Lords Sitting of 10 June 1992

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.
Several Lords Several Lords—Took the Oath.

Yugoslavia: Aid to Refugees
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they are taking any action to help with relief for refugees from the territories which were formerly Yugoslavia, in view of the particular burden being borne by Austria.
Baroness Trumpington: My Lords, since last November the UK has given £9.7 million to the Red Cross and the United Nations humanitarian agencies for work in the former Yugoslav republics, much of which involves assistance to refugees.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for her most satisfactory reply. Does she agree that the Austrians have an outstanding record for humanitarian and efficient reception of refugees from neighbouring countries? Does she further agree that western European countries should give help to them when necessary?
Baroness Trumpington: My Lords, as a signatory to the 1951 UN Convention on the Status of Refugees, Austria should deal with asylum seekers under the terms of the convention in the same way as would all other signatories.
Lord Judd: My Lords, the situation is obviously grave. Does the Minister agree that there are 1.4 million internally displaced people in Yugoslavia as a whole? Does she agree that in Bosnia-Herzegovina alone 800,000 have had to flee their homes in the past two months and that 250,000 have had to resettle in other European countries? Does the noble Baroness accept that much more must be done when the UN has appealed for 174 million US dollars to deal with the problem and so far only 26 million US dollars have been subscribed?
Baroness Trumpington: My Lords, the answer to the first part of the noble Lord's question is, yes. The international relief effort is being led by the International Committee of the Red Cross and the UN High Commission for Refugees. UNHCR is also co-ordinating the work of two other UN humanitarian agencies: UNICEF and the World Health Organisation.
The ICRC has launched an appeal for £15.1 million for its activities in the former Yugoslavia and the UN agencies have issued a joint appeal for 174 million US dollars. I believe that that answers the question.
Lord Mackie of Benshie: My Lords, does the noble Baroness agree that there ought to be a formal European agreement so that any country faced with the enormous expense and the duty of looking after refugees can rely on automatic funding from the whole of Europe?
Baroness Trumpington: My Lords, I am not sure whether the noble Lord refers to the EC, which has been involved on a financial basis. It has given £33 million since November 1991. The countries which have been most involved—Italy, Germany and Austria—have held meetings and appealed to people to give to the agencies which are involved.
Lord Jenkins of Putney: My Lords, is the Minister in a position to inform the House which, of the various nationalities which used to make up Yugoslavia, form the bulk of the refugees?
Baroness Trumpington: My Lords, I am not sure that I am. However, I can give the following figures. The total figure for refugees is 1,152,600, of whom 541,000 are from Bosnia; 128,000 are internally displaced from that area; 5,500 are from Macedonia; 22,500 from Montenegro; 31,200 from Slovenia; 294,400 from Serbia and 575,000 from Croatia.
Lord Cledwyn of Penrhos: My Lords, is it not the case that any relief operation in Bosnia is made virtually impossible because the airport at Sarajevo is closed? Will the noble Baroness confirm that the United Nations has now decided to send a force of over 1,000 men to the area in order to secure the airport and to ensure that it is kept open? That would transform the scene. Can she tell the House precisely what progress is being made?
Baroness Trumpington: My Lords, it would be wrong for me not to say how greatly concerned the UK Government are at the suffering of thousands and thousands of people. The UN Security Council resolution of 8th June authorised the deployment of 60 military observers to supervise the creation of secure conditions to allow the re-opening of Sarajevo airport. It also endorsed in principle the deployment of 1,000 UN troops to secure the airport once the ceasefire is in place. However, the UN Secretary-General will have to revert to the UN Security Council before deployment can go ahead.

Ayrshire: Child Abuse Cases
2.44 p.m.
Lady Saltoun of Abernethy Lady Saltoun of Abernethy asked Her Majesty's Government:
Whether they plan to review the Ayrshire child abuse cases.
The Lord Advocate (Lord Rodger of Earlsferry): No, my Lords. A complaint has been made to the Procurator Fiscal in a case concerning two children in Ayrshire. This complaint is still under investigation. In the case of a further three children the Court of Session has just upheld the sheriff's conclusion that the grounds of referral had been established and press

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reports indicate that the solicitors are considering other legal proceedings. An appeal is still to be heard in another case involving four children.
Lady Saltoun of Abernethy: My Lords, I thank the noble and learned Lord for that reply. In view of the fact that Sheriff Crozier criticised the handling by the Ayr social work department of one of the cases and then dismissed the case, is the noble and learned Lord satisfied that present procedures in these cases are satisfactory? Is he also satisfied that the recommendations of the Butler-Sloss report are being acted upon in Scotland, where some sections of the Children Act 1989 do not apply?
Lord Rodger of Earlsferry: My Lords, I cannot comment on the particular case referred to, but on the general point following the Cleveland inquiry, copies of a shortened version of the report by Lord Justice Butler-Sloss were sent to all social work departments and their attention was drawn to the full report. Fresh guidance was issued to all the agencies involved in such cases. That guidance and other relevant matters will be reviewed in the light of the report of Lord Clyde on the Orkney inquiry when that is available.
Lord Mackay of Ardbrecknish: My Lords, is my noble and learned friend aware that many people will welcome his reply that there is no intention to hold an inquiry into the Ayr cases? In case people tempt him in the future to hold such an inquiry, will he keep in mind the inquiry on children's matters in Fife under Sheriff Kearney which has been going on since March 1989 and from which no report has yet surfaced? Will he also bear in mind the inquiry in Orkney conducted by Lord Clyde which started last summer, stretched into the autumn, then into the winter and then into the spring? It perhaps only survived the summer because the summer was late in Orkney this year. Will my noble and learned friend bear in mind that these methods of solving such difficult problems are thought by many of us to be totally unsatisfactory? The cases in Ayr which involve serious allegations are currently before the courts and the courts are the proper place for the evidence on these cases to be decided.
Lord Rodger of Earlsferry: My Lords, the difference is that the cases just referred to are before the courts and the matter will be decided by the courts. The more general point concerns matters that have already been reviewed by Lord Clyde and by Sheriff Kearney. As I have said, we shall take account of their comments.
Lord Grimond: My Lords, is the noble and learned Lord the Lord Advocate aware that I, too, welcome his statement that the normal processes of law will now apply to the allegations that have been made in Ayrshire? Will he bear in mind the experience of the Orkney tribunal which sat for over a year and has, I believe, cost £5 or £6 million? It has led, as these inquiries so often do, to accusations being made against people who have no opportunity to defend themselves.
Lord Rodger of Earlsferry: My Lords, the noble Lord's comments indicate the importance of these matters being dealt with in the proper forum, which is the courts.
Lord Carmichael of Kelvingrove: My Lords, the noble and learned Lord suggested that the Ayr cases are sub judice, although I do not believe that he used that term. Therefore it is difficult to discuss them and it would probably be improper to do so. Nevertheless I am sure the noble and learned Lord will agree that public opinion in Scotland has been gripped in recent years by a number of sensational cases of actual or alleged sexual abuse of children in Ayr, Orkney and Fife. We know that child abuse exists and often results in emotional and physical damage along with the loss of innocence. I do not envy social workers their task of investigating these cases as they are often in a no win situation. It is easy to jest that social workers have too much power. However, as I understand the position—I hope the noble and learned Lord will bear me out on this—social workers have no powers themselves unless they are given powers in specific cases by justices' courts or children's hearings. I hope that the noble and learned Lord the Lord Advocate will be able to confirm that point.
Lord Rodger of Earlsferry: My Lords, as the noble Lord said, social workers operate within a statutory scheme involving the children's hearing system, which is widely respected.
Lady Saltoun of Abernethy: My Lords, does not the noble and learned Lord agree that unless the public are reassured that children will not be arbitrarily removed from their homes unnecessarily there is a grave danger that suspected cases of child abuse will not be reported when they should be?
Lord Rodger of Earlsferry: My Lords, it is, of course, important that they are reported. However, I believe that the system which exists for such matters to be reviewed by a children's hearing and further on appeal to the sheriff provides the necessary safeguards.

EC: UK Ministerial Sub-Committee
2.50 p.m.
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
Whether they will upgrade the Ministerial Sub-Committee on European Questions (OPD (E1)) to a full Ministerial Committee of the Cabinet under the chairmanship of the Prime Minister.
The Lord Privy Seal (Lord Wakeham): No, my Lords. It is appropriate that my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs should chair the Cabinet sub-committee concerned specifically with European Community issues. European Community matters may also be considered in other ways; for example, by OPD or by the Cabinet under the chairmanship of my right honourable friend the Prime Minister.
Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord for his reply. He will doubtless be aware that the terms of reference of that particular ministerial sub-committee, under the chairmanship of his right honourable friend the Secretary of State for Foreign and Commonwealth Affairs, are merely to report as necessary to the Ministerial Committee on Defence and Overseas Policy, of which the Prime Minister is himself chairman. Does the noble Lord agree that, regrettably, he himself, who represents this House, is not a member of either the ministerial sub-committee or of the ministerial committee? Does not the noble Lord agree that in view of the fact that the Prime Minister will assume the presidency of the European Council on 1st July it is entirely fitting that the Prime Minister should be seen to be fully in control of European Community policy and Britain's place within Europe rather than it being dealt with as a matter of Foreign Office concern?
Lord Wakeham: My Lords, I believe that these are matters which are most appropriately left to the judgment of the Prime Minister. As I indicated to the noble Lord in my original Answer, major matters of policy are discussed in Cabinet or in the committee chaired by the Prime Minister. I believe that that is the best way to proceed. As for myself, I have a way of getting to the meetings if I really think that your Lordships would like me to be there.
Lord Hailsham of Saint Marylebone: My Lords, am I not right in thinking—and will my noble friend put me right if I am wrong—that the constitution and chairmanship of Cabinet committees is not a matter of government responsibility but the personal responsibility of the Prime Minister of the day?
Lord Wakeham: My Lords, my noble and learned friend would have put me right if I had got it wrong. He is absolutely right and that is why I said that such matters are best left to the Prime Minister.
Lord Mackie of Benshie: My Lords, does not the noble Lord agree that his reply seems to indicate that the Government still regard European matters as foreign affairs?
Lord Wakeham: No, my Lords. These are matters which are dealt by the Cabinet, by OPD and, as appropriate, by a sub-committee. European affairs feature rather largely in our discussions at the present time.
Lord Cledwyn of Penrhos: My Lords, does not the noble Lord the Leader of the House agree that this is a committee of the first importance, especially at so critical a moment for the Government? Will he tell the House how often the committee meets and, in view of the importance of economic issues and the fact that we are on the threshold of the single market, whether there is a Treasury Minister on the committee?
Lord Wakeham: My Lords, the list of those who are members of the committee has been published, but I do not have it to hand. I believe that the Treasury is almost certainly represented; I cannot conceive of the
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Treasury not being represented. However, I do not believe that I should be tempted to give the noble Lord the information he requires because the Prime Minister has made it quite clear that he does not propose to give details of the topics discussed by individual committees, the timings of meetings or their proceedings.
Lord Stoddart of Swindon: My Lords, is the noble Lord the Leader of the House aware that my noble friend is seeking to assist the Government?
Lord Mason of Barnsley: As always, my Lords.
Lord Stoddart of Swindon: My Lords, that is particularly so on matters European. My noble friend has great expertise in the matter. Would it not be useful to listen to what my noble friend said and uprate that particular committee, especially bearing in mind the mess that has been created in Europe recently? Would it not be as well for the Prime Minister in his cabbage patch contemplating the Maastricht Treaty also to contemplate whether he should take the chair of that particular sub-committee?
Lord Wakeham: My Lords, it never crossed my mind that the noble Lord, Lord Bruce, was trying to be anything other than helpful in his Question. I am surprised that his noble friend felt it necessary to remind me of that fact. I had taken the noble Lord's instructions to heart. I listened very carefully to his Question. I hope that he will forgive me if I feel that it is the Prime Minister's judgment on which I am most likely to rely in these matters.
Lord Peyton of Yeovil: My Lords, will my noble friend reflect for a moment upon the awful fate which might await anybody who was unwise enough to accept assistance from the noble Lord, Lord Stoddart, or the originator of the Question? Does he agree that intrusion into such delicate matters is quite improper and indecent and that they are far better left unprobed and unrevealed?
Lord Wakeham: My Lords, my noble friend will know that I shall listen carefully to his advice. Indeed, I am not so proud that I shall not listen to advice from wherever it may come. However, over the years my noble friend has been a wiser counsellor than perhaps some of the noble Lords opposite, if they do not mind me saying so.
Lord Bruce of Donington: My Lords, will the Minister inform the noble and learned Lord, Lord Hailsham, that there is no machinery by which a Question can be addressed to the Prime Minister personally in this House and one can only address a Question to the Government? Will the noble Lord please accept my assurance that in this instance, as in many others, I am seeking to be helpful to Her Majesty's Government in relation to European matters? Does he agree that at the moment there is considerable disagreement in the Government's own ranks, as publicised in the press, and on the Government Back Benches? Does he agree that it would be in the interests of the nation as a whole if the

