Thirty years ago we had the Toothill Report. Not many people remember it now. It was produced by the Scottish Council and that remarkable man, Sir John Toothill.
The report suggested a number of policies that should be carried out. Nearly all of them were taken up by subsequently created government bodies. They now have a great deal of money and they are going ahead with them. The Scottish Council was the originator of them all. We shall see a result although it may take a long time.
In those days the unemployment rate in Scotland was 50 per cent. higher than that of the United Kingdom as a whole. It is now practically down to the average level for Britain even at a time of increased unemployment. Scotland has not been so greatly affected because we have built a strong Scottish economy and we are holding our own. Yarrow has an order for three frigates. Kvaerner Govan has won an order for an advanced ship in the face of worldwide competition, including competition from the Far East. Weirs of Cathcart is flourishing. It is constructing pumps, valves and all manner of things needed by industry. ICI is flourishing in Scotland. General Accident Insurance has more business in the United States than it has in Great Britain. The Dawson Group in the Borders (Pringle and Braemar, for example) is flourishing. Meanwhile, Scottish and
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Newcastle Breweries is slaking the thirst of workers all over Scotland and England. I could give many more examples. The electronic industry, which is made up of small companies, has done well. There is the financial industry made up of the banks and insurance companies to which my noble friend Lord Lyell referred.
All those companies are linked closely to the British economy. They are part of it. If there is devolution—Heaven help us if there is independence—what will those companies do? I sense a feeling of deep unease among the people running those companies about what will happen if Scotland has its own tax system. What will happen to those companies which are minded to seek a base in Britain? We have fought hard and persuaded a great many of them to come to Scotland. They might think twice in the future about deciding to come to Scotland.
We should say to our fellow Scots, "Think hard about what you are doing before you vote. Are you jeopardising your future jobs and all the work done by the Scottish Council and others to make Scotland what it is today?"
7.44 p.m.
Baroness Strange: My Lords, we are all grateful to the noble Lady, Lady Saltoun, for giving us this opportunity to speak on Scotland which, being our ain country, is very dear to our hearts. I should like to congratulate my noble friends Lord MacFarlane of Bearsden and Lord Dundonald and the noble Earl, Lord Kintore, on their winning treble of maiden speeches. My noble friend Lord MacFarlane of Bearsden was, like Glasgow, miles better. The noble Earl, Lord Kintore, gave us a speech masterly in its grasp of Highland cattle. My noble friend Lord Dundonald, in his brilliant and amusing speech, made us all feel that we should learn Japanese at once.
With so many speakers, I should like to make just the briefest of contributions. While I was writing this, I was reading through some old letters of an ancestor of mine, Adam Drummond, who was a Member of the Scottish Parliament in Edinburgh 300 years ago. In those days, the Scottish economy was very different from what it is now, with a faster growth than the growth of the United Kingdom economy as a whole. Now, our exports of manufactured goods, electronics and whisky have all gone up. (90 per cent. of the computers sold in Europe are made in Scotland.) Then, our exports were oatmeal and salted fish.
"If we could onlie have ane union of parliaments, and join the Scottish economy to that of England, such misery and corruption as I now see every day in Edinburgh would not then afflict us",
wrote my ancestor home to his wife. If only he could see now how that looked-for union of Parliaments has come about, and with it the prosperity which we now have in Scotland, how he would rejoice. How amazed and delighted too he would be to find a whole debate on the Scottish economy going on in your Lordships' House in the Palace of Westminster. How amazed that we no longer had a secondary currency of pounds Scots which were worth very much less than the pound sterling.

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There is much talk on television and in the newspapers today of how a separate Scotland would benefit the Scots. It might well benefit the English—there would be a lot less time taken up here at Westminster with Scottish business for one thing. But it would not be any good for Scotland. We should only have to pay twice as much in tax for every man, woman and child as we do already. We should probably, as we did in the 18th century and at other times, squabble among ourselves a great deal more, without the common cry of England to unite us. Our new found prosperity would drop, and I fear that my revered ancestor would certainly be turning in his grave.
7.47 p.m.
The Marquess of Huntly: My Lords, I join all other Peers in congratulating the three maiden speakers we have had the privilege of hearing tonight. It was a pleasure to hear them and I hope that we shall hear many more speeches from them.
I am grateful to the noble Lady, Lady Saltoun, for giving us the opportunity to discuss the importance of the forestry industry in Scotland with particular reference to the Grampian region. Most regional councils are now preparing forestry strategies. They have been encouraged to do so by a circular from the Scottish Office. The circular outlines current government forestry policy and clarifies the relationship of indicative forestry policies to structure plans. The consultative draft report from the Grampian region has now been published following consultation with numerous official bodies, local interest groups and individuals.
I expect that it will be impossible to satisfy all parties, which themselves may differ fundamentally on an appropriate strategy for the future. There is, however, a great deal to be commended in what has been drafted by the authors of the Grampian Indicative Forestry Strategy, even though there remain fundamental misgivings among farmers and landowners as to whether adequate consideration is being given to the position of those who fall within restrictive zoning. I shall come back to that in a moment.
Forestry is vital to the Scottish economy as a whole, covering 12 per cent. of our land area. It is even more significant in the Grampian region where the figure rises to 17 per cent. It is still rising, which is why it is so important to secure sound and positive ground rules actively to encourage the growth of the industry. To fail to do so would harness landowners to unworkable and restrictive guidelines and overlook, on account of selective arguments, the overriding economic imperative.
There is already an impressive record in the north east. The forestry industry has made a significant investment in the Grampian region. Roughly 150,000 hectares of the region are either under forest and woodland or with permission to plant. This high quality timber resource has also attracted significant downstream processing capacity to the area. The new sawmill at Aboyne, for example, is one of the most technologically advanced in Europe and between
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purchases of wood and services it puts over £4 million a year into the local economy of Grampian region. The mill is currently investing a further £million in the latest kilning technology which will enable it to compete in UK markets against the top grade imported timber from Canada. Timber production within Grampian is forecast to increase by about 60 per cent. over the next 20 years, offering scope for more processing expansion and related employment.
With the need for a reduction in agricultural surpluses under reforms of the CAP, forestry clearly has much to contribute to the Grampian economy, both as an alternative land use and as a major Scottish manufacturing industry. Unlike many other types of industry, it has genuine potential for growth.
If the potential is to be realised, however, investment must be positively encouraged by both national and regional policies. With the opening up of Europe in 1992–93 and with the rest of the world to invest in, the Government must do more to encourage rather than constrain investment in our rural economy. It is now subjected to too much conservation theory and perhaps too little genuine experience of land use production practice.
It is the threat from this conservation theory that requires clarification for those farmers and landowners who are zoned in the draft strategy document as being "sensitive"; that is to say, those holding land designated as being too sensitive to permit the establishment of forestry. May I illustrate an obvious example? As your Lordships know, there is a new initiative known as the farm woodland premium scheme, which was mentioned briefly by the noble Lady, Lady Saltoun, in her opening remarks. From the beginning of April it replaces the farm woodland scheme. The new scheme has a better land supplement, higher planting grant and higher annual payment. Under it timber can be considered as a commercial crop worthy of field scale operation rather than merely landscaping or shelter belt cover, as would have applied with previous schemes. The decision to plant on a significant scale would thereby have major consequences for future profits, cash-flow and viability for the farm for years to come.
The issue that has to be resolved is how farmers in these circumstances would be treated. What financial compensation would be forthcoming for those farmers who are prevented by the restrictions contained in the strategy document from benefiting from this or any other similar scheme? On a different scale but of equal importance to the applicant would be the restriction on large-scale plantations in the upland areas of, for example, West Aberdeenshire, where blanket constraints are proposed.
If compensation is to be forthcoming, who would administer it? Would the Scottish Tourist Board or the district tourist board be appropriate, or should some other altogether separate department of government take responsibility? The weight of scholarship being assigned to this subject from many standpoints is considerable. I do not believe that we should be concerned that hasty and ill-considered solutions will be pressed upon us.

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In raising the subject this evening, I simply ask your Lordships to acknowledge two points. The first is that compensation ought to be paid to individuals in the event that they are disprivileged as a direct result of the strategy adopted in their areas.
The second is this. The need to harmonise forestry with other land interests such as farming and nature conservation is fully acknowledged. It is accepted that appropriate controls and restrictions in all aspects of land management are essential. However, every encouragement should be given by government and planners at all tiers of responsibility to promote the continued growth of the forestry industry throughout rural Scotland. We must be alert. The ground rules for the future are being laid now and I urge the Government to take these matters into consideration when taking the decisions that will affect so many of US.
7.55 p.m.
Lord Burton: My Lords, I apologise for not having put my name down to speak, but had the parliamentary programme not been considerably disrupted today I should not have been able to be present. I wish to add my congratulations to the maiden speakers and also to the noble Lady, Lady Saltoun, on putting down the debate. It has been excellent, as Scottish debates usually are, and I am told that we are well to time.
One or two interesting points were made by my noble friends, particularly my noble friend Lord Palmer who referred to tourism. I should draw attention to the fact that many restrictions which may not be obvious are being put on tourism. For example, the preparation of food comes under stringent regulations which I believe emanate largely from the European Community. I understand that it is illegal to have any wooden equipment in the kitchen; one cannot use a wooden chopping board or, which is worse, a wooden spoon. These problems are causing difficulties in the tourist industry, and furthermore the taxation rating for bed-and-breakfast accommodation has recently been greatly increased.
My noble friend Lord Selkirk mentioned road improvement. Having been chairman of the Inverness roads committee of the county council for several years, I well remember that when my noble friend Lord Campbell of Croy was Secretary of State we achieved substantial improvements. I emphasise even more what my noble friend Lord Selkirk said, that road improvements are vital. I plead with the Government to give more money to Scottish, particularly Highland, roads.
The other point I wish to make is that once again with forestry and agriculture we are being strangled by health and safety regulations. A young forester cannot be trained when he leaves school because he is not allowed to use any mechanical instrument until he reaches a certain age, which is far older than necessary. For example, he cannot use a power saw and it is difficult to train young foresters. Furthermore, it puts farming and agriculture at a disadvantage compared with our European neighbours because most other countries do not apply the
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regulations, even if they have them. I remember visiting a French farm and seeing the hay-making equipment. It was simple compared with ours. Although safety regulations may be necessary, they should apply throughout the European Community so that there is a level playing field.
Then we have trouble with people who, for one reason or another, call themselves conservationists. They seem to forget that the countryside which so many tourists and others come to see in the Highlands has been created by the people who are looking after the ground now. Yet we have restrictions. We are not allowed to plant or cut down certain things; we are not allowed to do this or that.
The amount of paper work one has in an estate office now is unbelievable. It is mostly bureaucratic and presumably these people have to be paid for in one way or another. They may be regional council officials or government officials, but more and more people interfere with what we are trying to do and what I believe we have done well for many years. The Government have promised to do their level best for the farmers in the GATT negotiations. Those negotiations are like the sword of Damocles hanging over us. I wish our negotiators the best in their efforts.
8 p.m.
Lord Grimond: My Lords, it is always a pleasure to follow the noble Lord, Lord Burton. I, too, wish to thank the mover of this Motion and congratulate the maiden speakers. This is not a constitutional debate, but I would not put much money against the proposition that the constitution of Scotland will be altered soon after the next election. It is important that we should treat that matter sensibly. Some of the things that have been said about it seem to me to be fairly senseless.
If Scotland should by any chance become independent—I hope that will not happen—how it will fare depends on how the Scots behave. Switzerland is a successful independent country. Russia, which is a large country, was not at all successful as an independent country. I am against independence for Scotland, but I believe some constitutional change may well be coming and it will certainly be needed.
Whether taxation goes up or down depends on the Scots. On the matter of whether the economy will fare well or badly, I cannot say that the management of the British economy is doing so brilliantly well after the past 10 years. Some change might be welcome. When one considers how oil has poured wealth into this country, I am a little surprised at the enthusiasm for the status quo.
The one thing that can be said about the economic position is that since the First World War Scotland has suffered the continual beheading of its industries and the loss of control over its major industries. That not only affects those industries, it also affects the services in Scotland which lose employees. It also affects the whole community because the able people who would normally remain in Scotland drift south and with that drift something valuable is taken out of the community.

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It is desirable that foreign investment should be made in Scotland as it provides valuable employment. However, that does not compensate for the drift to the south of top people which has continued since the First World War. That loss of able people has proved a great handicap to Scottish life as well as to its industry. If there were some centre of power in Scotland that situation might well be reversed and there might well be an upsurge of new talent in Scotland, both in politics and in industry. I very much doubt, for instance, whether the works at Barrhead would have been closed had the management of Shanks remained in Scotland.
I wish briefly to discuss freight and transport. The coming of the Channel Tunnel may be either a good or a bad thing for Scotland. The outcome of that venture depends largely on the approaches to it. A speaker on the other side of the Chamber has rightly said that it is vital to have a trunk road to the south of England and to ensure that our communications from the Scottish ports across the sea and our direct air communications to the Continent and across the Atlantic are greatly improved.
I also wish to mention fishing. The noble Lady who opened this debate dealt eloquently with the common fisheries policy. A great change is coming over the industry. Enormous capital is now required to enter the industry and one needs to travel great distances to fish. Stromness in Orkney is not a well known fishing port but recently some young men there acquired a new boat. It cost millions of pounds and it is equipped to travel to the Atlantic. Inshore fishing is changing out of all recognition.
As regards agriculture, there is a feeling abroad that it has been feather-bedded. Small farmers at any rate have not been feather-bedded. Small farmers in northern Scotland have suffered greatly from the squeeze between rising costs and falling prices. That situation will continue whatever happens in Scottish politics. However, I am optimistic about Scotland. Whatever happens, I believe new talent is available and it will come to the fore. We have no particular reason to complain about our treatment. However, we might do much better with a different constitution. I much regret the way oil revenues have been handled. Oil has been an enormous benefit, but its revenues have been largely squandered when they could have been distributed much more widely throughout Scotland. Alternatively, they could have been used to endow long-term institutions such as universities. Whether we have one form of devolution or another form of unionism, I believe that if Scotland can mobilise the talent that now exists there it has nothing to fear in the future.
8.5 p.m.
Lord Carmichael of Kelvingrove: My Lords, as most other speakers have done, I should first of all thank the noble Lady, Lady Saltoun of Abernethy, for giving us an opportunity to debate the economic situation in Scotland. I do not intend to discuss the matter of an assembly or independence tonight. I
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should be quite happy to do so but the subject we are discussing tonight is wide and I cannot deal with the matter of independence quickly.
The noble Earl, Lord Selkirk, suggested that perhaps this debate could take place every year. I noticed that the noble Lady, Lady Saltoun, showed a certain interest in the suggestion. That is a welcome suggestion but in view of what the noble Lord the Leader of the House said earlier today on the business statement, I do not believe that such a debate should take place on a Friday.
I congratulate those who have made their maiden speeches today. The speakers list is rather oversubscribed and therefore it may not be possible for me to say quite as much as I would like in congratulating the maiden speakers. The noble Lord, Lord MacFarlane of Bearsden, has much the same attitude to the City of Glasgow as I have. There is no doubt that wonders have been performed there in the past few years.
I am not attempting to pour cold water on the debate. However, the noble Lord, Lord MacFarlane, will know as well as anyone here today that, while a great many things have been achieved, Springburn has 17 per cent. unemployment and my former constituency of Maryhill has 17.5 per cent. unemployment. I give those statistics to bring a touch of reality to the debate.
The noble Earl, Lord Kintore, made an amusing reference to pedigree cattle. He referred to the date of 1707. That date seems to be mentioned nowadays almost as often as people in Glasgow mention the date 1690. The noble Earl also referred to the frustration he has experienced when dealing with Ministers. I speak for Members on both sides of the House, with the exception of those on the Front Bench, when I say "Join the club". We have all felt frustration when dealing with Ministers. However, perhaps that will not be the case with the noble Lord, Lord Strathclyde. I shall be generous and not admit to frustration in his case.
Tourism is of course important. However, it can clash with the ideas of some people who want to preserve everything as it is in Scotland. That clash has been observed in previous debates. However, the mind boggles at the idea of Japanese golfers coming to Scotland en masse. They would be welcome but I wonder how they will get on with some of the east coast caddies I have come across.
I have never believed that all maiden speeches must be non-controversial. They should of course be non-abrasive. However, some subjects such as the one we are now discussing demand that the speaker expresses his point of view. Today the maiden speakers expressed their own points of view. They gave a refreshing angle on certain subjects. But, alas, some of the other contributions to the debate made me wonder whether I go home at weekends to the same Scotland as other noble Lords. I have already mentioned the unemployment in Maryhill and in Springburn. Serious endemic unemployment affects many areas in Scotland.
I am a townee and I love walking around cities. At weekends in Glasgow and the west of Scotland I see rows of vacant shops, emptying shopping malls and an

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ever-increasing number of estate agents' notice boards, intimating that some family has fallen victim to the recession and has been unable to keep up the mortgage payments. The human tragedy and irrational feeling of failure which lie behind each notice board is a condemnation of the type of society we have experienced over the past decade. I agree with the noble Lord, Lord Grimond, that we have not been very clever in the way we have handled matters in the past 10 years, particularly with regard to the boon of North Sea oil and the huge receipts from privatisation.
The arguments we have heard today, and will I am sure hear during the next few weeks on the hustings, will be exposed by history, which will lament the lost opportunities in Scotland and the United Kingdom because of the almost Messianic belief in a one club solution to all our problems. The end result of that dreadful distortion of Adam Smith was put with great clarity by the noble Lord, Lord Laing of Dunphail, in an excellent speech in this House on 22nd January this year, which is reported at col. 885 of Hansard. The noble Lord suggested that institutional shareholders buy and sell blips on an electronic screen and in our present financial and social climate are esteemed highly for so doing—so long as they happen to pick the right ephemeral choice of blips and end up with a quick profit.
Some noble Lords have quite naturally quoted figures to support their arguments. I have a plethora of figures and facts with me, but one of the most telling reports that I have seen is that of the Scottish Council Development and Industry of January 1992 which says that turnover at Price Waterhouse and KPMG Peat Marwick leapt by 25 per cent. and 21 per cent. respectively. Extra insolvency work was the factor which caused that increase.
The Fraser of Allander/Scottish chambers business survey of 22nd January 1992 said that:
"Business confidence has fallen back in all sectors. Demand remains stagnant or continues to contract across all major sectors. Investment continues to contract. Though demand is expected to improve in the first quarter in 1992 in manufacturing and wholesaling third quarter expectations were generally not realised in the fourth quarter".
I have no wish to be a prophet of doom. Too many of my friends and acquaintances have suffered under this Government for me to wish to make any cheap debating points about the loss of jobs, careers and houses which many people have suffered. They have strived to own their own homes and in many cases have had to give them up. Their children do not have the same opportunities for a good career with a job and a house. I am striving to show the cruelty of the false optimism generated by the government machine. That optimism is false.
I am sure that the Minister will know of the speech of my honourable friend Gordon Brown in another place on 6th February at col. 495 of Hansard for another place. I am sure that the noble Lord will have read that report, and perhaps it will have been taken to pieces. One of the points which Mr. Brown brought out was that Saatchi and Saatchi, for example, spread good news about the economy on its advertising hoardings but then quietly tells its shareholders:
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"Such limited signs of recovery in the United Kingdom economy as are visible remain patchy and do not give us any grounds for optimism".
The report goes on to say that the first months of the financial year have not indicated any grounds for optimism.
A headline in the Daily Express in November stated:
"At last we have lift off. Economy up".
However, the chairman's report to his shareholders at the AGM said:
"Contrary to the optimism of Government Ministers that the economy is turning, there are so far few tangible signs the advertising volumes … are picking up".
The,Sun—and I think that that must be the UK Sun rather than the Scottish Sun, which has taken a different line in the last few weeks—said: "It's looking good", "Britain on the way" and, "We're OK in the UK". It also said:
"If that's depression let's have more of it".
However, again, the report to shareholders in November said:
"Economic conditions as they affect the media are not expected to improve during the next year".
The Secretary of State for Trade and Industry was much more open and honest. He said:
"The problems are deep-rooted and complex and only the most fundamental cultural, academic and educational changes are going to bring about reform. I think that message is getting over".
I agree with that sentiment. But the Secretary of State was not talking to the Express, the Sun or Saatchi and Saatchi. He was talking to representatives of the technical journal, The Engineer, who are not likely to be as easily taken in as others because they are at the sharp end of industry.
I am happy to discuss what we as a party would do and what we shall be doing in a few weeks time. First, we would be honest about the economy; we would not promise candy floss. We would tackle the real problems. We would give new powers to Scottish Enterprise, establish a new Scottish education and training minister, introduce a Scottish work experience scheme to reduce unemployment and we would establish a Scottish technology trust and a Scottish innovation centre. We believe that those measures, with the enthusiasm of a new Labour Government, could give enough impetus to the Scottish economy to make it unrecognisable 10 years from now.
8.16 p.m.
The Parliamentary Under-Secretary of State, Scottish Office (Lord Strathclyde): My Lords, I, too, should like to thank the noble Lady, Lady Saltoun, for giving us this opportunity to discuss the Scottish economy. I should also like to congratulate the three maiden speakers, who all spoke with the benefit of personal experience and with the depth of feeling which that experience brings.
I believe that the Scottish economy is in good heart. Certainly, like the wider UK economy, it has been feeling the effects of recession, but it has a number of unique advantages, some of which have been referred to in the debate. I believe that the greatest resource of all is the quality and skill of the Scottish labour force which has shown itself adaptable to changing needs and conditions. For, as we are all aware, the Scottish