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Prime Minister could be seen to be speaking on this subject for his entire Cabinet, united under his chairmanship?
Lord Wakeham: My Lords, up to this moment the noble Lord had conducted this exchange in a way with which I could find no criticism. However, I thought that his last question was perhaps a little excessive. The noble Lord should not believe everything that he reads in the newspapers. I have no anxieties about disunity in the Cabinet. I was present at the meetings of which details appear to have been leaked, and the reports do not appear to bear much resemblance to what happened.
Lord Williams of Elvel: My Lords, will the noble Lord the Lord Privy Seal, in the spirit of open government which I know the Government accept, tell the House whether among the membership of the committee are Mr. Lilley and Mr. Portillo?
Lord Wakeham: My Lords, I am not sure to which committee the noble Lord is referring. We have moved fairly freely from one committee to another. If it is the committee which is the subject of the original Question, neither of my right honourable friends appears to be a member of that committee.

Domestic Water Supply: Disconnections
3 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
What action they propose to take in view of the number of disconnections of domestic water supply to customers in the last year.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde): My Lords, the Director General of Water Services is responsible for protecting consumers' interests. He has expressed his concern over the level of disconnections, and has recently issued new guidance to water companies on the subject of debt and disconnection to ensure they take a consistent approach towards consumers with unpaid charges. The Government welcome the action that he is taking.
Lord Dean of Beswick: My Lords, I am grateful to the Minister for that reply, indicating that Mr. Byatt the Director General of OFWAT is taking action. Is the Minister aware that statistics have been published from various reliable sources which, if taken together or separately, show a very substantial increase in the number of disconnections in this sector? Can he give some indication of the number of disconnections in the last year when the water supply was under the control of the water board? To what extent have those disconnections increased since privatisation?
Lord Strathclyde: My Lords, the most recently available figures show that in the last year 21,286 domestic customers had their water supply disconnected. That figure compares with 7,673 customers for the year before and represents an increase of 177 per
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cent. Comparisons with the period before privatisation are not helpful because the figures are difficult to get. However, I make the point that customers have no less protection than they did before privatisation. There has always been a minority who refuses to pay until faced with disconnection.
Lord Dean of Beswick: My Lords, is the Minister aware of more recent reports in the press showing an astronomical increase in the number of people in various areas of the private water sector who complain about the substantial increases in water charges? Does he agree that that is an indication that, if the Director General of OFWAT does not take strong action, we shall be speaking next year of a further substantial increase in the number of domestic users who have had their water supply cut off? As most of those people are at the bottom end of the social scale, will the Government do their best, through Mr. Byatt, to ensure that such adverse action does not take place?
Lord Strathclyde: My Lords, the Director General of OFWAT is very worried. He has also proposed to carry out research to find out how many of the customers disconnected were in real financial difficulty rather than simply trying to avoid payment. Perhaps I could remind the House that the average daily household charge for all water services—drinking, cooking, washing and watering the garden; and all water delivered to the house and taken away—is 46 pence, which is less than the cost of a bottle of fizzy water.
Baroness Oppenheim-Barnes: My Lords, is my noble friend aware that one of the matters that has exacerbated the problem is that in central London and elsewhere the water rates are based on the old rateable values? In central London they can be over £800 a year. Does he agree that if that is widespread across the country, it may be one of the reasons that people are unable to pay?
Lord Strathclyde: My Lords, between now and the end of the century the water companies have to come up with alternative ways of charging their customers. At the moment all customers can demand to be put on a meter.
Baroness Robson of Kiddington: My Lords, can the Minister say whether there is any similarity between reconnection to the water supply and reconnection to the telephone if one has not paid? Is there a charge for the customer to have the water reconnected?
Lord Strathclyde: My Lords, I do not know the answer to that question but I shall find out.
Lord Mackie of Benshie: My Lords, can the Minister tell the House how successful is disconnection as a means of collecting the money? Is the money paid within a week? Can he say what is the average time?
Lord Strathclyde: My Lords, the noble Lord will be pleased to know that the industry's figures suggest that about 75 per cent. of disconnections are reconnected almost immediately.
The Countess of Mar: My Lords, can the Minister say whether any regard is taken of the health of the community when water authorities turn off the water? Is he aware that in a block of flats in Staffordshire people were recently found throwing faeces out of the windows, which is very dangerous to children and adults?
Lord Strathclyde: My Lords, I am well aware of the problem to which the noble Countess referred. That was an unusual case involving 16 out of 114 tenants. But the local authority was alerted and all those who were contactable had supplies restored virtually immediately.

Business
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 Annan, and the noble Viscount, Lord Hanworth. 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 Annan, this means that all other speeches should be limited to a maximum of eight minutes and in that of the noble Viscount, Lord Hanworth, 14 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. Possibly I should remind your Lordships that in the case of the first debate, when eight minutes appears on the digital device above your Lordships, it means that eight minutes have passed rather than are about to commence.

Works of Art: Export Controls
3.6 p.m.
Lord Annan Lord Annan rose to call attention to the reports by the reviewing committee dated September and October 1991 on the export of works of art; and to move for Papers.
The noble Lord said: My Lords, I tabled this Motion because the reports of the reviewing committee on the export of works of art are the most ironical and exasperated official documents that I have ever read. The committee say that the Waverley rules governing the export of works of art have totally broken down. If the Government would not contribute to keep the statue of the Three Graces in this country, it was hard to know what would stir the Government to save a work of art. The heritage, the committee says:
"seems to come at the very bottom of the back page of the Government's list of priorities and indeed that page may have been mislaid altogether".
The committee went on to say that when a major item came before it the procedure to save it resembled:
"one of those quaint British rituals like Morris dancing on the green, a harmless custom, the original purpose of which is almost forgotten".
What was the point of the committee meeting and making a recommendation, since item after item went
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abroad because our museums and galleries could not afford to buy them and the Government refused to intervene?
Why has the Waverley system broken down? The answer is very simple. Today there are numbers of very rich individuals and institutions who want to buy works of art, and Britain is one of the very few countries which possess great masterpieces and allow them to be exported. The purchase grants of our museums and galleries cannot begin to compete with American, Japanese or German competitors. Mr. John Welsh, Director of the Getty Foundation in Santa Monica, is a scrupulous and honourable man. He behaves impeccably when a work that he covets appears in the market. But his trustees are compelled under American law to spend each year £30 million to £40 million of their income on the purchase of works of art. In the recent Mantegna exhibition at the Royal Academy there hung a painting put up for sale by the noble Marquess, Lord Northampton. Mr. Clifford of the National Galleries of Scotland raised £4 million to keep it here. The Scottish Office refused to find a matching sum. That painting now hangs in the Getty Museum.
I do not criticise those who sell their treasures. In 1984 the noble Duke, the Duke of Devonshire, most reasonably decided to build up an endowment fund to preserve Chatsworth and the estate. He therefore decided to sell 74 drawings from his renowned collection. He made a public spirited offer to the British Museum asking for £5½ million. The British Museum replied that it could raise only £5¼ million. The trustees of the noble Duke's estate felt obliged to put the drawings on the market. They fetched, so I understand, £23 million.
Consider the case of the sensational collection of the noble Duke, the Duke of Sutherland, which consists of 22 paintings. Among them are five Titians, two Raphaels and seven Poussins. With great generosity the noble Duke has lent them to the National Galleries of Scotland. What will happen when eventually his estate has to pay inheritance tax? Almost inevitably, to protect his landed estate, one or more of those paintings will come on the open market.
Faced with that situation, the last Minister for the Arts said to the reviewing committee, "What do you recommend?" The committee concluded that the Waverley rules should continue to be observed for most objects. But with great reluctance it said that the only way of ensuring that certain supreme works of art —about 2,000 in number—would be saved was to list them and tell their owners that they could not be sold for export. They could of course be sold to anyone who kept them in this country.
The committee did not recommend that scheme. It is perfectly clear that it disliked it. It is unfair to the individual owner. It breaks the Waverley rules that have made Britain the centre of the world's art market. The criterion is that the vendor should receive the full market value for the work of art that he possesses.
As we all know, the Minister has decided that a scheme of listing is unacceptable to the Government. He is to be congratulated on making that decision