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economy has been in transition. For long it was dependent on the heavy manufacturing industries—coal, steel, shipbuilding, heavy engineering—industries which made Scottish skills and craftsmanship known throughout the world. It has given none of us pleasure to see those industries go into decline. However, we have had to acknowledge the realities. The decline of heavy manufacturing industry and the growth of services are a feature of most modern economies. What distinguishes Scotland from some other countries is the unusual degree of dependence we have had on heavy industries. That has undoubtedly made the process of transition more difficult. In some areas—and of course Lanarkshire is very much in our minds—that process has admittedly been painful.
However, we can all take pride in the determination with which the challenge has been faced. The work of diversifying the Scottish economy has already brought results. One has only to think of the large concentration of high technology industries in central Scotland—what has come to be known as Silicon Glen —and the immense benefits those have brought to the economy. Certainly those industries too have been feeling the effects of the recession, but there is nothing to suggest that the flow of high technology industry and other inward investment into Scotland is anywhere near an end. Indeed, there have been continued inward investment successes over the past weeks and months. There is every evidence that internationally mobile companies are continuing to see Scotland as an important base not only for their United Kingdom but also their European operations. I am confident that we will see yet more inward investment particularly as the world economy starts to recover.
I know that the Scottish economy needs more than inward investment. It needs encouragement and strengthening of its industrial base. The Government have given priority to that. Through various supply side measures—deregulation, tax reductions and trade union reforms—we have sought to give Scottish industry the incentives it needs. We have been the first government to tackle the thorny problem of business rates, mentioned by the noble Lord, Lord Selsdon. We have a commitment to continue that. All of those measures are aimed at improving the competitiveness of Scottish industry.
My noble friend Lord MacFarlane in an excellent maiden speech showed that he was an able advocate of the city of my birth, Glasgow. It is a city of which I know the noble Lord, Lord Carmichael of Kelvingrove, also has great knowledge. One outstanding feature of my noble friend's maiden speech was the time he spent talking about private sector initiatives in Glasgow, not the one-club solutions spoken to by the noble Lord, Lord Carmichael of Kelvingrove, but a partnership between public investment and private sector money and initiative, bringing people together so they can succeed. That is one of the secrets of the success of Scottish Enterprise and the local enterprise companies in Glasgow and throughout Scotland.
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I turn to some of the other points raised in the debate. The noble Lady, Lady Saltoun, made a strong case for investment incentives for industry in the Budget. As she will appreciate, the Chancellor has been the recipient of a great deal of advice over the past few weeks. Indeed, I believe the advice the noble Lady offered is not very different from what some sectors of industry have been putting forward. I cannot anticipate what will be in the Budget, but I can give the noble Lady an assurance that the Government remain firmly committed to the need to rid industry of unnecessary burdens, financial and otherwise, so allowing it the freedom it needs to prosper and be competitive. Our record on that score speaks for itself.
The noble Lady and many other noble Lords stressed the importance to Scotland of the three basic rural industries: agriculture, fishing and forestry. As to agriculture, the noble Lady referred to the "unhelpful" changes being proposed to the common agricultural policy. If I may say so, that was a fine understatement. The Commission's proposals threaten to disadvantage agriculture in the United Kingdom and in several respects the impact on Scotland would be more damaging than elsewhere. In particular, the proposals for restricting entitlement to premia for sheep, beef and dairy cattle would apply disproportionately. We have made clear our opposition to the discriminatory features of the proposals. We have been at pains to explain to the Commission and our partners the damage the proposals would bring about in Scotland. We shall stand firm, not just because the proposals discriminate against our farmers but because they would undermine the ability of the more efficient farms in Europe to compete in a wider international market place.
We will not agree to changes in the CAP which impose unreasonable burdens upon our farmers. But we must distinguish between the actual problems facing farmers and what are as yet only threats. If we are to concern ourselves with threats let us also remember that there are opportunities. A good illustration is the SNFU's positive initiatives to develop quality control systems for livestock and now arable farms. I am glad that we have been able to offer some government support to their efforts and I understand that various programmes are making progress.
The noble Lord, Lord Kintore, in his maiden speech, spoke about BSE and current restrictions on the export of live pedigree cattle from the United Kingdom. There is no evidence of lateral transmission of BSE. The latest research findings suggest that even if lateral transmission does occur it is unlikely to be a major feature of the disease, pointing to a rapid decline in the number of confirmed BSE cases within the next years. Once it is clear that the expected decrease is being realised a strong case can be mounted for relaxing the ban on the export of breeding stock. We are in the hands of the European Commission and the hard diplomatic work by British Ministers will have to be continued before we can get re-entry into European markets.
I am very much aware of the problems facing the Scottish fishing industry, raised by the noble Lady,

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Lady Saltoun, and the noble Lord, Lord Grimond. While the tie-up measures introduced in 1991 did not prove popular they were required to avoid the possible collapse of the stock. The Government worked very hard to avoid the worst elements of the Commission's original proposals. Our successes can be seen in the much greater degree of flexibility available to our fishermen in this year's regime. I recognise that the gear options proposed for this year will not be a suitable alternative for all Scottish fishermen but they will certainly offer greater flexibility than would otherwise have been the case.
I noted the views of the noble Lady on decomissioning. The Government are giving careful consideration to the development of conservation measures designed to reduce effective fishing effort. We have said that we are prepared to consider decommissioning as part of a wider conservation package. The SFF and the NFFO have put proposals to us which we are looking at carefully and seriously.
The noble Lady referred to forestry and the importance of the timber-processing industry. As she will be aware, there has been over £1 billion worth of investment in the industry since 1984 and a substantial part of that has come to Scotland. We now have a processing industry which can compete on quality and technological innovation with the best in the world. As the noble Lady said, production has increased and with it market share. Even so, the noble Lady and my noble friend Lord Huntly—who spoke with great knowledge of the situation in Grampian and made a very thoughtful speech—expressed concerns about new planting by the private sector.
It was inevitable, I believe, that there would be some reduction in the rate of growth of the industry as a number of influences came to bear. There was a bulge in planting in the mid to late-1980s on the back of a buoyant economy and a rather generous tax regime. Since 1988 there has been a growing awareness that planting must be sensitive to the landscape and environment, and investors are taking more time to plan their planting. They are adjusting to the new financial regime and economic circumstances. I have every expectation that they will soon seize new opportunities. In the long term this temporary holding back will have no practical effect as forest managers use their skills and exploit the flexibility of the tree resource. I shall bear in mind the interesting suggestions of the noble Lady for further action. As she knows, forestry Ministers maintain close links with the industry. We are confident of the continuing prosperity of that industry and the communities it serves.
The noble Lady and the noble Lord, Lord Palmer, referred to the whisky industry and emphasised its importance to the Scottish economy. I make it clear that neither the industry nor the Government is opposed in principle to the harmonisation of duty rates on alcoholic drinks. The current position is that the Community is preparing a report covering possible distortions in the market for alcoholic drinks. It will be only after receipt of that report that any decision will be taken on the minimum rate of spirits duty to be applied within the Community.
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The noble Lady and my noble friend Lord Lauderdale spoke about the prospects for North Sea oil. It is right that we should acknowledge the vital contribution of that industry to the Scottish economy. In less than 30 years the offshore sector has grown from nothing to become one of our most important industries. Government revenues exceeded £70 billion to March 1991. While we can no longer expect income levels to match those of the mid-1980s when oil prices were so high, the industry continues to be a major contributor to the economy. Last year's oil trade surplus is not expected to match the £1.5 billion of 1990. However, we can look forward to increases in 1992 reflecting higher production levels and a consequent rise in exports.
My noble friend Lord Lauderdale was right to mention the problems of oil and the independence movement. It has never been obvious to me that we should set such faith in a commodity which will not last for ever and whose price fluctuates so much. One of the benefits of the offshore industry has been the greater attention it has focused on the need for infrastructure. The Government are committed to maintaining and improving transport systems both within Scotland and from Scotland to the rest of Europe. Investment in railways has been at unprecedented levels since 1979. Much of this has been directly beneficial to the railway network in Scotland. We have seen investment of over £125 million in new rolling stock and £450 million in electrification of the east coast main line between Edinburgh and London.
Investment in roads, too, has been a priority. I can point out to my noble friend Lord Burton that current spending on roads is the highest ever. This is allowing us to improve much of the network more quickly and to build on recent successes such as the quick start to the upgrading of the A.74 to motorway standard. When completed the upgraded A.74 will mark a major improvement in Scotland's road links with the South. It will significantly assist Scottish industry to remain competitive in the major markets south of the Border and in Europe.
Many noble Lords, including the noble Earl, Lord Glasgow, the noble Lord, Lord Palmer, and my noble friend Lord Dundonald in his first class maiden speech, spoke on tourism. I know that my noble friend Lord Dundonald comes from an area of great tourism potential. His ideas on golf will attract a great deal of interest, not least in the Scottish Tourist Board, which I hope will take up some of his suggestions.
As all noble Lords who spoke on that subject pointed out, the industry is a substantial contributor to the Scottish economy. The Scottish Tourist Board estimate that visitors to Scotland spent over £1.6 billion last year alone. If spending by daytrippers is added, the value of tourism to Scotland's economy in 1991 was over £2.5 billion.
The noble Earl, Lord Glasgow, mentioned unemployment. Our commitment to the tourist industry is clear. Since 1979 the financial provision of the Scottish Tourist Board has increased by 27 per cent. in real terms. I have recently been able to announce a further increase in funding for 1992–93.

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This latest increase of almost £1 million will be spent mainly on increased support to area tourist boards. They are an essential element in the promotion and development of tourism at the local level. The Scottish Tourist Board will also be able to target more effectively the lucrative conference market, which at present is worth £300 million to the Scottish economy. The noble Earl had some interesting ideas about the administration of tourism in Scotland at national and local level; this I have taken on board.
The noble Lord, Lord Carmichael, was also right when he mentioned some of the problems that tourism faces over the environment. He will be delighted to know that at the end of this month I shall be announcing the conclusions of a report on tourism and the environment.
My noble friend Lord Burton spoke about hygiene regulations in the tourism industry and wooden chopping boards. It is important that regulations on hygiene do not create disincentives for people. On the other hand, the consumers must have faith in the quality of the food that they receive, and that is the intention behind these regulations.
No debate would be complete without mentioning the constitutional position in Scotland. I noticed that the noble Lord, Lord Carmichael, spoke at some length but would not be drawn on the subject. I am sorry about that. However, other noble Lords have considered the options; namely, my noble friends Lord Selkirk, Lord Gray of Contin and Lord Dundonald. The noble Lord is quite right. There should be a clear debate on this subject backed up by facts and logic.
This Government believe that all parts of the United Kingdom have benefited from the Union. The Union has served the interests of Scotland well over 300 years. We have shared commercial and industrial expansion, as was explained so ably by my noble friend Lord Selsdon. We created an empire together. We stood side by side to protect the United Kingdom and the rest of the world from the tyranny of nazism. My noble friend Lady Elliot of Harwood demonstrated very well the importance that Scotland and Scotsmen have played in the governance of the United Kingdom. Yet out of political expediency the Labour Party has brought forward proposals for a tax-raising Scottish parliament, creating not only the conditions for the eventual disintegration of the Union but also imposing a heavy economic cost on the people of Scotland. I am very grateful to my noble friend Lord Gray of Contin for his speech, which I think is one of the finest speeches that I have heard him make in this House. It was not so much a defence of the Union but a glorification of it. That is very important when so many wish to denigrate the benefits of the Union.
A Scottish parliament established by the Labour Party would have the power to increase the basic rate of income tax by about 3p in the pound. The right honourable John Smith, the Shadow Chancellor, confirmed that in a speech he made on 10th January 1992. That increase in taxation, along with Labour's proposals to raise the top rate of income tax to 50 per cent., to abolish the ceiling on national insurance
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contributions, to impose a 9 per cent. tax on income from savings, to increase inheritance tax and reintroduce capital transfer tax would place Scotland near the top of the European tax league. Scotland's unique taxation structure under a Scottish parliament would have a major impact on inward investment to the Scottish economy.
As my noble friend Lord Dundee said, in the period 1981–1991, some £4.2 billion of planned overseas investment has come to Scotland, creating 80,000 jobs. That flow of inward investment has been of great benefit to the Scottish economy as a whole and to Lanarkshire in particular. Scotland's ability to attract inward investment has undoubtedly been aided by the Government's reductions in income tax, corporation tax and business rates and their record on industrial relations. In 1990 there were fewer working days lost in Scotland through industrial disputes than in any year since the war. Completion of the single European market has significant inward investment implications, with non-European companies considering establishing a manufacturing plant in Europe so that their products can be regarded as European in origin. Scotland has benefited from that. The noble Lord, Lord Grimond, said that what we had seen in the past was a brain drain to the south of England. I wonder whether that would not be even worse if the English economy were stronger and existed under a more beneficial tax and economic regime than did Scotland.
Undoubtedly talk of the constitutional position in Scotland will rock the confidence of commercial enterprises and individuals in Scotland. It is time that those on the other Benches said what they really believe in: unionism or separatism.
Lord Carmichael of Kelvingrove: My Lords, I wonder whether the Minister can help me. At the time of the referendum in 1979, the then leader of the Conservative Party, at least in Scotland, the noble Lord, Lord Home of the Hirsel, said that he did not like the scheme that was being put forward by the Labour Party. He advised people not to support it. He said that he and the Scottish Conservatives would bring forward a proper scheme of devolution. I am absolutely sure that the noble Lord, Lord Gray, would remember that very well. Can the noble Lord say what work has been done since 1979 on a Conservative form of devolution as inspired by the noble Lord, Lord Home?
Lord Strathclyde: My Lords, the main point is that we do not believe that devolution as proposed by the Labour Party, Liberal Party or any other party will be in the best interests of the people of Scotland or its economy. Those interests are safeguarded by a firm belief in the United Kingdom. That is what has preserved and helped not only Scotland but the other constituent parts of the United Kingdom over the past few centuries.
There is much more that I could say on that subject and on others. I could say much to my noble friend Lord Lyell on financial matters, to my noble friend Lord Lindsey and Abingdon on opencast coalmining and to the noble Lord, Lord Macaulay, on the

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Western Isles. I am conscious that a lot of money has been spent on agriculture in the Western Isles over the past five years.
Scottish firms have been scoring successes even in these recessionary times. One need only instance the outstanding performance of British Aerospace at Prestwick with the remarkable Jetstream aircraft; the export achievements of smaller firms, such as Norfrost in Caithness, which have proved that distance can be no obstacle to successful marketing; and the orders won by Weirs of Cathcart and Kvaerner and Yarrows on the Upper Clyde, which have demonstrated that traditional Scottish skills in engineering and shipbuilding are still very much alive; not to mention the many other commercial enterprises, large and small companies, mentioned by my noble friend Lord Polwarth. It is that sort of record which gives me confidence in the Scottish economy. It is not just a record of government achievement. It is a record of people with the skills and incentives to work together and improve their lot.
My noble friend Lord MacFarlane talked about "Glasgow, city of community" and I talk of "Scotland, nation of community". I will not talk down Scotland and I am glad the noble Lord, Lord Carmichael, said that he would not talk down Scotland either. Of course there have been problems, and in an imperfect world problems of one sort or another there will be; but if the resilience of these recent times is typical, as I believe it is, I have no hesitation in saying that we can look forward to a future that will not only consolidate the gains we have made but will also, I believe, see us making further progress along the road towards a successful and prosperous modern economy.
8.41 p.m.
Lady Saltoun of Abernethy: My Lords, we have had a very interesting and wide-ranging debate. I am most grateful to all noble Lords who have taken part in it and who have in many cases travelled far at personal inconvenience in order to do so. I, too, should like to add my congratulations to the three maiden speakers on three excellent speeches. First, the noble Lord, Lord MacFarlane, spoke about the regeneration of Glasgow. I think that we all share his pride and enthusiasm over what has happened there. Then my noble friend Lord Kintore told us about his pedigree Highland cattle breeding business and its problems. I hope he will soon have more profits to share with his wife. Lastly, the noble Earl, Lord Dundonald, gave us a most entertaining speech about attracting Japanese golfers to Scotland, among other things. I very much hope that his suggestion will come true. I am sure all noble Lords will join me in hoping that all our three maiden speakers will become regular contributors to our debates.
Although we have not taken as long as I feared this evening due to the admirable self-restraint of most noble Lords, I am not going to inflict another speech on your Lordships and therefore I shall not mention all the speeches individually. But there is just one to which I should like to refer. The noble Earl, Lord Selkirk, who is no longer here, suggested that we
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should have a debate on Scotland every year. I think that is an excellent suggestion; but he also seemed to imply that I would have to organise it. There I take issue with him. There are over 120 members of the Scottish Peers Association and I would respectfully suggest that another noble Lord should organise next year's debate. However, I agree with the noble Lord, Lord Carmichael of Kelvingrove: never on Fridays!
Lastly, I should like to thank the noble Lord, Lord Strathclyde, very much for the trouble he has taken to answer almost all the points I raised. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Consolidated Fund (No. 2) Bill
Brought from the Commons, endorsed with the certificate of the Speaker that the Bill is a Money Bill, and read a first time.

Offshore Safety (Protection Against Victimisation) Bill [H.L.]
8.43 p.m.
Baroness Turner of Camden: My Lords, I beg to move that this Bill be now read a second time. I should perhaps explain to your Lordships why I felt it necessary to introduce a Private Member's Bill on the subject of offshore safety when we have only recently debated and passed the Government's Offshore Safety Bill. The fact is, however, that that Bill was very narrowly drafted: it was a technical Bill concerned with health and safety and it was so narrowly drafted that it was not possible to accommodate within it the concerns addressed by my Bill. Of course, we on this side of the House supported the Government's Bill and attempted to amend it in Committee to deal with the matter of victimisation or possible victimisation of employees, but the amendments were deemed to be out of order because they dealt with employment matters rather than health and safety issues.
The Offshore Safety Bill, as your Lordships will recall, was introduced by the Government to give effect to some of the recommendations of the honourable Lord Cullen in his report on the appalling Piper Alpha disaster. In that accident 165 employees on board the installation were killed, and two members of the crew of a rescue craft. The inquiry under Lord Cullen was an extensive one and the report massive, much of it highly technical. It does serve to indicate, even to lay persons such as myself, that impressive as the scientific and technical achievements are, the operations are extremely hazardous, although economically very beneficial to this country.
The Piper Alpha disaster hit the headlines because it was so utterly dreadful, with a devastating effect upon the communities from which the employees concerned came; but relatively minor incidents, some of them leading to deaths and injuries, have been fairly frequent occurrences. I have here a list of incidents which took place at around the same time as the Piper Alpha disaster, from July 1988 to November 1989.

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There were about 30 incidents, some causing work to be halted for quite long periods and including two incidents leading to deaths and injuries.
In my Second Reading speech on the Government's Offshore Safety Bill on 14th November last, at col. 668, I referred to an accident and fire on an oil rig operated by Arco British, which resulted in the death of an operative and which led to a report which indicated that the accident could have been avoided if those in charge of the rig had operated proper control. And this incident took place very shortly after the Piper Alpha disaster, when everyone concerned should have been even more than usually alert to what might happen.
It is for this reason that the report by the honourable Lord Cullen is so important. Of course we are glad that some of his recommendations were embodied in the Government's Bill. We welcome all the innovations and the new regulatory system that is being put in place, but in one crucial respect the recommendations of the honourable Lord Cullen have not been contained in legislation; and that is the reason for my Bill. One of the most important sections of the Cullen report refers to what he calls the creation of a "safety culture". He believes that it is essential to involve the whole of the workforce in safety observance. He further says that the most visible instrument for the involvement of the workforce in safety is a safety committee system. He says that his remit does not extend to industrial relations, but he also says that trade union recognition is limited and employment of offshore workers is fragmented between a number of different employers, with a high proportion being employed by contractors. Many of the individuals concerned are employed on short-term contracts.
My Bill does not deal with industrial relations either, although I would say in passing that it is my belief that the employees would have far less fear of victimisation if there were widespread union recognition and proper union involvement in the election and training of safety representatives. The unions, to my certain knowledge, have been very willing to undertake such a task and the Cullen Report makes some favourable references to this.
However, Lord Cullen clearly understands that if the workforce is to be fully involved in safety, and particularly if individuals are to be found who are willing to serve as safety representatives, there must be some assurance that if they attempt to do a "safety" job conscientiously they will not risk losing their employment, and that they will not find, at the end of their short-term contract—and many of them, as I said earlier, are employed on short-term contracts—that it is not renewed for some unaccountable reason, which they may believe is because they have been too ready to point out breaches of safety regulations or possible health hazards.
That is particularly important in situations where there is still high unemployment. That is true of Scotland, for example, where much of the oil industry is based. If there are hundreds of people waiting to take your job if your contract is not renewed, pointing
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out safety hazards may not rank as highly as the need to keep the job no matter what the conditions. Therefore, it becomes even more important to give protection to people who otherwise may feel vulnerable.
In his report, at paragraph 21.86, Lord Cullen said:
"For the present I am satisfied that it is appropriate that the type of protection provided in the case of trade union activities under Section 58(1) (b) of the Employment Protection (Consolidation) Act 1978 should also be afforded to the activities of an employee acting as a safety representative".
He repeats that in his final recommendations.
That is what my Bill seeks to achieve. It is very simple. On the Second Reading of the Government's Offshore Safety Bill, the Minister indicated that the Government accept all the recommendations of the Cullen Report but that they could not deal with this recommendation within the narrowly technical Bill then before the House. Therefore, I hope that the Government will now feel it possible to support the Bill.
I have received distinguished professional assistance in drafting the Bill, but if it is felt that there are technical flaws, perhaps they can be dealt with in Committee. I should be happy to support any amendments designed to improve the Bill. I beg to move.
Moved, That the Bill be now read a second time. —(Baroness Turner of Camden.)
8.52 p.m.
Lord Rochester: My Lords, from these Benches I am delighted to speak briefly in support of the Bill. I congratulate the noble Baroness, Lady Turner, on the convincing way in which she introduced it.
When we debated the Government's Offshore Safety Bill at the end of last year other noble Lords and I considered that a number of other matters should have been included in the Bill. For example, I recall saying that I should have liked to see some reference made to the need for all employees to be involved in the promotion of safety at work.
However, there was one matter to which we all referred; namely, the need to ensure that all employees working on offshore installations were protected against victimisation when acting as safety representatives or as members of safety committees. We said that because, as the noble Baroness, Lady Turner, said, in his report on the Piper Alpha disaster Lord Cullen made the specific recommendation that such provisions should be afforded by means of a provision similar to that found in Section 58 of the Employment Protection (Consolidation) Act 1978.
At all stages of the passage of the Offshore Safety Bill the noble Viscount, Lord Ullswater, insisted, first, that the Government accepted all the recommendations of the Cullen Report and, secondly, that because the recommendation concerning victimisation was an employment issue and therefore fell outside the scope of the Bill, the Government intended to deal with the matter as soon as a suitable legislative vehicle presented itself.
As the noble Baroness, Lady Turner, pointed out at the time, that meant that, meanwhile, safety