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quickly; otherwise the auction houses might have had a sensational number of items for sale. That is one issue on which we do not have to waste a great deal of time today. As St. Augustine said: Roma locuta est: causa finita est. The Minister has spoken and that is the end of the matter.
What then can be done? There is one defect in the Waverley rules that the Government could amend at once. I shall not weary the House with the tangled story of the Three Graces. However, the upshot is this. Fine Arts Investment, a company based—need I say? —in the Cayman Islands, refused an offer by the brothers Barclay of £7.6 million for the statue. By so doing it forfeited its chance of an export licence. But by a decision of the courts, the Minister does not have the power to compel Fine Arts Investment to forfeit that work of art. The sharks who skulk behind the anonymity of this corporation and who intend by hook or by crook to sell the statue abroad have stored the statue in this country. Presumably they are waiting for the art market to recover somewhat and to sell the statue at a higher price to a willing purchaser who will then be entitled to apply for an export licence.
Surely the Government should legislate to stop such chicanery? If a genuine offer is made that is above the price paid by the original purchaser, the original purchaser should be compelled to accept that offer whether the new purchaser is the Victoria and Albert Museum or some benefactor such as the Barclay brothers who intend to keep the object in this country. Surely that is one case where the right of the property owner to do what he will with his own should not govern the matter.
What alternative to the Waverley rules, other than listing, exists? On that issue Mr. Mellor was deafeningly silent. Some museum directors favour the creation of a contingency fund into which will be paid, say, £20 million a year for disposal by the National Heritage Memorial Fund. In 1946 Hugh Dalton put forward his land fund scheme for just such contingencies. The Treasury scuppered it. The Treasury allows no official body to create nest eggs or to hypothecate general taxation towards a specific purpose.
I am sceptical about pinning hopes on the national lottery. The claimants on that treasure trove will be too numerous to mention: Norman churches, opera houses and third division football clubs unable to finance the stands in which their fans must now, by law, be seated. My guess is that probably the first proceeds will go to boost Manchester's bid for the Olympics. Clearly the Minister will have to devise a notional carve up of the proceeds of the lottery: a percentage of so much for sport, so much for buildings old and new, so much for works of art, and so on. But we do not need a new quango to do that. The old hands-off principle of the Arts Council is almost as dead as the Waverley rules. The Minister should make the decisions. But perhaps he might consent to have an advisory committee to indicate just how important are the various claims made upon the proceeds of the lottery.
Some I am sure will urge that the purchase grants to the national museums and galleries—which have not been raised since 1985—should be increased; and I imagine that there are few who would grudge them an increase. But that is not the way to save the 2,000 masterpieces. I hope that the lottery will enormously augment the income of the National Heritage Memorial Fund in time to come so that when a supreme work of art comes on the market the fund does not have to beg for an exceptionally large sum. Incidentally, at present it is overwhelmed with applications.
What can be done in the interim? I believe that the best hope is not to urge the Treasury to adopt the American model where gifts to museums can be offset against tax. The best hope is to beef up the acceptance in lieu procedures which are not at present very effective. Could not the 25 per cent. douceur be raised to 50 per cent.; and cannot the procedures for the in lieu provisions be made the same as those for private treaty sales? At present, acceptance in lieu negotiations are between the family, the Treasury and the Museums and Galleries Commission. Some people murmur that the commission is not always that helpful. A work is allotted to a museum only after it has been accepted. But in a private treaty sale the vendor bargains directly with the museum, and the Office of Arts and Libraries (as it was) merely has to give final approval.
There is also the question of the relation between the auction houses and the museums and galleries. Do not the auctioneers sometimes so inflate the estimates of a prospective sale that the client is dissuaded from approaching a museum? Perhaps the noble Viscount, Lord Astor, will consider laying down some ground rules on that matter. I do not expect the noble Viscount to deliver a solution to these problems off the top of his head like Zeus giving birth to Athena. But I do ask him to tell his right honourable friend how urgent it is to wrestle with the Treasury and in the interim to give the National Heritage Memorial Fund a hefty increase in grant. My Lords, I beg to move for Papers.
3.18 p.m.
Baroness Birk: My Lords, I am sure that we are all grateful to the noble Lord, Lord Annan, for bringing this subject before us today. However, unlike him I believe that the export reviewing committee did us a great service by bringing a scheme forward that was then able to be knocked down. In so doing the committee said:
"If we are between the devil of a continued freeze on the funding of our museums and galleries and the deep blue sea of losing key heritage objects because Government funding is not made available to acquire them, then with reluctance we would support a system of listing".
The committee has certainly woken everyone up—including the Government, one hopes—to the parlous situation of the arts in this country.
The Waverley criteria have worked well, and still do, so long as the Government play fair and enable essential funds to be available. But now that listing is definitely out, we must be prepared to find funds to prevent such losses. The gap estimated by the export

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reviewing committee is between £15 million and £20 million a year. That is in addition to the annual £12 million to the National Heritage Memorial Fund. The noble Lord, Lord Annan, referred to the loss of the land fund scheme. I am sure that he remembers as well as I do that after the débâcle of Mentmore, the National Heritage Memorial Fund was set up. It has done and is continuing to do a wonderful job but on stretched funds, which should be increased.
I am afraid that many of us will bank too much on the national lottery. I have previously asked the Minister whether it will be restricted to objectives which come within the National Heritage Department or wander further like the good causes which Mr. Kenneth Baker, when Home Secretary, mentioned in his press handout. Even if the lottery is restricted to the objectives of the National Heritage Department the claims upon it will be enormous, as the noble Lord, Lord Annan, pointed out.
The state still has a tremendous responsibility. It would be a great pity if it were thought that a national lottery when we have it—there is as yet no Bill—would let the state and therefore the Government off the hook. Recently the chairman of the Arts Council, the noble Lord, Lord Palumbo—unfortunately he is not in his place today—spoke to the Parliamentary Heritage Group. He said that he saw the national lottery as providing the capital funds for museums and galleries. That would be wrong; the responsibility for the buildings of museums and galleries must rest with the state and the Government. It is therefore right that money which comes from the lottery should be spent on acquisitions. Furthermore, an attractive proposition to put before the people who will be asked to buy the tickets will be not only that they have a chance to win an enormous amount of money, but that the money they made will be used to acquire objects that they will appreciate and enjoy.
As the noble Lord, Lord Annan, said, the purchase grants have been frozen for seven years. That is an absolute scandal. The new Secretary of State must be pressed hard on that issue. I realise that the noble Viscount cannot answer all my questions—I am not sure that even the Secretary of State has the answers. I do not suppose that the noble Viscount can go out on a limb alone, but I hope that on behalf of all noble Lords who are speaking he will press hard on that matter and will express our strength of feeling.
The situation is especially damaging to museums and galleries such as the Tate which have a statutory duty to collect contemporary art. Any acquisitions missed now can only be made at a later date at a much greater cost. Then stronger provision is needed, equivalent to Grade I listing on buildings, to prevent the removal of works designed for a particular location; for example, Canova's The Three Graces. The extension of the gift-aid and acceptance-in-lieu schemes, as mentioned by the noble Lord, would allow works of art to be given to museums rather than go on sale on the open market. The Government could extend those schemes without tremendous cost; the chairmen of the Museums and Galleries Commission and the National Art Collections Fund have recommended this as a cost-effective way of saving
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works of art. Today The Times has printed a letter from the chairman of the National Art Collections Fund in which he expresses the need for an increase in the amount of government money given to the arts.
Listing has diverted attention from many of the excellent recommendations in the ERC report: for instance, the replacement of current outdated legislation for export control; the inclusion of national heritage items such as fossils; and VAT remission on sales to national and university museums, which would bring them in line with local authority museums.
The Secretary of State's track record has wandered between the Treasury and the arts. I hope that he will remember that he is now permanently wearing his arts and heritage hat and that he must fight the Treasury rather than the arts Ministers as he has in the past. It is crucial that as we enter the year of the UK's presidency of the EC and seek to establish agreement among EC member states on harmonised policies on the movement of works of art we put a stop to the drain on our own works of art.
3.26 p.m.
Lord Donaldson of Kingsbridge: My Lords, it would be appropriate to begin my remarks by paying a tribute to Sir John Anderson, later the first Viscount Waverley. He was the perfect civil servant, even though for many years he was a Minister of the Crown. If one went to him with an awkward problem he would always find the cheapest and least damaging way round, whether as secretary to the Board of Inland Revenue, later in connection with air-raid shelters (when his name was immortalised), as the unexpected first chairman of the Royal Opera Board, or as the ingenious inventor of the Waverley rules, which we are discussing tonight. I never met him but I know, or knew, many who have consulted him to their benefit. We must be careful before we replace his solution with something else. In making that comment I follow my noble friend Lady Birk.
The Waverley rules were introduced in 1952, the export committee being formed at the same time. They constitute a notable example of reliance on the open market tempered with some very definite, voluntary but not compulsory encouragement to act otherwise than strictly on the best price available. That is a complicated statement but Lord Waverley was trying to deal with a complicated situation. As was explained by the noble Lord, Lord Annan, the seller agreed a maximum price with the museum or gallery interested and calculated the tax due on a sale at that price. If the review committee then said that the particular article was worth the price the Minister was advised. The gallery then had to pay the agreed price less the tax. The Treasury gave a receipt for the amount of the tax due as if it had been paid.
Then came the douceur by which, though it is hard to believe, the Treasury refunded 25 per cent. of the tax which had not been paid. It was a really breathtaking arrangement and it worked for many years. Throughout the time that I was connected with the scheme—during the last quarter of its life—there were few failures. There had to be a few as people can

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never be content with anything but the last penny. However, there were not many failures and not enough to threaten the voluntary status of the scheme. I wanted your Lordships to realise what an extremely ingenious and unlikely scheme it was to have worked so well for so long.
However, it went wrong because three things have changed. First, the levels of taxation have been somewhat reduced. Therefore, the tax concession is less valuable and the douceur is equally less valuable. Secondly, the purchase grants to the museums and galleries—and here I follow the noble Baroness, Lady Birk—have been allowed to fall seriously below the level of inflation.
I should like to explain just how far they have fallen behind. The purchase grant of the National Gallery in my time—1979–80—was £2,612,000. After some ups and downs over the years it settled at £2,750,000 in 1985–86 and as the noble Baroness indignantly announced, it has not moved since. Similarly, the British Museum purchase grant was £1,023,000. In 1986–87 it was £1,400,000 and it has not moved since. In today's values that amounts to a reduction, in the case of the National Gallery, of 56 per cent. and in the case of the British Museum, a reduction of 43 per cent. on the figure which we were giving in 1979. Can we expect the system to work as well? The only way forward is to address that problem. If people are not prepared to pay that money, or an increase on the present figure, there is no hope of doing anything.
Those steep falls would put the museums and galleries in a poor position even if art prices had kept within inflation, but we all know that they have not done so. The explosion in art prices has reached absurd levels, but it has fallen back now to something like 10 times that which it was in the 1980s. That is the figure we are stuck with. I am sure that your Lordships understand that if you get back the tax agreed, plus the 25 per cent., that means you are as well off as if you sell something for considerably more to somebody else. That is the point of the issue.
What can be done to correct the shortfall in those purchase grants? It seems to me that there can be no other way of tackling the problem than by bringing the grants up to 1979 levels, plus inflation. That should be done not just as soon as possible but at once. Consideration could perhaps be given to increasing the douceur, as the noble Lord, Lord Annan, suggested, to 50 per cent., but I doubt whether the Treasury will agree to any of those proposals. I am surprised that it ever agreed to Sir John Anderson's proposals in the first place; and that was a triumph for him. However, I see no other answer to the problem and the cost would not be enormous. The noble Baroness quoted a figure of £15 million to £20 million. I believe that that figure comes from the export committee's report and will be the kind of figure at which one might arrive if one took a list of those people who have sold not through the Waverley rules and estimated what it would have cost had the sale been carried out in the other way.
That brings me to the question of how much the nation is prepared to pay to keep its treasures within
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those voluntary limits—liberal and not fascist or dictatorship limits. That should be discussed openly and fully and we should realise the kind of figure we are talking about. If it is really £10 million or £15 million, we should not hesitate to insist that the Government do something about it.
Finally, as regards listing I agree that that is over, at any rate for the moment.
I conclude on a note of grave warning. By far the worst thing that could happen to our heritage would be the application of VAT to works of art. I understand that the EC is threatening that. Although I am a good European, I offer the Minister total support to the death in opposing any such innovation.
3.34 p.m.
Lord Renton: My Lords, your Lordships are no doubt grateful, as I am, to the noble Lord, Lord Annan, for raising this extremely important matter.
Before I deal with the issues raised so far in the debate, perhaps I may say how glad I am that my right honourable friend Mr. David Mellor has been appointed to this enlarged department. Of course, its responsibilities are very wide and go far beyond the arts and heritage; but each of its responsibilities are matters in which your Lordships have always shown great interest and indeed have great expertise. I am glad that, as a first step, Mr. David Mellor has been realistic enough to abolish the listing system. I believe that that will be generally approved. Of course, he is a former Chief Secretary to the Treasury and his success will depend to a great extent upon how he can use his expertise in getting money out of the Treasury.
I am also delighted by the appointment of my noble friend Lord Astor as Under-Secretary to the department because he is well qualified to advise and answer your Lordships' questions. The noble Baroness, Lady Trumpington, seems to be disagreeing with me and perhaps she will correct me at a later stage.
Let us realise that, over the past 300 or 400 years, this country has acquired far more of the works of art of the countries of Europe and Asia than any of those countries have acquired from us. As a result, we have great public and private collections of Italian painting and sculpture and French, Dutch and Flemish paintings. It is wonderful that we have so many magnificent art galleries full of those treasures. However, you will not find many British pictures in the Louvre, the Tuileries, the Pinakothek, the Pitti Gallery or any of the palaces of Asia. Therefore, it seems to me that we can afford to have London as the principal art market of the world, which it undoubtedly is. It is to our economic advantage that we should do so and it is part of the life of a free society.
Your Lordships may wonder how it was that last Session I was responsible for raising questions in your Lordships' House about the disposal of the Badminton cabinet. I was persuaded to do so by the chairman of the National Art Collections Fund, of which I happen to be a member. I thought that there were good reasons for trying to keep it in this country. First it was simply a matter of finance but then it went

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beyond that. The Government and the splendid committee on export of works of art, of which the noble Lord, Lord Annan, was rather disparaging, gave a licence eventually when the money could not be found. I wanted the cabinet to go to the Fitzwilliam Museum because I live less than 20 miles away from that museum but between us we were not successful in that.
Let us face it, the National Heritage Memorial Fund, which has made extremely good use of the limited funds at its disposal, could use unlimited sums of public money to public advantage. It will not get those funds although we hope that it will receive more money than it has so far.
Therefore, let us consider the other possibilities. The National Art Collections Fund does marvellous work within its limitations. I am in favour of a national lottery; but let us not raise our hopes too high. I do not see any money coming from the national lottery, for the purposes to which this debate relates, for at least two financial years and it is more likely to be three. When the money is available, there will be many competing claims upon it; for example, sport and so on. I do not know whether a quango or the Government will decide which of those good causes shall have the money, but there will be many competing claims and the amount available for keeping works of art in this country will be somewhat limited. We must go on living in hope, doing our best.
The noble Lord, Lord Donaldson—no doubt accurately—gave us figures to show that less money was spent by the British Museum. We can rejoice in a wonderful paradise. The British Museum and all our other museums have improved year by year whatever funds have been available to them. Let it continue to be so. Preserving the national heritage gives rise to a confused situation. I feel that the Waverley rules, which have stood the test of time, are simple, direct and workable. They should continue to give the guidance that is needed. Meanwhile, a debate of this kind in your Lordships' House can offer a great deal of valuable advice.
3.40 p.m.
Lord Charteris of Amisfield: My Lords, I am grateful to and congratulate the noble Lord, Lord Annan, for instituting the debate. I agree with everything that he said, particularly regarding added resources for the National Heritage Memorial Fund. I should like to congratulate also the Secretary of State for the National Heritage on abandoning the idea of listing works of art. I see the temptation to do so. I am glad that it has been resisted and hope that the idea will not be reverted to.
During the past 12 years it has been my great privilege and joy to be the chairman of the National Heritage Memorial Fund, a job which has now been taken over by the noble Lord, Lord Rothschild. During that time I was intimately concerned with the preservation of two parts of our heritage. The first part is what I call real estate—houses, woods, bogs, fens, flats, mountains and meadows. The second part
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is what I call the moveable heritage—pictures, sculpture, drawings, books and manuscripts. It is with the second category that any list would be concerned.
Having been able to observe the present system at close quarters, I shall defend it. I concede that the position I held makes me more conscious of what has been saved than of what has been lost. However, the system of which the National Heritage Memorial Fund is an essential part is perfectly good, with one obvious proviso; that is, that it must be properly funded. It is a good system because it allows adequate movement of works of art; because, with it, London remains the art centre of the world; because it allows the owners of heritage property who sometimes need to sell to obtain a proper price for their assets and it is good because it allows museums and galleries to acquire treasures for the nation.
The provisions of the private treaty sales involving the douceur and acceptances in lieu are of help both to the vendor and to the buyer. The system is extremely British—it is civilised; it is not too loaded down with logic; there is room in it for negotiation; it is absolute in nothing; it is foggy and uncertain and beneficent, like our climate. But everything depends on adequate funding.
It is my contention that over the past 12 years—since the National Heritage Memorial Fund came into existence—with the help of one or two massive private donations from rich people like Mr. Getty, the funding has not been too bad. Of course, there have been sad losses like the Badminton Cabinet but there have been many triumphs ending with the purchase by the National Gallery of Holbein's "Lady with the Squirrel and the Starling" from Houghton.
The elements of the system involved in that purchase were the National Gallery, private resources of the National Gallery given to it by Mr. Getty, the National Heritage Memorial Fund, the National Art Collections Fund and the private treaty sale. Practically everyone in this country assumed that the picture would go abroad. It did not go abroad. The system worked and we kept it.
One can measure the effectiveness of the system by what I shall describe as the "rumpus quotient". I refer particularly to political rumpus. How much fuss and bother is there in Parliament about the loss of works of art? Over the past 12 years there has been nothing to compare with the row that occurred over Mentmore, which, we must not forget, brought the National Heritage Memorial Fund into existence. There was almost a row over Calke Abbey but the Chancellor of the Exchequer managed to stop that when he was making his Budget speech. There would certainly have been a row over Kedleston, Fyvie, Belton and Chastleton. They were all saved by the National Heritage Memorial Fund.
There has not been much in the way of rumpus quotient over moveable heritage; that is, nothing compared with Leonardo's Cartoon. I cannot remember who bought that. However, there might have been a similar sort of row if, through the workings of the National Heritage Memorial Fund, we had not acquired the painting by Altdorfer, "Christ

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taking leave of his Mother", the "Enchanted Castle" by Claude, the "Fabula" by El Greco and, lastly, the Bute Cuyp.
All that is because the National Heritage Memorial Fund kept the rumpus out of the political arena. But make no mistake about it. If we are not properly funded it will go right back into the political arena. It is all a matter of proper funding. It is an absolute disgrace that museums and galleries have not had their purchase grants increased since 1985. It is important that they should be properly funded. Not only does it help the nation to acquire works of art, but also, unless museums and galleries have funds which they can spend and thus increase their collections, they themselves become fossils.
We must put the situation right, and quickly. The noble Lord, Lord Annan, said that the National Heritage Memorial Fund was swamped. But the next period will be extremely difficult. Many people who suffered terrible losses at Lloyd's will put their houses and moveable works of art on the market. By all means let us have more in the National Heritage Memorial Fund, but remember one thing about the fund—particularly when one is thinking of museums and galleries. The National Heritage Memorial Fund can only assist with matters which are considered to be part of our heritage. Many items at museums and galleries such as icons and so forth are not part of our heritage and we and our successors cannot help them.
Purchase grants must be restored. Resources of the National Heritage Memorial Fund should be increased. We must remember the great maxim of war: reinforce success. The National Heritage Memorial Fund has been a success, so we must reinforce it.
3.49 p.m.
Lord Strabolgi: My Lords, I am sure that we are all grateful to the noble Lord, Lord Annan, for initiating this short debate. Perhaps in company with other noble Lords I may say also how warmly I welcome the announcement by the Secretary of State last Friday that he intends not to proceed with the idea of listing important heritage objects in private hands.
The case against listing was put forcefully and convincingly by the Reviewing Committee on the Export of Works of Art in its special report. It is an infringement of the rights of owners to dispose of their property as they wish and also it would distort market values not only for outstanding works of art but, of course, all down the scale. Indeed, I have never met anybody in the art world who has been in favour of listing. The whole world seems to be unanimous in opposing it. The Labour Party was also against it, as confirmed in a letter from the Shadow Minister for the Arts to The Times just before the election. I congratulate the Government on that wise decision.
I only hope that it will not be reversed one day by a directive from Brussels. Britain has much the best system of flexible control over art exports—the Waverley system —and I hope that we shall be successful in persuading our European partners to adopt it when the matter is debated by the European
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Parliament next month. I am also delighted that the control of art exports has been transferred from the Department of Trade and Industry to the new national heritage department and that the arts have now at last a Secretary of State in the Cabinet. Therefore, the Government have started well but there will continue to be problems unless there is sufficient financial back-up, as has been said.
There are signs that the threat of listing had increased the flow of important works on to the market. There was the Holbein from Houghton—a pre-eminent heritage painting if ever there was one —which was secured recently by the National Gallery only after considerable trouble and concern, as the noble Lord, Lord Charteris, said. The gallery's annual grant has had to be foregone for the next three years in consequence. There will be further works coming on to the market shortly, I understand, including a Rembrandt from Dalmeny, and a Turner, a Gainsborough and a Constable from the Royal Holloway and Bedford New College.
What is to be done? I suppose that one possible solution—it may sound strange coming from these Benches—would be to consider abolishing the inheritance tax, because all our problems stem from that and always have. I was interested in the speech made by the noble Lord, Lord Rees, on the final day of the Queen's Speech debate, in which he put forward that suggestion. With all his great authority as a former Treasury Minister, he said that the tax brings in only very little money and is mainly cosmetic. Such a measure is of course perhaps not politically feasible but I hope that one day a Chancellor will take the plunge just as my right honourable friend, who is soon to be my noble friend, Mr. Healey, took the plunge when he abolished the inheritance tax between spouses after a long campaign against abolition conducted by the Treasury.
Therefore, the only possible solution at present is to try to save our heritage by increased finance and more tax incentives. The annual grants to our 18 national museums and galleries have been frozen since 1985. The National Gallery's grant is just £2.75 million and the Tate Gallery has only £1.8 million. Indeed the Tate was only able to save the Canaletto of the Old Horse Guards' Parade, through the great generosity of Mr. Andrew Lloyd-Webber. As a first step, these and other grants should be increased. The reviewing committee estimate that an extra £15 million to £20 million a year for the National Heritage Memorial Fund would be sufficient to keep most major works of art in this country. I am sure that we are all grateful to the noble Lord, Lord Charteris, for his wise and eminent chairing of that fund and the splendid work which it has done.
In his announcement last Friday the Secretary of State stressed the importance of in lieu acceptances, and with that I agree. However, with the reduction in the rate of inheritance tax to 40 per cent., the inducement to offer works of art in lieu of tax should be made more attractive. The so-called douceur, which is at present 25 per cent., should be increased to 50 per cent. and made more flexible in certain cases. I must also ask the noble Viscount who is to reply—although