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representatives would he left without statutory protection. Thanks to the initiative which has now been taken—and I quote once more the noble Viscount's phrase—a suitable legislative vehicle presents itself to deal with the matter of victimisation. Therefore, I hope that he will now prove as good as his word and will, on behalf of the Government, welcome the Bill.
As the noble Baroness said at the end of her remarks, it may be that there are some technical deficiencies in the Bill or it is not sufficiently comprehensive. In that case I join with the noble Baroness in hoping that the Minister will accept the principle and perhaps table any amendments on behalf of the Government, which may be needed, in Committee.
8.55 p.m.
Lord McCarthy: My Lords, it will not surprise the House to learn that the Opposition welcome this Bill. We support it and we thank my noble friend Lady Turner of Camden for introducing it. As my noble friend said, the objectives of the Bill could not be simpler. They are to provide the normal minimal protection for safety representatives who complain of acts, on the part of their employer, which may be illegal and which may cost lives, especially if they complain through their trade unions or through the inspectorate.
Of course, those people will have to prove their case and will have to prove that the principal reason for their dismissal is that they have made those complaints. They must prove that that is the sole or principal reason for their dismissal. This is a very simple Bill and extremely limited in its operation.
Indeed, someone from outside looking at our debates and looking at the situation may wonder why a provision of this kind has not existed before. They may wonder why it was not included when the Health and Safety at Work Act was first enacted. They may wonder why, when the provisions of the Act were applied to offshore operations in 1977, it was not included at that time. They may wonder why we have had to wait for such a long time and the appearance of the Cullen Report.
What is being suggested here is minimal and limited but, nevertheless, extremely necessary. I remind the House that because the recommendation concerned is recommendation 30 of the Cullen Report, that does not mean that it is relatively unimportant. Indeed, I argue that it is somewhere near the centre of what Lord Cullen is saying. We must remember that the central thrust of the Piper Alpha report was that what happened was not an accident in the pure sense of the word. It was not something which may well not have happened. The whole industrial relations and safety situation on the rig was a disaster waiting to happen.
Lord Cullen mentioned five defects or irresponsibilities on the part of the consortium or its management which led to the disaster: the failure to communicate about the removal of the safety valve; the failure of the emergency system which was supposed to deal with that situation; the failure of the water supply; the failure to foresee the effect of the
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smoke which was generated and which made air rescue impossible; and the failure to supervise an alternative escape by sea.
Those mistakes were not just mistakes of management. There was a failure on the part of the Department of Energy's inspection system. That was superficial and inadequate even after the Piper Alpha disaster. When Lord Cullen recommended three measures which should be taken to solve that problem, the third and, in some ways, the most important measure led directly to the provisions of this Bill.
Lord Cullen said that there should be new regulations. Secondly, he said that there should be a transfer of responsibility from the Department of Energy to the Health and Safety Executive. Most important, he said that there had to be the development of a safety culture. In the development of a safety culture, as my noble friend Lady Turner said, Lord Cullen said that it was central to have the right attitudes between management and the workers for the development of that culture and the development of a climate of involvement of the workforce in safety as a central concern.
Paragraph 18.48—it has already been quoted and I do not apologise for quoting it again—says,
"Possibly the most visible instrument for the involvement of the workforce in safety is a safety committee system".
Why? Because it can pass,
"uncensored safety comments up the management line".
That brings us centrally to recommendation 30. How are uncensored safety comments to be passed up the management line unless there is some degree of protection for those people and their representatives?
We must therefore ask: what have been the Government's reactions so far? As the House is aware, we tried to introduce amendments to deal with this issue during the passage of the Government's Bill. The amendments did not reach the Floor of the House because we were told that the Bill was a safety Bill and we were proposing industrial relations. What did the Government say? After all, they had taken a long time to proceed as far as they had with the Bill. The disaster occurred on 6th July 1988. The inquiry was set up and reported to the Government in November 1990. Over two years had been lost. Another year was lost until the Government introduced the Bill to this House. On 14th November last, at col. 677 of the Official Report, the noble Viscount, Lord Ullswater, said that while the Government accepted all 106 recommendations, number 30 fell outside the scope of the Bill we were discussing. He added:
"We shall deal with the matter of victimisation as soon as a suitable legislative vehicle presents itself".
The question we must decide today is what is a suitable vehicle and, in particular, what is wrong with the vehicle we are now presenting to the Government. As we understand the replies of the Minister—I do not want to misunderstand him—he seemed to be suggesting that an appropriate vehicle could be the tenth labour relations Act, if the Government survive. It would be a successor to 1980, 1982, 1984 and so on. But that is not in the White Paper; it is not so far in the public pronouncements. If the Government say

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this evening that that is the first sign of a suitable vehicle, then we shall have to wait until some time in 1993, if the Government survive.
Secondly, the Government may be saying—at one stage in the passage of the Bill the Minister seemed to be saying—that we must wait for the Government to implement the EC framework directive on safety. God knows when that will be.
Thirdly, in the same debate in reply to the noble Lord, Lord Rochester, the noble Viscount appeared to be suggesting that the Government could not be expected to do anything about the matter until they brought before the House the results of their inquiries into the 1989 regulations review. Again, we do not know when that will be.
What is being said by the Opposition this evening in support of the Bill is that it must surely be the most appropriate vehicle and the most suitable moment. All the Government need do is accept the Bill—not necessarily as it stands but with amendments. Nevertheless, accept the Bill! This is surely the most suitable and appropriate moment.
I wish to make one further point. The Minister said that the Government accepted all 106 recommendations of Lord Cullen. On page 392 of Volume Two of the report five recommendations are listed. Three of those five do not involve any legislation at all. Therefore we are only talking about recommendation 30, which is the recommendation embodied in the Bill:
"Safety representatives should be protected against victimisation",
and so on. And recommendation 31. That is the one on which I should like the noble Viscount to explain his views. We will not necessarily table it as an amendment; it may not be suitable. But it would be suitable for the Government to give us some information about it. The recommendation says,
"The Offshore Installations (Safety Representatives and Safety Committees) Regulations 1989"
which we know are subject to review
"should be modified to the effect that the training of safety representatives should be determined and paid for by the operator".
The Government must have some influence over the review. It would perhaps be appropriate for the Government to suggest that recommendation 31 should also be accepted, and that the review—when it comes—should recommend that it be put into effect. That is for the future. For the present we ask the Government to accept the Bill.
9.6 p.m.
Lord Wedderburn of Charlton: My Lords, I have the unusual task of being asked to sum up a somewhat one-sided debate. Certainly if the number of voices determine the matter then the Government must surely accept the Bill.
I believe that there are three major reasons why the Government should accept the Bill. The first, as my noble friend Lord McCarthy said, is that it is a suitable and proper vehicle to implement recommendation 30 of the Cullen Report. I shall not rehearse the arguments again on that matter which my friends have already dealt with, save to say that in the previous
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debate on the Government's own Bill they were left in the somewhat remarkable position of accepting the entire Cullen Report and choosing to put forward a Bill which did not implement an important part of those recommendations; that is, the safeguards for safety representatives against victimisation. The second reason why we believe the Government have so far got the position wrong is the direction of the European Community which will gradually govern these areas.
The third reason is our clear view, and I believe that of everyone working in the field—certainly that of the Health and Safety Commission—that there is an indissoluble link between regulations relating to safety at work and the involvement of workers and all employees who take part in the work of accident prevention. There is therefore a link to their protection against victimisation in their employment. It is almost impossible to read a document on this matter, including those of the Health and Safety Commission, which does not refer to that link which the Government broke in choosing to implement a Bill which so far is concerned only with safety regulation.
The next reason I pass through quickly. The framework directive of the European Community No. 89/391 demands that we take certain steps. I am aware that the Government are proceeding, through the commission, with drafts to put them into effect. Part of the requirement of that directive is that workers should have a clear right to remove themselves from a dangerous, hazardous, serious and imminent danger at their place of work and to do so without fear of disadvantage or victimisation. In numerous articles especially Article 8 of the directive, that is made clear. That has not been made clear so far on oil rigs. One might say that in my noble friend's Bill, which I heartily congratulate her on pursuing in the way that she has, there might be matters inserted in that respect in Committee if the Government's drafts for implementing the directive are not wholly satisfactory.
Finally, as I have suggested, not every Bill, even from these Benches, is perfect. When, as we hope, the matter comes to Committee—I shall discuss this with my noble friends—we would like to consider inserting, for example, something which we believe was in the mind of Lord Cullen but which he does not advert to expressly. I refer to the fact that victimisation takes its toll not only by dismissal but also in our employment law generally by action short of dismissal, a situation which should be protected in the Bill.
I now come to a more difficult point. This Bill is attached to the Health and Safety at Work Act 1974. It is therefore attached to safety representatives who are appointed by recognised unions. That is a difficulty in our law and it is certainly a difficulty in implementing the directive. Recognition is voluntary and therefore there is a problem about employers who do not recognise unions. That has certainly arisen in the offshore industry. Therefore, we have put into the Bill—and here I congratulate my noble friend especially—Clause 1 (1) (b) which does not give rights only to the safety representative, who by the very terms of the Bill can only exist in law where the union is recognised, but also to the individual worker who is

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allowed in law to complain either to his employer or to the health and safety inspectors about what he believes genuinely to be —it may be that one wants to insert that he had reasonable grounds for that belief —a breach of the safety regulations.
We believe that that is a most important paragraph. It is a right for the individual worker where the employer refuses to recognise a union and where, therefore, in law the safety representative does not have status. Moreover, we believe it right that under Article 11 paragraph 1, of the European framework directive 1989 the worker has the right to make proposals—which plainly include complaints to the employer—and under paragraph 6 he is explicitly given the right to appeal,
"to the authority responsible for safety and health protection at work if they consider that the measures taken and the means employed by the employer are inadequate for the purposes of ensuring health and safety at work".
Clause 1(1) (b) in the Bill purports to enact just that part of the directive. To remove it would be a very serious step indeed. We feel quite sure that the Government will not be minded to take any step of that kind. I believe that for once, late at night, there may be a consensus. I urge the Government to accept the Bill.
9.13 p.m
The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater): My Lords, the noble Baroness, Lady Turner, has brought forward an important measure, the objective of which, as she will know, has considerable support from all sides. As noble Lords will know, it is designed to implement one of the recommendations of Lord Cullen following the Piper Alpha disaster in which he said that safety representatives should benefit from protection against victimisation for carrying out their functions.
The noble Baroness quoted the words of Lord Cullen, about the creation of a safety culture. She not only said that tonight but she gave a certain importance to that at the Second Reading of the Offshore Safety Bill. Of course that is implemented by way of the safety committee structure. Similarly, the noble Lord, Lord McCarthy, drew attention to the creation of the safety culture.
I believe that the Government have made it clear, as I have had cause to repeat more than once over the past few weeks, that we accept without reservation every recommendation of the Cullen Report. Regarding this particular recommendation, No. 30, we have also given explicit assurance that it is our intention to implement related but more far-reaching requirements contained in the European Community health and safety framework directive as soon as we have a suitable legislative vehicle. By extending these provisions offshore Lord Cullen's concerns will be fully met.
The noble Lord, Lord McCarthy, asked me when that will be done. The Government are planning to include provisions in legislation to be brought forward in the next Parliament, although obviously I cannot anticipate the Queen's Speech. I can, however, anticipate the next Parliament, I believe. No suitable
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earlier vehicle existed. We debated the matter of victimisation thoroughly during the passage of the Offshore Safety Bill through this House. That Bill is not such a vehicle. As I then pointed out, although essential, it is a technical enabling measure which deals solely with health and safety issues. Provisions for employment protection, however desirable, are clearly beyond its scope. The noble Baroness and others have already attempted that route. There is no doubt that that Bill cannot be used for such a purpose.
However, the noble Baroness has now presented the House with a further option in the shape of this Bill. The noble Lord, Lord Rochester, has indicated that that gives me an opportunity to stand by what I said at the Second Reading of the Offshore Safety Bill. I listened very carefully to the arguments put forward by the noble Baroness in the course of our discussions on that Bill. I have to say that there is very little between us in what we are looking to achieve. I have also had the benefit of what was said in Monday's debate in another place on the Second Reading of the Government's Bill. Once again, protection of safety representatives against victimisation was, very properly, a matter of great concern. My right honourable friend the Secretary of State for Employment said then that he would take into account the points made that afternoon before determining the Government's final attitude to the Bill of the noble Baroness.
He went on to suggest that her Bill might prove a more promising vehicle for Recommendation 30 than the Offshore Safety Bill. After hearing the noble Baroness introduce her Bill this evening, I can only agree. The Bill now before us deals directly, or aims to, with Lord Cullen's Recommendation 30. The Government categorically accept that recommendation. We intend to implement it. I think that noble Lords opposite want us to implement it and here may be an early opportunity to do so.
The noble Lord, Lord McCarthy, in the course of his remarks wondered why a measure of this sort was not implemented in 1977. But he never gave us an answer to that. He also asked whether the training of safety representatives, which is dealt with in Recommendation 31, would be paid for by the operatives. I think he is aware that a review of the safety representatives is under way. I can do no better than quote the words of my right honourable friend the Secretary of State:
"a review of the regulations is under way. As soon as the review is complete, the Government will implement this recommendation together with any other necessary changes." —[Official Report, Commons, 10/2/92; col. 681.]
I think that answers the question of the noble Lord.
In its present form, however, the Bill before us does not fully achieve the result Lord Cullen proposed. The noble Baroness indicated just now that she would welcome amendments where the intention of the recommendation had not been fulfilled. We shall therefore seek to bring forward for consideration in Committee amendments which ensure that the Bill fully implements Lord Cullen's recommendation.
I have listened again very carefully to the words of the noble Lord, Lord Wedderburn. I shall consider carefully what he had to say on Clause 1(1) (b). I hope