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he is not yet a Minister as the noble Lord, Lord Renton, supposed, we know that his heart as regards the arts is in the right place and we welcome his presence here today—whether there is a ceiling on the amount allowed by the Treasury for in lieu acceptances.
In 1985 when the noble Earl, Lord Gowrie, was arts Minister, he stated that the amount of £10 million set aside from the reserve was an estimate and not a target or a limit. That was confirmed in a Parliamentary Answer by the then Minister for the Arts, Mr. Renton, on 16th March just before the general election. The Shadow Minister for the Arts has also confirmed that it is Labour policy not to have a ceiling.
As one Parliament cannot bind another, I ask the new Government to say whether it remains their policy that there will be no ceiling on the acceptance in lieu reserve. I hope so because, unlike the French Government, which moves promptly to secure for the nation parts of its patrimoine, we have allowed too many important treasures to be exported from Britain in recent years. As the reviewing committee said in its last report:
"The Waverley system of export controls for major works of art has been, to all intents and purposes, killed off for lack of funds".
Let us hope that the new heritage department will mean a fresh start, increased government interest, more arts funding and a real will to save our national heritage.
3.56 p.m.
Lord Cobbold: My Lords, first, may I thank the noble Lord, Lord Annan, for raising this important subject. I wish to declare an interest. I am honorary treasurer of the Historic Houses Association and I am also the owner of an historic house which is open to the public. I would like to echo the noble Lord, Lord Annan, and other noble Lords, in welcoming the announcement made last Friday by the Secretary of State rejecting the listing of key heritage objects. All owners of historic collections will have welcomed the demise of that proposal which threatened a form of planning blight on heritage objects without the right of appeal.
Historic house owners also welcome the establishment of the new Department of National Heritage. It must be right that responsibility for works of art and other moveable heritage objects and for historic buildings and monuments, should all be under one roof. We welcome not only the content of the Secretary of State's statement but also the tone in which it was expressed. Much of our effort is directed towards avoiding the need for works of art coming to the market in the first place.
It is extremely important to maintain the right balance between the public and the private interest in matters of the heritage. It is in the public interest that private owners should be encouraged to keep their heritage assets in good repair and to make them available as and when appropriate for public viewing. It is in nobody's interest if owners are driven to allow historic properties to fall into disrepair, works of art to deteriorate and historic collections to be broken up.
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In the case of works of art the principle of private treaty sales and acceptance in lieu of tax is well established. There have been some great successes, as the noble Lord, Lord Charteris, has told us this afternoon, due in no small part to his expert stewardship of the National Heritage Memorial Fund in recent years. We should all be very grateful to him for that. As the noble Lord, Lord Annan, and others have pointed out, it is to be hoped that the new heritage department will be able to improve and extend these schemes; to streamline the procedures involved and to permit the process of decision-making to be speeded up. There are too many stories—we have heard some of them this afternoon—of works of art being sold on the international market at huge prices following the failure of protracted negotiations with the various national bodies at much lower price levels.
In the case of historic houses, owners can often only raise the resources necessary to maintain the building by selling works of art. If works of art have to be sold and tax paid —and a larger tax liability will be involved if the objects have been previously conditionally exempt—it means that more objects will have to be sold from collections to finance the necessary repairs, which must be contrary to the public interest.
With successive Administrations, historic house owners have developed the principle that if private assets are pledged to the maintenance of an historic property in a dedicated maintenance fund, income and the proceeds of asset sales within the maintenance fund should be free of tax. That should apply also to objects that are already conditionally exempt under past provisions. I hope that the new department will continue to develop this valuable principle of co-operation between the public and private interests and will tidy up the remaining deficiencies in the rules on maintenance funds so that they may become more widely used as the accepted standard mechanism for ensuring the preservation of historic houses.
Finally, perhaps I may take this opportunity of expressing to the Minister the concern of owners of historic houses at the fall in the level of grant aid that is available from English Heritage. Grant aid to private owners fell from £3.1 million in 1988–89 to a paltry £1.8 million in 1990–91. This is not attributable solely to the squeeze on national resources. English Heritage has changed its policy to one of concentrating grant aid on "buildings at risk"—the implication being that grant aid is available only if a building has been so neglected that its survival is at risk. That does not seem to be a policy for good housekeeping.
I hope that the noble Viscount, Lord Astor, will encourage the Secretary of State to review the workings and priorities of English Heritage with its new chairman. I know that many historic house owners who have met with delays and frustrations when dealing with that institution will be hoping that the new Department of National Heritage will promote greater efficiency in this area as well.
4.2 p.m.
The Earl of Perth: My Lords, as your Lordships all know, the listing of works of art is out. I should like to add my voice to those who have congratulated the Secretary of State with responsibility for the arts on having made that decision so quickly. Several important works of art have already been sold, and it was quite clear that the trickle would become a flood. However, that is over. Despite the suggestion of the noble Lord, Lord Annan, that the idea of listing is all in the past, I shall touch on that point for a little while because it is mentioned in the second report and because we all hope that the suggestion of listing will never rear its ugly head again.
I know that the reviewing committee was between the devil and the deep blue sea but, having explored the idea of listing, I believe that it should have made it very clear that it would have no part of it, especially when the listing was linked to expropriation—or legalised theft, whatever one likes to call it. However, that issue does not arise now because the Secretary of State has ruled it out.
Incidentally, I do not believe that listing would have worked at all well—if at all. My reason for believing that is that it would have been a paradise for the bureaucrats, lawyers and art professionals. It would have provided an opportunity for endless dispute and skullduggery.
A lot of very large sums of money are involved. The report put a figure of £2 billion on the treasures that should be listed and rather light-heartedly said that the amount to be paid to the owners should be reduced to £1 billion. It would have been some sort of record if the owners had found themselves £1 billion worse off than they had expected. Who are the owners? So often they are those to whom we owe a great debt of gratitude. They possess great national treasures, and if asked they almost always volunteer to lend them to exhibitions at considerable inconvenience or sacrifice to themselves—and their reward was to be the loss of £1 billion.
Money is at the heart of everything. As we have heard, the shortfall amounts to between £15 million and £20 million a year. I cannot help but think that that sort of money represents postponing the building of a mile or two of motorway for a year or two, which would be a very good thing for the environment.
Of course, we all hope that lotteries will come to the rescue, but what should be done in the meantime? First, we must recognise that we cannot and should not try to save everything. After all, almost all of these objects have come from abroad and we should not be too unwilling to let others have some of these great treasures. Therefore, I start from the premise that we should not mind some things going abroad including, say, the Badminton cabinet—pace Lord Renton—but on the other hand I might argue that saving the Middleham jewel was of immense importance. There are bound to be differences of opinion about what constitute the right treasures, which is where the reviewing committee, the arts world, the benefactors and, as a last resort, Parliament and the public come in. I believe that the expression is "the rumpus factor"—and I agree with that.
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Where do we go for help? First, we have the private benefactors who have shown immense generosity in the past few years. I refer, for example, to Mr. Paul Getty and his gift to the National Gallery and to the host of contributors to the National Arts Collection Fund. I include also the many friends of the museums and galleries. I could continue adding to that list for a long time, but many of your Lordships know well who I am talking about. We have also had unexpected benefits from people such as Mr. Lloyd Webber who has saved the Canaletto and who may perhaps do even more. I must also pay tribute to the Sainsbury family and the Clores. After all, they have done as much as anybody—if not more—to enable our treasures to be exhibited and to be saved. Long may such generosity continue.
Now comes the question of government help. It is so easy for us all to say, "Only a few more million pounds." The Secretary of State's statement rightly pinpointed saving in lieu of tax. That is a very important channel, but is not properly known. Owners very often do not know what we are talking about and do not realise the potential advantage to them. They may be able to do a deal that nets them, say, £5 million for certain, and they will know that the work of art is going to the nation, which is what they would undoubtedly like to happen. If the work had gone on the open market, the figure might have been £12 million; but the owners would not have been any better off. The Government and the Secretary of State should try hard to make the merits of that channel of help more widely known. Incidentally, I must pay my tribute to the auction houses which so often work towards encouraging owners to take that course of action—at a loss to themselves. Perhaps I may suggest that that system is given wide publicity. There could be a new campaign. I know that that has been tried once; but let us see some more of it.
There is also a need to stop the freeze on the museum acquisition grant. Grants to the National Heritage Memorial Fund have been quite good; but there has been a tendency recently to centralise on that fund rather than also let the museums have their chance. That is a wrong policy. It must be enormously discouraging for the directors of museums and galleries. I very much hope that the policy will be reconsidered.
In mentioning the National Heritage Memorial Fund, I feel that we all owe an immense debt of gratitude to the noble Lord, Lord Charteris. He has made us wonder how the rather limited funds with which he has been provided have gone twice as far as anyone could expect. I am sure that his successor will do all he can to continue its good work.
I have a suggestion to make. The Secretary of State should start a comprehensive study of the benefits which the arts bring to the Treasury and the economy of the country. There are great benefits in terms of employment. Such benefits are provided not only through works of art but through opera, etc., and historic houses. The country as a whole is not sufficiently aware of the economic benefits which the arts bring to the country.