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that the wish on all sides to ensure the health and safety of those working offshore, and the co-operation we have experienced on the Offshore Safety Bill, will be continued in our joint aim to find an appropriate way to implement Recommendation 30.
Baroness Turner of Camden: My Lords, I thank the Minister for his statement. I am very glad indeed to learn that the Government accept in full Recommendation 30 and will seek to introduce in Committee a series of amendments designed to give full effect to it. My colleagues and I look forward to seeing the text of those amendments and to speaking to them at the Committee and Report stages.
As I indicated, we are very happy to welcome amendments that will strengthen the Bill. On both sides of the House we know what we are after. We seek to ensure complete compliance with the recommendations of Lord Cullen. I welcome in particular the noble Viscount's response to my noble friend Lord McCarthy in regard to Recommendation 31. I am sure that on this side of the House we shall watch with interest to see what emerges from the review in regard to training, which we also view as a matter of considerable importance.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Investment in Industry
9.21 p.m.
Lord Ezra Lord Ezra rose to ask Her Majesty's Government whether in view of the continuing recession they have any plans for stimulating investment in industry.
The noble Lord said: My Lords, I have put down this Question for debate because, although industry and the state of the economy have been the subject of many debates over recent years, the prolongation of the present recession has made industrial recovery a vital issue. Indeed the Bank of England's latest quarterly bulletin indicates that in spite of many predictions no recovery has yet occurred.
The problems of British industry, its size and competitiveness, are not new. Attention has been drawn to them over several decades. More recently, in our own House the reports of the Select Committee on Overseas Trade in 1985 and of the Select Committee on Science and Technology in 1991 on innovation in manufacturing industry have represented painstaking reviews of industrial policy and have put forward many recommendations for long-term industrial growth. Industry was particularly badly hit in the recession of 1980–81 and has once again been hard hit during the present recession. The need therefore for measures to correct the present situation and to hold out some prospect of long-term growth has become particularly urgent.
The main problem with which British industry has had to contend in the post-war period has been the ups and downs of the economic cycle. More often than not these have been brought about by excessive relaxation of credit, leading to balance of payments difficulties and inflation, which in turn have necessitated
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restrictive action. The impact of world economic fluctuations, as on the present occasion, has exacerbated the cycles. What is needed above all for industry is a background of greater economic stability. The move towards European economic and monetary union may well hold out this prospect and this would need to be accompanied by institutional changes within Britain. In the meantime, however, a way has to be found to correct the present critical situation.
The hope that recovery will come through a resurgence of consumer demand is fraught with difficulty. In the first place there is no sign that such a resurgence in demand is taking place. There is a lack of consumer confidence, indebtedness is still widespread and consumers are likely to remain cautious for a very long time before they indulge once more in a spending spree. Further, when they do so they may be sowing the seeds of the next recession just as the spending spree in the late 1980s led to the present recession.
Throughout the post-war period the revival of consumer demand has generally been accompanied by a substantial increase in imports because of the lack of capacity to produce sufficient goods to satisfy the demand in Britain. It is regrettable that even during the course of the present recession Britain has continued to run a substantial balance of payments deficit whereas a surplus might have been expected in view of the reduced demand for imports. If consumer demand should pick up that deficit will clearly grow to even greater proportions.
What is needed is not a consumer-led recovery but an investment-led recovery. By that means capacity could be built up not only to expand exports but to meet an increase in consumer demand when it finally emerges. A diversion of resources to stimulate investment in industry is clearly called for. Such a diversion should not lead to a major increase in public expenditure. To a large extent it should be self-correcting through increases in tax revenue both from enterprises and through the generation of more jobs. That, in turn, would lessen the pressure on social expenditure and, above all, ease the excessive burden of unemployment.
Many proposals have been made on how industry in Britain might now be re-activated. I should like to put forward the following five-point package. First, the most important requirement is a further noticeable reduction in interest rates. Real rates of interest in Britain are the highest that they have been for a very long time. It should be possible to make an adjustment without jeopardising sterling's position in the exchange rate mechanism. The resurgence of confidence would correct any technical weakening in the currency.
Secondly, a specific incentive to industry to invest should be given by increasing investment allowances. The CBI has proposed that they should be raised from the present level of 25 per cent. to 40 per cent. Others have suggested even bigger allowances. Thirdly, consideration should be given to preferential interest rates for small businesses. They have been particularly badly hit in the present recession, not least by delays in payment by their major customers. A system of

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preferential rates of that sort has been in operation in France and in Germany for many years with beneficial effect.
Fourthly, the Government should remove specific financial burdens on industry. In particular the recent imposition of monthly VAT returns in place of the normal quarterly returns on the 1,600 largest companies, while no doubt an interesting proposition for the Treasury, would take £1.5 billion out of industry's cash flow at the very time when it is most needed. I cannot think of a worse time to introduce such a measure. There is also the impact of surplus advance corporation tax on companies with overseas earnings, which acts as another absorber of cash flow and to which the CBI has drawn attention in its report on economic priorities for 1992.
Fifthly and finally, steps should be taken to stimulate investment in the infrastructure. The construction industry is now going through one of its worst post-war crises. A major corrective could be brought about by releasing more of the local authority housing funds to which reference has been made many times in your Lordships' House. Transport, and in particular rail transport, is another area where further investment is urgently required. Authorisation for British Rail to borrow from the private sector in addition to the public sector funds allocated to it would have a positive impact. Incentives for training and research should also be considered as part of the infrastructure package.
Therefore, what is now urgently needed is a combination of measures to stimulate investment in industry and in the infrastructure. I have indicated what those measures might be. There is a growing consensus in support of them. Without such measures it is difficult to see an early end to the recession. If it is brought to an end by a revival of consumer demand, the seeds of the next recession might well be sown. By stimulating investment in industry and the supporting infrastructure we should effectively be preparing ourselves for the more stable environment which is being held out by moves towards economic and monetary union.
9.30 p.m.
Lord Stoddart of Swindon: My Lords, the noble Lord, Lord Ezra, is to be congratulated on asking this Question. It is a matter which worries all of us and the country. I have noted, as have many others, the dismal reports that are coming in day by day of large-scale employment losses in a variety of industries. Yesterday, it was 3,000 from Gateway (a retail firm); today it is 2,200 in British Aerospace (a manufacturing industry). What will come tomorrow? That catalogue of lost jobs, day by day and week by week, is sapping the confidence not just of industry but of individuals; and yet the Government appear to be moribund in their thinking, and sitting on their hands.
The noble Lord, Lord Ezra, is right, because in 1985 he and I sat on the Select Committee discussing overseas trade under the chairmanship of the noble Lord, Lord Aldington. We predicted what would happen unless the Government then took serious action. We predicted that as the production of North
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Sea oil reduced we would face a severe balance of payments problem. We urged the Government to resuscitate and stimulate manufacturing industry, but what was the reply from the then Chancellor? Insults to the committee and a reliance upon what he termed market forces. Now we know where market forces have taken us: to slump and high unemployment.
I ask the Government how high they are prepared to see unemployment figures go. Is it to 2.6 million, 3 million or 3.5 million? When will they take some action to stop that inexorable and seemingly inevitable rise in unemployment which is now becoming the scourge of the nation? The Government need to take immediate action. The proposals put forward by the noble Lord, Lord Ezra, are right. We must stop listening to computers and economic experts. We need to take economic models with a pinch of salt, because so far they have not delivered the goods. We may now need a dose of good common sense.
The noble Lord, Lord Ezra, pointed the way. He said that people would be more prepared to invest if interest rates were reduced. Like him, I believe that it is possible to reduce interest rates. Indeed, it is vital that interest rates are reduced substantially and soon. That is one thing the Government can do. I also agree that investment in industry must be made more attractive by better investment allowances. The future lies in investment in industry; not in laissez-faire economics, but in helping the industrialists to expand their businesses and provide goods and services, thus helping unemployment.
I also believe that there needs to be a stimulus to spending in a way that will encourage spending where it is needed among the poorest people in our nation. The way to do that is not by taking a penny or twopence off income tax; it is to restore VAT to the 15 per cent. that it was last year, before the Government tinkered with it. In that way, the right people will buy the right goods and encourage further investment in manufacturing industry.
In conclusion, I warn the Government that the worst long-term solution would be to stimulate the housing market. There is enough money in the housing market as it is; we need the money in manufacturing industry. I sincerely hope, therefore, that the Government and the Chancellor in his Budget will take heed of what has been said here tonight and elsewhere, not only by the Opposition but by experts in the matter. I hope that the Government will get off their hands and do something about the economy.
9.36 p.m.
Lord Cobbold: My Lords, I wish to support my noble friend Lord Ezra in the five points he put forward in the debate. I wish to stress the most important role for Government, setting the circumstances in which industry can operate. I deplore the Government's record during their period of office, perpetuating the stop-go cycle of boom and bust which we have had in this country since the war. It is most important for the future to get out of this cycle and I therefore welcome moves towards participation in the European monetary system, the exchange rate mechanism. I equally regret that we have not been able