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I wish to make one final point. The outlook for the arts has been transformed. Waverley remains the best system that was ever devised. The national heritage is now centralised in the Secretary of State rather than having part of its business in the Department of Trade and Industry, which was a muddled affair. I feel that we have a new Secretary of State who will really care about our heritage. I wish him well.
4.13 p.m.
Lord Mulley: My Lords, I gladly endorse the remarks of the noble Earl in thanking the great benefactors who have made possible the acquisition of a number of important works of art and in commending the work that the noble Lord, Lord Charteris, has done in the National Heritage Memorial Fund.
It is only fair to say, to put it in perspective, that the former Minister with responsibility for the arts, the right honourable Tim Renton, only asked for an opinion about the principle of this scheme. He did not in any sense commit himself, or the government at that time, to it. I welcome the fact that the present Secretary of State in the new Department of National Heritage has rapidly said that it was a non-runner. I not only agree with that but I should like to see the funds that would have been spent on the administration of such a scheme made available for the acquisition of works of art.
While I think the Waverley rules are sensible—and we are indebted to the work of the reviewing committee—we should also pay attention to a rule which the department has adopted which I do not think was one of the original three Waverley rules; namely, whether there is a comparable work of art by the painter or artist available for public display in this country. That is obviously an important consideration. All too often we have the feeling that where a famous name is concerned or a famous picture, no matter from whence it came, we ought to keep it here. I am not at all sure that that is right. I would be in favour of abolishing the licensing system altogether.
What will happen in the future? So far as I understand it, the one part of the extension of the European Community for which we have full approval is the creation of a single market. If that is to happen, where will there be the barriers to which one has to present export certificates? If I had an old master which I wanted to sell—sadly I do not—what would stop me putting it in the back of a car, driving it to Paris or Frankfurt and putting it up for auction there by one of our own auctioneers—Christie's or Sotheby's? That problem has to be addressed.
Another problem concerns what will happen in a single market to the restrictions we have on the import, subject to quarantine, of domestic animals? If we do not have controls at the frontiers, what will happen? I hope that when he replies the noble Viscount will tell the House the Government's thinking in connection with the Common Market, at least on the question of free movement of works of art between the various members of the Community.
Since 1985 the grants to our museums have been frozen and that has coincided with a remarkable
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increase—it is abating a little now—in the auction values of all the old masters. It could not have come at a worse time. Not only the listing prospect, which I agree is now happily dead, but the actual operation of the licensing system has tended to pre-empt what funds were available in the public sector for the individual galleries to spend on such works of art that might be available either here or abroad and also on the works of contemporary artists. The money is often mortgaged because they have gone in to save this work or that work at the behest of the reviewing committee. We have to take a quite different view about it.
I accept the principle that if public money is to go in, as it should, to support purchases of works of art they should be available for public inspection. I do not draw a distinction between public galleries and private houses. Equally, I commend the fact that one of the first priorities of the new and rather controversial director of the Victoria and Albert Museum was to have the roof of the building waterproofed, which if one is conserving pictures is just as important as some of the other considerations.
I have a very good opinion of the Secretary of State for National Heritage and I have an idea which I hope the noble Viscount will convey to him. When many of our art galleries have storerooms or basements full of pictures which they never show—this is not a national but an international problem—I wonder why we cannot develop a system of exchange, perhaps beginning in the European Community and extending into the Council of Europe as developments occur. Such a system would not involve the expenditure of funds.
We are very short on the work of certain artists. I shall just mention one or two examples. There is a quite distinguished Luxembourg painter none of whose works are to my knowledge on show in this country. Certainly, we are very thin on the Austrians Klimt and Schiele and on the Norwegian Munch. Moreover, there are some very interesting Norwegian impressionists whose works I had never heard about until I visited the art gallery in Oslo.
It is possible that other countries have surplus works of their own artists as, indeed, we have many surplus works which, because we never show them, we might well be prepared to exchange. It should be possible, and I should have thought rather easier than having a valuation list, to encourage galleries to produce a list of works that they are prepared to sell or exchange. Then a review committee or an independent person could award so many stars, or whatever it may be—a plus or a minus—so that an exchange system could be run. That could be done during our presidency of the Community with the proviso that in no way would the Commission in Brussels be allowed to have anything to do with it.
A proposal could be put forward that consideration should be given to an exchange of surplus pictures in our galleries for pictures from foreign galleries which those concerned would like to have available in this country. I think that the idea is certainly worth considering. I agree that the details of such an exchange system have not been worked out but I should be very glad to work on it, if that would be

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helpful. However, I am sure that others could look at the matter more competently than myself. As I said, I very much hope that the noble Viscount will convey the idea to his right honourable friend, for whom we have very great hopes. We hope that he will discharge with much distinction the wide and difficult job that he has undertaken.
4.21 p.m.
Lord Gibson: My Lords, my only qualification for taking part in the debate is that I was for about 20 years, until I was superannuated last year, a member of the Executive Committee of the National Art Collections Fund. Therefore I had a ringside seat to observe the operation of our export controls on works of art. I should like to add my testimony to that of other noble Lords. For most of that period I thought that the system worked extremely well. It only broke down because of funding. It is not a crisis of operation or of the system; it is a crisis of lack of funds. On the one hand, since 1985 funds have been frozen: while, on the other hand, the prices of first-class objects —not of everything—rose inexorably.
One reads a note of bitter despair in the document that we are discussing today. I shall not quote the parts read by the noble Lord, Lord Annan, which are colourful and which have great impact. However, there is one sentence that I do not think he read out which seems to me to be particularly bitter. The report says:
"It is tempting to recommend that you should end the charade of the Committee's activities",
and so on. When good men, who, so far as I know, are paid nothing for their activities and who are very busy and expert people, feel that they are performing a charade, the word "crisis" is not too strong. Therefore, it is natural that the reaction of many people would be that we must fall back on the system of listing without compensation. I am very glad that that has been knocked on the head by the new Secretary of State. It would have been severely damaging to our art trade, as well as being unfair to owners.
Of course, our art trade has by far the largest share of the art market of the EC. Its success is largely due to our open, liberal system. Its skill and its experience are other components of its success. But one successful French auctioneer said that, if only he could operate under the British system, he believes that he could outdo British auctioneers. Whether or not that is the case, it is an indication of how much our liberal system is envied by the trade abroad.
I believe that the French operate three methods. First, they have a large list of objects which may not be exported. I forget the actual number of objects involved, but many thousands of objects may not be exported. Secondly, they require export licences for various categories of works of art—for example, by age, by price and so on—which the French Government can then acquire at the price on the export application. If one wants an illiberal system, that is quite a cute method. Thirdly, the French Government can pre-empt at the hammer price
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objects sold at auction. Thus they vigorously protect their artistic patrimony. In consequence, they have a much less vigorous art trade. We must try to hold, and continue to hold, the proper balance.
I applaud the decision not to proceed in that way. I must say that I believe discussing the possible introduction of a listing system—that is, a list of forbidden exports—is rather like discussing devaluation of a currency before one devalues. It leads to a rush to sell. I can only hope that that rush has now been stemmed.
But what can we do to protect things that it is very important for us to keep? First—and here I find myself at one with the noble Lord, Lord Renton—we must not try to keep too much. I say that not because of the cost to the Exchequer, although that is not unimportant, but because art objects which are movable and which satisfy the Waverley criteria should, in my opinion, move unless they are very rare. I shall just remind your Lordships of the objectives of the latter. First, is the object closely connected with our history; secondly, is it aesthetically important; and, thirdly, is it of outstanding importance for study?
Those criteria are often met by objects which are not of great rarity. An example would be a great Turner or Constable painting. It would be very nice to keep them but in a way I would rather see them go abroad. We have so many of them and unless it has a very special meaning for this country—which I cannot at the moment imagine because so many of the ones that we have have those qualities—I would rather that foreigners also had Turners and Constables in their museums and in their private collections. I should like the world's appreciation of such pictures to be equal to our own. It has not always been so, although it is now coming to be so.
Further, objects which are exported are not necessarily lost to view in this age of easy travel. Moreover, if works of art go into private collections they may well return. We should not lose sight of that fact. Another reason for us not to keep too many things is that in my opinion—and I say this as a former chairman of the National Trust and will therefore be thought to be biased, which I am—we need to devote a larger share of our resources to those objects which would meet the Waverley criteria, if they were applicable to them, but which are immovable and which, if neglected, will decay and disappear. The noble Lord, Lord Charteris, spoke of that category regarding the beneficiaries of his fund. I think that the claims of cathedrals, historic Churches and country houses must be brought into the Government's calculation of what we can afford. I urge that, other things being equal, immovable treasures score more marks when competing for resources than those which are movable.
However, as regards those movable objects which we should keep and which by reason of their quality, their association and their rarity will almost always be necessarily expensive, where are we to turn for funds? Apart from recommending better funding of public collections, the reviewing committee recommended a modification of the tax system to make private treaty arrangements more attractive to owners wanting to

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sell and an improvement in the operation of the gift aid scheme so that works of art could be more readily offered in lieu of tax. I heartily endorse those improvements. But a major source of funds can be expected ultimately from another source which has been mentioned once or twice and that is of course the national lottery.
I must declare a non-pecuniary interest here because, like my noble friend Lord Birkett, for a year or two I have been a director of the National Lottery Promotion Company. At the moment we do not think that we have done too bad a job. I hope that the national lottery Bill, which is still awaited, will set up the lottery in a form which will enable the net proceeds to support arts, sport and the environment really effectively and, I trust, with as much confidence as I can muster, that the Government will resist any effort by the Treasury to deplete the proceeds through tax. I know that the Treasury takes 37 per cent. of the pools but the comparison is false. The pools are corporations run for profit whereas the national lottery should be run for public purposes. I believe that the national lottery could provide a major contribution to solving the problem over time.
4.30 p.m.
Lord Beaumont of Whitley: My Lords, there was a moment when I thought that the noble Lord, Lord Annan, had merely given us the opportunity to hear the mandarins of the art establishment of the United Kingdom defending the status quo and asking for more money. The first half of the debate was in fact exactly that. But the last two speeches have slightly restored my faith in human nature. The noble Lords, Lord Mulley and Lord Gibson, have actually challenged some of the bases on which the previous speeches were founded.
If one goes back and reads the Anderson report (the Waverley report) and examines its logic, one will find that that element is remarkably absent. My noble friend Lord Donaldson spoke highly of Sir John Anderson and, yes, that document is a model of a civil servant arriving at a consensus—a consensus which will certainly work for at least a time and for quite a long time. But there is very little logic in it. This is particularly so when one comes to any kind of definition of what is the national heritage.
I am at one with, I suspect, everybody in this Chamber in thinking that we have a definite duty to save for this country those works of art which are specifically to do with the history of this country and part of our heritage. But there are a great many works of art which we are striving to keep which have absolutely nothing to do with it at all.
I think we should set up a logical basis by which we define what works are of national interest. I suggest that the way we could quite easily measure this is by saying, "If this was adopted by every other country would we regard it as fair?" The converse of that is "Do other countries regard our definitions as fair?" For instance, do the Italians regard Mantegnas as part of the British national heritage? It seems to me quite extraordinary if they should do so.
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We should narrow the definition and then we would have another look at the universally condemned—in this Chamber —list approach. Once we have a narrower definition of what everyone agrees ought to be kept in this country, then many of the disadvantages of the list system would disappear. We would then have a fairly small number of objects with which we could challenge people as to whether the guff that they often produce about being stewards actually means anything or whether, in the last resort, they are only interested in the money; in which case they could sell their works of art to the nation which would then preserve them.
If we had such a set-up we could indeed also apply a certain amount of common sense to another problem from which we usually run away; that is other people's ideas of what is their national heritage. I take as an example the Elgin marbles. If we say that a country should be entitled to preserve as much of its heritage as it can look after and preserve, we find ourselves in a rather difficult position with regard to the Elgin marbles. There was, of course, a time when it was right that we should keep them because it was quite clear that they would not be kept and preserved properly if they were returned to Greece. I do not think that that is the kind of accusation which we can now level against a fellow member of the European Community and I do not think that it is the kind of accusation we can level against Greece today.
There is a real case for looking at the whole basis of this problem. I do not think that in the debate today we have yet succeeded in examining logically and clear-headedly what it is that we are attempting to do. We would be well justified in causing a new national treasure to be formed by getting hold of some artist of any nationality and getting him to do a picture of the noble Peers sitting on the Cross-Benches and calling it "The Night Watch". It appears that they have in fact been performing that extremely good service of defending the status quo. But it is only a good service if we then look at the situation which will arise when we have several countries trying to apply this criterion. We wish to apply the same criteria as they do and we wish to respect their criteria, as we wish them to respect ours. With the so-called Waverley criteria, which I do not think stand up to any logical examination, we have not got it. I think that we should go back and start again.
4.37 p.m.
Lord Birkett: My Lords, I enjoyed very much reading the October 1991 report of the reviewing committee which is the cause of an admirable choice of debate by the noble Lord, Lord Annan. One does not usually look to White Papers, Green Papers and government reports as examples of fine writing, clarity and brevity. However, in this case I thought the report admirably written and I wanted to go on reading it. I congratulate Jonathan Scott, the chairman, on preparing such an eminently readable report. Of course, he had to spend a great deal of time perforce on the merits and demerits of the listing system. Thank