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to participate with full commitment. That would be in the interests of this country and of reducing interest rates for the benefit of business.
I further wish to stress the huge neglect by the Government of the country's infrastructure. I deplore the way in which they have used the proceeds of privatisation, selling the capital assets of the nation and using the proceeds for current expenditure rather than ploughing them back as investment in improving the infrastructure for the benefit of private enterprise.
I fully support the five points made by my noble friend Lord Ezra and hope that we shall see considerable improvement on them by the Government.
9.39 p.m.
Lord Grimond: My Lords, my noble friend Lord Ezra spoke of two aspects of this extremely important Question: first, the importance of increased investment; and, secondly, the need to ensure that when the recovery comes it is led by investment and not by consumption. I take it that the Government agree with both those points. My noble friend then went on to make five suggestions as to what should be done. I should be interested to hear whether the Government accept them also or, if not, what counter proposals they have.
I have one or two comments of my own to make. The demand for investment is high and rising worldwide. There is a need for immense investment, for example, in Eastern Europe. That makes it more important than ever that we make proper use of the savings and investment available. It is not only that we need more trained workers, but we wish to ensure that the investment which we can provide assists workers by increasing the number of tools and the amount of horsepower at their disposal and ensures that these are not wasted. Unfortunately it seems to me that we have become sadly incompetent. The stories of the British Library, the Channel Tunnel and the London Underground escalators all point to our failure to use our investment efficiently. To my mind the waste of resources is one of the most serious problems facing Britain today.
I can give two examples of that from Orkney. I know that area well. First, Orkney local council has now poured between £6 and £12 million into trying to create a short sea crossing: no result has been achieved. Secondly, the pipes which are laid to transport oil in the North Sea are nearly all made either on the Continent or in Japan. That does not indicate efficient management of our affairs at home. I press the Government to continue to ensure—I must confess that they have been doing this—that public and local authorities make the best use of the investment available to them.
It is absolutely essential that we establish stability in the economy. It is also essential not only that inflation is temporarily reduced but also that it is kept down to negligible levels. One reads about enormous salaries being paid to the leaders in our society. I have read that public servants will be awarded a pay increase far in excess of the rate of inflation. When one
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reads of the amount of money that is apparently available for secondary purposes, one wonders whether the Government have any faith in their ability to reduce inflation more or less to vanishing point.
I believe British industry bears an extraordinary burden in the form of our complex tax and accounting systems. For a brief period I belonged to an international organisation. It appears that foreign industry does not suffer from that handicap to the same extent. Again I urge the Government to simplify and reduce as far as possible the various taxes and other regulations which industry has to deal with.
The noble Lord, Lord Ezra, rightly stressed the importance of the infrastructure. With the advent of the Channel Tunnel it is essential that communications from the North and West and from Scotland should be improved so they are much more adequate than is the case at present. That is particularly essential for the railways. However, it is also necessary to improve the roads, ports and air services.
At the moment personal savings are high. I believe they have been increasing. At the same time there is a large unused pool of resources in the form of unemployed people and other resources. It would seem an ideal moment to bring those resources together. Future generations will be amazed that our interest rates appear to be at the mercy of movements of foreign money in and out of this country and have little to do with the needs of our industry and services. I cannot believe it is beyond the wit of the banks to change that situation. They could either establish a separate interest rate for production and investment or they could devise some other means of conducting our affairs.
That may be a long-term solution and in the long term other changes may be needed in banking, such as a greater shift from loans to equity. However, in the meantime, we face this serious problem of a lack of investment to which my noble friend has drawn attention. Members on all sides of the House have admitted that a problem exists. My noble friend has proposed five remedies which could be put into operation more or less at once. We shall be extremely interested to hear the Minister's remarks.
9.44 p.m.
Lord Desai: My Lords, I thank the noble Lord, Lord Ezra, for initiating this debate on this matter. The need to stimulate investment is the most vital aspect of our economic policy. I regret that so few noble Lords have shown an interest in this debate. However, as I am an academic I am used to small audiences. Therefore I shall ignore my small audience tonight and act as if what matters is the issue we are discussing and not the number of noble Lords who are interested in it.
We face one of the deepest recessions that has been recorded for a long time. The Question of the noble Lord, Lord Ezra, is especially urgent because of that fact. It will not do to argue that the current recession is somehow caused by foreign influences. All parties have to stop the practice of claiming credit for all the

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good things and blaming foreigners for all the bad things. That will not be sustained by any examination of data.
It may be that Japan, Germany and other countries in the EC suffer what we call a growth recession—their growth rate has slowed down. We have a negative growth rate, which is different from a growth recession. We are also suffering one of the longest recessions of recent history. Although about five months ago the Government claimed that the recession had ended because output had increased by a fraction of 1 per cent., if we discount North Sea oil it is clear that that was a hollow claim.
I do not want to make a party political point. The important matter is that this is an unusual situation in British economic history. Therefore it is urgent that all good people get their heads together and ask how we are to get out of this situation. I recognise that there are constraints. Our membership of the exchange rate mechanism constrains us. I recognise also that we do not want to do anything which will disturb the fragile confidence of the international financial markets. However, at the same time I want to argue that doing nothing is not the right strategy. We are grateful to the noble Lord, Lord Ezra, for having put forward a set of concrete proposals.
There are two problems. There is the problem of investment in industry during the recession. However, in the background there is a longer term problem. The UK economy invests less in all activities in comparison with our competitors such as Germany and Japan. For example, we invest about 18 per cent. of our GDP whereas Germany invests 21 per cent. and Japan about 30 per cent. There are accounting problems and, as an economist, I know that such numbers never mean exactly what they are supposed to mean. However, by and large it is clear that other countries invest a larger proportion of their GDP.
At the same time the long term trend of investment in manufacturing industry in this country has been downward in terms of the proportion of GDP invested. I have obtained figures from Economic Trends which show that in the 1970s we invested about 3 per cent. of GDP in manufacturing. In the early 1980s that fell to 2 per cent. and it fell to below 2 per cent. in 1983. Now it is barely crawling up to 2.8 per cent.
Whatever is said—and it was said by the previous Chancellor of the Exchequer but two that manufacturing does not matter and that it was money which was important—it is very important that manufacturing investment is maintained. We are a trading nation and tradeable goods matter, and manufacturing industry makes tradeable goods. If we do not have manufacturing we will not have tradeable goods and exports and we will be in trouble.
Of course, we may finance any level of deficit, as Nigel Lawson used to say when he was Chancellor, but we cannot do that at any rate of interest we choose. If we run deficits we pay high interest costs. Even within the ERM, hard discipline though it is, I would submit that our currently high interest rates are due to the fact that we are financing a large deficit on manufacturing account and need to offer high interest
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rates to the world at large. Even within the ERM we could have had lower interest rates if we had run our affairs better. Indeed, Nigel Lawson when Chancellor confessed that deregulation of the financial sector was a mistake whose consequences were unanticipated. We got into a bad financial boom and we are now paying the cost of it.
It is clear that the current levels of investment as a proportion of GDP are inadequate. Even if one were to argue that some manufacturing had to be reclassified as services and so on the overall level of investment, growth rate and investment in manufacturing would be inadequate.
The recession at hand is a serious matter. The Engineering Employers' Federation has argued very cogently that it is worried about the level of investment in the economy. If one looks at the total of net new fixed investment as a percentage of domestic product one finds that even at the peak of the 'eighties (1989) as a proportion of net domestic product investment did not exceed the level of 1974. While there has been a recovery since 1981 it has not been adequate and we have to start thinking seriously about the problems. The problems relate to the crucial activities of engineering and construction. We have to encourage investment in those two activities.
I will come to the suggestions of the noble Lord, Lord Ezra, and other noble Lords. If we are to have higher investment it is obvious that within the exchange rate mechanism our scope for raising interest rates is limited. Although there may be a difference of opinion on the matter, I argue that the Government could have been bolder even within the ERM and got interest rates down faster than they have. Opportunities have been missed. I do not want to raise hopes but it could have been 9½ per cent. rather than 10½ per cent. Over the next two or three weeks we face the prospect of having to raise interest rates if the Bundesbank decides to do so. That would be catastrophic for the economy.
We come to the question of what we can do in regard to fiscal policy because our room for manoeuvre in monetary policy is limited. There is tripartisan agreement that we are in the ERM and want a stable macro-economic framework. I know that my noble friend Lord Stoddart will disagree with me, but I beg his forgiveness. He has limited tolerance for economists and economic models but I beg leave to differ with him.
Fiscal policy has been a dormant instrument for a long time —not fiscal policy as regards public spending. One of the paradoxes of the Autumn Statement was that the Government gave up their dogma on public spending as such. They tolerated a public spending borrowing requirement of £10.5 billion which we expect to be overshot by £1 billion or £2 billion. I do not complain about that. I am not a monetarist hyena; I am, or used to be, a Keynesian. I complain about the fact that it is a passive fiscal overrun from which we suffer rather than an active fiscal policy. It is not just that we need to absorb the additional unemployment benefits that we have to give; nor the fact that we have to have an overrun of PSBR. I should like to see an active fiscal policy within

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the ERM framework which we can implement. The pity is that the Government have seemed to be very passive in that respect.
The noble Lord, Lord Ezra, made a number of suggestions. I am happy to say that, although not entirely, there is a great deal of convergence in the ideas put forward by the Labour Party and those which he put forward. It is quite clear that we need a major set of incentives for investment. In order to get out of recession they may be temporary incentives: investment allowance and quick write-offs brought forward. We need to take steps that will encourage firms to write off old plant more rapidly; we should give them incentives or tax holidays for investments being made currently. A whole host of measures could be formulated. I should be quite happy to spell them out in detail if the Government wish me to do so. It would mean an accelerated depreciation allowance or a tax postponement. The noble Lord, Lord Ezra, proposed increasing investment allowances from 25 per cent. to 40 per cent. We need things of that order which are a temporary measure. They will be returned to normal later on. They will bring forward investment so that we can get out of the recession faster. That is most important.
The noble Lord also put forward the idea that we should have preferential interest rates for small businesses. That is an interesting proposition. That may perhaps be done by giving preferential tax treatment to small businesses compared with large businesses. There will be problems within the EC about making preferential interest rate payments for small businesses as against large businesses. But the idea is to do it either by way of corporation tax or other taxes that the small firms pay. We ought to be able to discriminate so that small firms will either pay less for the cost of finance, pay less in turnover tax of some sort or are able to postpone their payment until times are better.
Although the noble Lord did not mention the uniform business rate, it is causing a lot of heartache to many firms. I throw out for the moment the notion that it would not be a bad idea for the Government to say that this is a recession year; we recognise that the uniform business rate was based on evaluations made at a prosperous time but the prosperous time has gone and we are giving firms a small concession for another day. That would put up the PSBR. We recognise that. However, the Government have also said that budgets are to be balanced over the cycle, not year by year. I think that that would be a financially prudent action rather than suffering from the deep recession that we have on our hands.
The noble Lord made other proposals about investment in infrastructure and changing the VAT return. The idea is that there should be a clear set of temporary relief measures which have small financial cost, or rather postponed financial cost, and which ought to be implemented now. They are urgent because we want the economy out of recession.
One peculiar characteristic of this recession as distinct from previous recessions—and there were two major recessions in 1974–75 and 1980–81—is that
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when the economy got out of recession then the growth rate was much higher than is predicted for the current recession. So not only is the recession deep but the Treasury and everybody else expect the recovery to be rather luke-warm. That is the case because we have a lack of activism in fiscal policy.
I suggest that what was good enough in 1981 and 1975 should be good enough in 1992. We can do things which will get us out of the recession with a much more accelerated recovery than we have now. A growth rate of 1½ per cent. following one of the deepest recessions in the post-war period is just not good enough. Fiscal prudence, economic prudence and the national interest require that we should do whatever is in our power—and there is a lot in our power—to get us out of the recession as quickly as possible and as steeply as possible. I once again thank the noble Lord, Lord Ezra, for having put this before us.
10.2 p.m.
Lord Reay: My Lords, I agree with the noble Lord, Lord Ezra, and, I think, all noble Lords who have spoken when they argue that investment is vital to the continued success of this country's industry. Investment provides the capacity for growth and the means both for introducing new techniques and products, and for improving productivity. But we must always remember that investment is the means to an end, not an end in itself. We must not fall into the trap of thinking that all investment is necessarily good. As the economies of Eastern Europe have discovered, high levels of investment are of themselves no guarantee of economic prosperity.
We must also avoid the temptation to view investment too narrowly. Investment in fixed assets such as plant and machinery is important but so is investment in people and ideas—in imparting new skills through training and in research and development leading to new innovations. Investment in such intangibles enables firms to exploit the full benefits of their investment in fixed assets, and it enables employees to adapt more easily to new technology.
Moreover, we need investment in all sectors of the economy: in service industries as well as in manufacturing. For too long now there has been a sterile debate about the relative importance of these sectors. In truth, as the CBI recognises in its admirable report Competing with the World's Best, all sectors of the economy are inextricably linked and interdependent. Service industries provide a substantial market for manufacturers' products while manufacturing depends on many services, for example, transport and distribution, for its success. In saying that, I do not in any way denigrate the importance of manufacturing to the nation's wealth. My right honourable friend the Secretary of State and I have said many times before—but it bears repeating—that we cannot imagine a healthy economy without a vigorous manufacturing sector.
Proposals are often put forward for increasing investment by means of tax allowances, grants and other forms of subsidy. I cannot be expected to comment on anything which my right honourable