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goodness that is out of the way. I add my own voice of congratulation to the Secretary of State on that admirable decision.
One of the interesting things about the report is that it quotes literally dozens of experts on the subject of the Waverley criteria and the system as it is at the moment. Unlike the noble Lord, Lord Beaumont, I think it works admirably. It is singular that out of those dozens of experts there is one absolutely steady chain of agreement; first, that the Waverley criteria and the system work very well, and secondly, that the reason the whole system goes wrong is that there is not enough funding. Practically everyone whose views appear in the report said so.
There has not been a capital fund for the arts of any sort in this country for years. Even counting the small and now departed Housing the Arts Fund that the Arts Council used to operate there has not been any serious capital money available at all. It is a miracle that the noble Lord, Lord Charteris, has been able to do what he has. I add my voice to that of everyone else in congratulating him on spreading the little butter he has had so amazingly thinly and with such delicacy and grace.
Of course, one has to ask, "So where is the capital coming from?" I am glad to say that my noble friend Lord Gibson has declared my interest for me because I too am a member of the Lottery Promotion Company. I have been banging on about it for years, and I am delighted that it looks as though we shall have one.
The noble Baroness, Lady Birk, asked the Government whether the proceeds of the lottery would be confined to matters within the new Department of National Heritage. I do not know whether the noble Viscount will be able to give an answer. I suspect that his noble friend the Secretary of State has not yet worked out the details of the lottery. I rather hope that it will be confined to matters within the department at any rate for the major part, although I do not exclude all charities from it. The admirable decision to set up the Department of National Heritage and give it a Cabinet post—again something I have recommended for years and which I am sure meets with the approval of most noble Lords —has happily put almost everything that counts in the quality of life within one department. That is a sensible grouping. I hope that the proceeds of the lottery will wind up in the department, however they are distributed.
The question is how much those proceeds will amount to. The noble Lord, Lord Annan, was rather gloomy about the prospects and wondered whether the amount would be enough. He predicted, and I am sure he is right, that there would be countless applications for funds from all those who need money. We need all kinds of capital.
As regards preserving our national heritage, urgency is often of the essence. There may be great needs for all kinds of buildings within the arts, sport and the environment, where action is required within six months or it is too late. That is the case with a great deal of our heritage.
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Predictions about how much money a lottery would raise have often been looked at askance. People have said, "It's pie in the sky to dream of a turnover of £2.5 billion or £3 billion a year". Counting one's chickens before they are hatched has been a national pastime for years, but in this case one must try to do so. The only reason for predictions of large sums of money is the experience of other nations. Since we are the only country in Europe, except Albania, which does not have a lottery, there is much experience to go on. There are lotteries all over the world. If we carry out computations based on population, gross national income and so on, the figure of £2.5 billion or £3 billion a year gross is not too far fetched once a lottery is successful and up and running.
How much of the proceeds of the lottery goes back to our heritage and all the items associated with it, as the noble Lord, Lord Gibson, said, will depend on whether or not it is taxed. If somehow the Treasury can manage to keep its tax claws off the money, it will not only be beneficial to the lottery and the causes which will receive money from it, but I believe it will also be beneficial to the Treasury. There is a good case for saying that the amount that goes into arts, sports and all the other subjects we are talking about today benefits the Treasury indirectly by between four and eight times the original money. That is more than any taxation could achieve. Taxation of a charitable lottery, which I hope this will be, is ill advised. Whether the wisdom of my words will have any impact upon the Treasury is another matter; I hope however that it will at least listen to the argument.
I was pleased to hear the noble Lord, Lord Charteris, point out that he has only the capacity to save and cope with objects within our national heritage. I agree with several speakers that there is often too wide a definition of that. Anything that is both desirable and expensive tends to be described in the press as "part of our national heritage" if it happens to be found in our country. That is not only an illiterate but a hopelessly impractical definition of our heritage.
Like the noble Lord, Lord Gibson, I like to see works of art going round the world. What is more, I like to see them in private houses and private collections. There is a danger of art being regarded as something found only in museums while furnishings are found only in houses. It would be a poor world in which that was a criterion.
What is good is that the Waverley criteria work. They are a sensible guide to what should be retained. If my predictions about the lottery or some other form of income come true, everything in our garden may well yet be lovely.
4.45 p.m.
Baroness Brigstocke: My Lords, several distinguished and experienced speakers in this important debate, particularly the noble Lord, Lord Annan, have expressed far more eloquently than I could our anxiety that the country continues to be stripped of so many works of art, even precious natural objects such as the fossil, Lizzie the Lizard. But for a last minute rescue, it would have gone to Germany.

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I speak as a member of the Museums and Galleries Commission which welcomes the Secretary of State's decision to reject listing as an option for safeguarding great works of art from export. I join everyone who has spoken so far in believing that it is most encouraging that the Secretary of State appears to recognise that a relatively small amount of additional funding—£ 15 million to £20 million per annum, about half what the Getty museum has—is needed to make the present system work.
If museums had access to adequate purchase funds or, on occasion, to special Treasury grants, there would be a considerable saving of taxpayers' money. For example, the Badminton cabinet was initially available for purchase by the Victoria and Albert Museum for £4 million spread over three years. If a United Kingdom museum had succeeded in raising the eventual auction price, it would have had to pay £8.6 million, more than double the original price. Had a special grant been available in the beginning for this treasure, not only would it have stayed in the country but we should have got it for what one might almost call a bargain price.
Then there is the Middleham Jewel, for which the Yorkshire Museum was unable to afford the £1.4 million which it first fetched at auction. When it came up for export, I am glad that the museum was by that time able to acquire this important heritage object. But at what price? By this time it had risen to £2.5 million.
Additional funding is needed now. The national lottery which should be a major source of funds for acquisitions—or so I thought until I heard the noble Lord, Lord Annan—will not be operational for at least two years. Extra funding must come now through increases in museum purchase grants which, as we have already heard, have been frozen since 1985 for English nationals. There should be access to the public expenditure reserve for special grants for outstanding items. Latin seems to be in order this evening, so I say to the Treasury: Bis dat qui cito dat. He gives twice who gives quickly.
I fully endorse the call of the noble Lord, Lord Annan, for the acceptance in lieu scheme to be improved. I emphasise that the Museums and Galleries Commission places the highest priority on seeking new acceptance in lieu offers and encouraging owners to make more use of this excellent scheme.
I should like to turn to the noble Lord's implied criticism of the Museums and Galleries Commission. So far as I know, its negotiations with owners are always conducted with twin aims: first, to secure the maximum number of successful acceptances; and, secondly, to ensure that the tax settlement figure arrived at is fair to the taxpayer. It may be that the auction houses are not always too happy. I hope I may remind noble Lords that the usual commission figure that an auction house can expect to receive on an auction sale is a full 20 per cent., that is, £2 million on a £10 million painting, and the usual commission for a private treaty sale or acceptance in lieu is 5 per cent. Indeed, as the noble Earl, Lord Perth, has pointed out,
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an auction house takes an enormous cut when it encourages a private treaty sale or an acceptance in lieu.
The Secretary of State has the opportunity now to put a stop to the drain of great works of art from the United Kingdom. The Government have already demonstrated their commitment to the national heritage. Now I should like to see the Treasury follow suit by taking all the excellent advice it has been given this evening.
4.50 p.m.
Lord Palmer: My Lords, it is a great honour for me for the first time to follow a noble Baroness in a debate. I had intended to be brief but I shall be still briefer. I, too, am grateful to my noble friend Lord Annan for introducing this debate. Like other noble Lords, I greatly welcome the announcement by the Secretary of State. The idea we are discussing was fundamentally flawed from its earliest conception and the nation will be greatly relieved by the announcement and saved from irreparable damage.
I, too, wish to pay tribute to my noble friend Lord Charteris for his role as a much respected and loved chairman of the National Heritage Memorial Fund. I have two near neighbours, Thirlestane Castle and Paxton House, which might not have survived without the help of the National Heritage Memorial Fund, although sadly they have pinched all our visitors!
I feel I must declare an interest as almost everything I own is listed and indeed conditionally exempt from inheritance tax. My home also has the dubious honour of having the country's first maintenance fund. On 1st July 1978 the then treasurer of the Historic Houses Association, Commander Michael Saunders-Watson, wrote a letter to The Times bemoaning the fact that no maintenance fund had been established. That very same day we received notification from the Treasury that our maintenance fund had been accepted. I would at this point like to pay tribute to Commander Saunders-Watson for all the hard work he has put in over the years to help safeguard the nation's heritage. I do not think any of us realise quite how much he has contributed and how almost single-handed he persuaded successive governments from both sides to change the inheritance tax laws.
The Secretary of State's wise decision will be particularly welcomed by the private owner who, over the centuries, has played an important role in acquiring works of art and more importantly displaying them to the public, especially in houses that are open to the public. Many may now feel considerably freer and less restricted to resume their role in acquiring works of art. To have the arts supported by the private purchaser must be a good thing. I am greatly taken by the idea of the noble Lord, Lord Mulley, about exchanging works of art. The National Gallery of Scotland, for example, is literally stuffed full of works of art that have not been seen for years. Latterly the gallery has lent 70 pictures to Paxton House, which is situated next door to my home.
In his evidence to the Scott Committee Sir Hugh Leggatt mentions the national lottery—many noble