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friend the Chancellor may or may not include in his Budget, but I will say that the 1984 reforms of business taxation sought to widen the tax base by removing special incentive allowances, thereby enabling substantial reductions to be made in the rate of corporation tax. This set the pattern for similar reforms in many other countries. Following our tax reforms, companies are left with more of their profits to invest where and when they, and not the Government, think best.
We have reduced the main rate of corporation tax from 52 per cent. when we took office to 33 per cent. now. We have also cut the rate for smaller companies from 42 per cent. to 25 per cent., and raised the level of profits at which that rate applies to £0.25 million —a fourfold increase over the lifetime of this Government. As a result, we now have the lowest main rate of corporation tax and the most favourable tax regime for smaller companies of all the main industrial nations, to the great benefit of our industry.
The noble Lord, Lord Ezra, and other noble Lords called for a package of government measures to stimulate an investment-led recovery. However, greater investment is of no use to either the investor or the country unless it is aimed at the satisfaction of anticipated demand. I suggest that that is why calls for such measures put the cart before the horse. Investment is determined by the expectation of future demand and profits, not by intervention or subsidy. The CBI understands that well. It recognises, as do the noble Lords, Lord Ezra and Lord Cobbold, that the best stimulus to investment is provided by a stable economic environment.
That is the answer also to the noble Lord, Lord Stoddart. The only way to increase job opportunities is to get the economy right. That is why the Government have made the defeat of inflation their number one priority—a commitment reinforced by their membership of the ERM and re-emphasised in the latest Bank of England quarterly bulletin, which was referred to by the noble Lord, Lord Ezra.
Experience shows that the best performing economies are built upon a foundation of low inflation. Inflation makes industry uncompetitive, erodes profitability and creates uncertainty thereby destroying both the means and the incentive to invest. It encourages an emphasis on the short term because, as I said when we debated this subject last month, it destroys confidence in the future. When the ability to plan for the long term is undermined in that way, is it any surprise if investment suffers?
The noble Lords, Lord Ezra and Lord Stoddart, called for a reduction in interest rates. Interest rates have already fallen by 4.5 percentage points since we joined the European exchange rate mechanism. That is a substantial fall; it saves industry almost £6 billion each year on its interest bill. My right honourable friend the Chancellor has made clear that interest rates will be set at an appropriate level to keep sterling within its ERM bands and to bear down on inflation.
Lord Stoddart of Swindon: My Lords, is it not true that although interests rates have fallen by 4.5 per cent., the real rate of interest has nearly doubled over the past year?
Lord Reay: My Lords, be that as it may, we consider that it would be a grave mistake to cut interest rates prematurely in order to give a short-term stimulus to the economy. That would take risks with inflation. I assure noble Lords that the best guarantee of low interest rates is low inflation.
Of course, establishing a favourable tax regime and defeating inflation are not the only ways in which government can seek to improve the climate for investment. By scrapping pay controls, price controls, exchange controls and a host of other unnecessary restrictions we have freed industry to concentrate on its main task: creating wealth and jobs. Privatisation has boosted incentives and promoted business efficiency, resulting in almost every case in increased output and increased investment. And by reforming trade union laws we have restored managers' ability to manage. As a result, the number of days being lost through stoppages has fallen to little more than 5 per cent. of the average of the 1970s, contributing substantially to businessmen's confidence in the future.
Nevertheless, there are areas in which the Government do have a more direct role to play in supporting investment. Research and development is one such area. Innovation is the principal source of economic growth but the market on its own will not generate an adequate level of investment in pure or pre-competitive R&D. That is why we spend £3 billion a year on civil R&D, a similar share of national income to that spent by the Japanese Government.
The noble Lords, Lord Ezra, Lord Grimond and Lord Cobbold, pointed to the role the Government have to play in establishing and maintaining the infrastructure which underpins industry's ability to grow and to generate wealth. Consequently, we are committed to a major programme of investment in transport which will see the Department of Transport's capital expenditure on roads more than double by 1994–1995; and investment in the railways is at its highest level for 30 years. Next year alone, British Rail and London Transport plan to invest over £2½ billion. But, as the noble Lord, Lord Ezra, also said, the concept of the infrastructure goes much wider than just transport. For example, it includes a skilled workforce. This year alone some £2.8 billion will be spent on training, enterprise and vocational education—two-and-a-half times as much in real terms as was spent in 1978–79.
The success of the Government's policies can be judged from our remarkable record in attracting inward investment to this country. In the three years to 1990, the latest period for which figures are available, almost half of all inward investment into the European Community from Japan and the USA came to the UK. That is a measure of overseas investors' confidence in the Government's policies and the long-term prospects for the economy.
It is true that there has been a fall recently in investment. But there are bound to be fluctuations in the volume of investment over the economic cycle. It is important to place such figures in context. Business investment rose by 45 per cent. between 1986 and 1989 and in the 1980s as a whole grew faster in the UK than

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in any other major industrialised country except Japan. Last year business investment took a higher share of the nation's resources than at any time during the 1970s or indeed the first half of the 1980s. Despite the recent fall, business investment is still more than half as high again now as it was in 1981.
Not only has the quantity of investment risen but so too has its quality. The rate of return in industry rose sharply during the 1980s; and according to the OECD, the UK was the only major nation to experience a rise in capital productivity—that is to say, the output produced by a unit of capital—in the business sector over the past decade.
Anxiety is sometimes expressed at the performance of manufacturing investment. The distinction between manufacturing and other sectors has become increasingly blurred. During the 1980s many manufacturers contracted out substantial blocks of work which they previously undertook in-house. As a consequence, investment in such items as office machines might now be classified as service sector investment where in earlier years it would have been treated as manufacturing investment. Nevertheless, despite falling during the recession, manufacturing investment remains over a third higher than it was in 1981; and, given that it normally lags the business cycle, it is heartening that manufacturing investment rose in the third quarter of last year and that the Central Statistical Office survey of investment intentions indicates a further rise in 1992.
As I have said, it is a mistake to view investment narrowly. British industry has come increasingly to recognise the importance of investment in intangibles. As the CBI report to which I referred says,
"a major factor in the improved performance of UK manufacturing has been an increased emphasis on quality, training and innovation".
Employers now spend over £20 billion a year on training; and research and development performed and funded by industry grew by almost half in the six years to 1989, the latest period for which figures are available. Most encouragingly, surveys of CBI members' intentions show that investment in such intangibles is even now holding up well.
Therefore, we must not allow ourselves to become discouraged by short-term falls in fixed investment. The benefits of the surge in both the quality and quantity of investment in the 1980s have not been lost: those benefits will come through during the 1990s. As we move out of recession, they will become apparent in increased productivity, increased competitiveness, increased profitability, increased employment prospects and increased national wealth.
I believe that it was the noble Lord, Lord Ezra, who said that it was difficult to see an early end to the recession. We have made no secret of the fact that the recession has been both longer and deeper than expected, reflecting the slowdown in the world economy. It is not only in the United Kingdom that output has fallen, although I believe it was the noble Lord, Lord Desai, who suggested that. The United States, Canada, Switzerland and New Zealand have
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all been in recession. Australia, Sweden and Finland are in recession and there has been a fall in industrial output in Japan.
The conditions for recovery—lower inflation and interest rates—are in place. Although business and consumer confidence has faltered recently, it remains higher than a year ago. Leading indicators point firmly to an upturn in output in the course of the year, as the latest Bank of England quarterly bulletin makes quite clear.
The 1990s will be a decade of immense opportunity for British industry. In the European Community, the completion of the single market will bring access to a home market of 340 million consumers and vast new markets will open up as Eastern Europe shakes off the legacy of state control and joins the capitalist world.
The Government are determined that industry shall be fully equipped to take maximum advantage of these opportunities. We have a policy to achieve that. It is not the tired old policy of quick fixes, subsidy and intervention which has so miserably failed this country in the past. It is the creation of a framework within which industry can make profitable investment according to its own priorities, free from meddling by government, and be rewarded appropriately.
Our policies are bearing fruit. Inflation has been more than halved since it peaked at nearly 11 per cent. As I have said, interest rates have fallen by 4.5 percentage points since we joined the exchange rate mechanism. The noble Lord is interrupting the final moments of my peroration. Does he insist?
Lord Desai: My Lords, I thank the noble Lord for giving way. Will he concede that, during the days of bad intervention and so forth, the proportion of GDP invested in manufacturing was higher than it has been throughout the 1980s? Does he agree that even now it has not recovered to that earlier level? If the noble Lord is interested, I can inform him that it was about 3 per cent. in 1979. Since then it has not attained that level.
Lord Reay: My Lords, for one moment I thought of saying that, as regards the tired old policies, it was the intention of noble Lords opposite to return to them. I forebore to do so. I can only interpret the noble Lord as suggesting that those are the policies which he would like to see his government take up again were they back in power. As I said, our policies are bearing fruit. Inflation is down; interest rates are down; the conditions for economic recovery are in place. Against that background, I have every confidence that industry will in full measure invest for the future.

Protection of Badgers Bill [H.L.]
Reported from the Joint Committee without amendment, and recommitted to a Committee of the Whole House.
Trade Union and Labour Relations (Consolidation) Bill [H.L.]
Reported from the Joint Committee with amendments and recommitted to a Committee of the Whole House.
Severn Bridges Bill
Returned from the Commons with the amendments agreed to.

Social Security (Consequential Provisions) (Northern Ireland) Bill [H.L.]
Returned from the Commons agreed to.
House adjourned at seventeen minutes past ten o'clock.