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Lords have mentioned that tonight—and we all eagerly await its introduction in 1994. However, it is vital that this is seen as additional funding.
As many noble Lords have mentioned, it will no doubt be difficult to allocate its funds between the arts and sports, and what must be taken into account is the fact that the arts by their very nature are a non-commercial activity. It will no doubt also be difficult to apportion funds between the fine arts and the performing arts. However, what is to happen before 1994? This was so well brought out by Mr. Timothy Clifford in his toast last week to the Royal Academy of Arts. There must be some interim extra funding and I agree with Mr. Clifford that the Minister should set up a committee of independent minded people to look most urgently into this matter.
If there is one message that comes out of the report and out of our debate this afternoon it is the gross underfunding of the country's galleries. Here one must hope that the Government will keep this continually under review. Time and time again those interviewed in the report mention "lack of funding" or something similar—we have discussed that tonight—and what of course must not be forgotten is that all those interviewed in the report were among the most distinguished in the field of the arts and the heritage. On page 12 of the report there is mention of maintenance trusts, and the committee rightly urges that they become more attractive for those trying to protect and conserve our built heritage. Today there are still under 60 such trusts in existence, which is a pathetic record if one considers that legislation has been in existence for the past 14 years. There are two extremely simple things the Government could do to rectify the situation. First, they could and should reduce the level of income tax levied on maintenance trusts. It currently stands at a ridiculous 35 per cent. —a full 10 per cent. higher than the basic rate. That surely simply does not make sense. Secondly, maintenance funds should be exempt from capital gains tax.
Finally, as an associated and vitally important measure, the Government could and should abolish VAT on repairs to listed buildings. I beg the Minister to look at these points and not to lose sight of the fact that maintenance funds have one purpose and one purpose alone which is to help preserve the nation's heritage.
4.57 p.m.
Viscount Astor: My Lords, I am most grateful to the noble Lord, Lord Annan, for initiating this important debate. I am well aware that when the noble Lord tabled his Motion he was concerned with the question of the listing of important heritage objects in private ownership and our response to the suggestion of listing by the reviewing committee.
I am afraid that in the meantime, if I may use a phrase that befits my right honourable friend's new sporting responsibilities, the Secretary of State has clean bowled the noble Lord. However, this has
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enabled your Lordships to concentrate positively on the way forward without any note of rancour which might otherwise have crept into the debate.
The debate has raised a number of issues mainly concentrating on the provision of adequate funding to enable the retention in this country of works of art and other heritage objects. In replying I am sure that your Lordships would wish me to say something about the establishment of the new department concerned with national heritage. I am sure that the House will join me in welcoming this important development.
The creation of a department with a Secretary of State at its head is an important step forwards. It is a just recognition of the value which the Government place upon all aspects of the national heritage. My right honourable friend the Secretary of State is uniquely equipped to head the new department. As a former arts Minister and Chief Secretary to the Treasury he has turned from poacher to gamekeeper and back, or indeed the reverse depending on which side of the fence one sits on. I am sure your Lordships wish him all success in his new, well deserved wider heritage responsibilities. I am delighted to be a member of his team and look forward to representing the department in your Lordships' House as well as —this is most important—representing your Lordships' interests in the new department.
It is undoubtedly true that our national heritage represents a major resource for this country and it is only right that we should be vigilant in ensuring that it is properly maintained. My noble friend Lord Renton pointed out the wide-ranging responsibilities of the Department of National Heritage—the arts, built heritage, sport, tourism, and broadcasting. Our remit ranges from Stonehenge to the Royal Opera House, Wembley to the British Museum, the Royal Parks to the BBC, and the British Library to Fleet Street, Wapping or wherever the press are now. We shall, as has been mentioned, also be responsible for legislation to establish the national lottery and implementing its provisions. The department is actively reviewing its role and its policies in all areas of its enlarged responsibilities.
I shall now turn to the specific issues raised in the debate. First, however, I should like to remind your Lordships of the debate initiated by the noble Baroness, Lady Birk, in May of last year. Much of that debate covered the same ground as we have traversed this afternoon. There was concern then for the underfunding of the Waverley system, so much so that the noble Earl, Lord Perth, called for a high level review, a working party that would examine the balance of purchase grants to national museums and galleries against the annual grant to the National Heritage Memorial Fund.
In that debate my noble friend Lord Rees asked whether I saw merit in transferring responsibility for the control of the export of works of art from the Department of Trade and Industry to the Office of Arts and Libraries. I am glad to say that we considered that suggestion, and we have made the transfer to the new department. Therefore, I must say to the noble

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Baroness, Lady Birk, that some of what is said in our arts debates is taken seriously and, indeed, acted upon.
The same concerns continue to exercise your Lordships today. But time has not stood still, and nor have the Government in dealing with those concerns. As I said, our most significant innovation has been the creation of the new Department of National Heritage. One of my right honourable friend's first major policy decisions was precisely to address the issue raised by the noble Earl, Lord Perth, in this House—the use of the Waverley system in the retention against export of important heritage objects, and also the other recommendations in the two most recent reports from the Reviewing Committee on the Export of Works of Art.
The Government are very conscious of the need to protect our heritage for the benefit of future generations. That is why our policy in relation to export control is kept constantly under review. It was in response to criticisms, particularly those expressed in this House, that my right honourable friend, the former Minister for the Arts, asked the reviewing committee to undertake a review of the operation of the Waverley system.
I should like to take this opportunity to congratulate the reviewing committee, which, under the chairmanship of Jonathan Scott, conducted what was a most thorough review of the present system of controls on the export of works of art. I am sure that noble Lords will agree with me that its report on that review was not only extremely well presented and argued, but also made excellent reading, a point admirably made by the noble Lord, Lord Birkett.
The committee was asked to examine the existing export control procedures against the background that "Waverley standard" objects presently require a compensating offer to purchase to be made before an export licence can be refused for them, and that existing financial constraints have contributed to a decreasing number of important heritage items being retained by the compensating offer method.
In its report the committee recommended, most reluctantly, that in the absence of additional funds a small list of perhaps 2,000 to 3,000 pre-eminent items was possible, though it set out a number of objections of principle and practice which surround the concept of listing. The purpose of such a list would be to define those few items which could be sold within this country but not exported.
My right honourable friend the Secretary of State has given careful consideration to the representations, which have almost unanimously opposed listing however limited it would be. He announced in another place last Friday that he shared the view that the disadvantages of listing far outweigh the advantages. Listing would represent a diminution in the rights of owners to dispose of their property as they saw fit and prohibition upon the export of outstanding heritage items would distort the market value, both for the outstanding items and for others. I am sure that my right honourable friend the Secretary of State will appreciate the approval of his decision expressed by all noble Lords today.
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In welcoming that decision your Lordships have rightly asked the crucial question whether the Government have accepted the view that an additional injection of public funding should be provided for the Waverley system in order that it may operate properly. Over the last six years during which the reviewing committee has reported on its activities, namely, between July 1985 and June 1991, 51 per cent. of export deferred objects worth in excess of £31.5 million have stayed in this country. That is creditable in a climate of continued high prices for pre-eminent works of art. My right honourable friend cares deeply about improving that percentage, but he has a duty to balance that against the wilder extremes of the fashions of the art market. When fashion and fancy lead to an extraordinary surge in the prices of particular objects such as we have seen over the past few years prudent public expenditure should not necessarily try to compete. Indeed, all of us have noticed that many of those prices have now started to come down.
Among the objects retained since May of last year, the Middleham jewel, an item starred by the reviewing committee, was purchased by the Yorkshire Museum. It is a noteworthy example of public enthusiasm and determination to succeed against enormous odds. Similarly the recent case of Holbein's "Portrait of a Lady with a Squirrel" acquired by the National Gallery, and Canaletto's "The Old Horse Guards" acquired privately but lent to the Tate, demonstrate how both public and private funding can be successfully tapped in order to acquire important objects for the benefit of the nation or to prevent their export. However, we must accept that we lost the Badminton cabinet, although it was not a starred item, as noble Lords reminded the House.
In May last year I pointed out at some length the Government's record in maintaining a balanced approach to retaining this nation's heritage. In addition to the significant grants given to bodies such as the National Heritage Memorial Fund and others to assist in the purchase of items threatened with export or destruction, there exist a number of important tax concessions created by the Government to support our heritage with which the noble Lords will be familiar.
I echo the tributes paid today to the noble Lord, Lord Charteris, for his magnificent stewardship of the National Heritage Memorial Fund. In his 12 years he has received in grant £123 million and managed to convert that to spending of £143 million—I apologise to the noble Lord, £153 million! That is a feat of which many government departments would be very proud, if they were able to match it. We must all appreciate what the noble Lord has achieved. It is important to remember that what he and his fund have managed to save puts export licence problems into their proper perspective. Many great items have been saved for this country.
I should like to remind your Lordships of our record. Heritage items, buildings and land may be offered in lieu of inheritance tax. In 1991–92, 12 items were accepted in lieu of just over £3.28 million of tax. Since 1980 over £45 million worth of tax has been

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satisfied in that way. Several noble Lords—in particular the noble Lord, Lord Annan, and the noble Lord, Lord Donaldson—called for further encouragement in the take-up of that concession by raising the douceur from 25 per cent. to 50 per cent. and making it more flexible. I can assure your Lordships that the matter will be kept under review. However, I am pleased to say that at present there is no shortage of offers in the pipeline. I can say to the noble Lord, Lord Strabolgi, that the Government's policy in relation to the ceiling for those funds remains as stated by my right honourable friend the former Minister for the Arts.
The Government also offer a significant tax concession to individuals owning items on which inheritance tax is due if that item is sold to an approved institution. Between 1985 and 1991 items valued in excess of £55 million have been acquired by UK museums and galleries through the mechanism of the private treaty sale at a cost to those institutions of only £25 million—under half the gross figure.
The noble Lord, Lord Annan, drew attention to the disincentives to auction houses to negotiate private treaty sales. I shall draw this to my right honourable friend's attention for further consideration in the context of the tax concession arrangements for retaining heritage quality items. But I must say that I believe that the auction houses have been very helpful in negotiations over private treaty sales and have given many people great help in achieving those sales.
I must add that there is the system of gift aid, an excellent tax incentive, which has been warmly welcomed by the arts world. It covers one-off single payment donations from £400 upwards and was reduced from £600 in the last Budget. I am sure that that will lead to a significant surge in personal and corporate support for museums, theatres and arts organisations all over the country.
Much of the discussion today on funding has naturally centred upon the continuing freeze on the purchase grants for national museums and galleries, on funding of the National Heritage Memorial Fund and on the possible benefits of the introduction of a national lottery. It is the case that the purchase grants of the national museums and galleries have been frozen since 1985. Nevertheless, just over £9 million is provided annually. The decision by successive Ministers to freeze purchase grants reflects the priorities identified by the national museums and galleries in their annual corporate plans that extra resources available should be directed to running costs and building works. In announcing his decision on listing, my right honourable friend said he was sympathetic to the reviewing committee's view that between £15 million and £20 million per annum would solve most of the problems of the export of significant items. He will bear that in mind in the forthcoming public expenditure round. He can of course give no guarantees of additional funding; but he accepts the reasonableness of the case made by the reviewing committee and others, as well as by noble Lords today.
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We have discussed the introduction of a national lottery and the degree to which the proceeds might assist in the retention of our heritage in this country. We are at an early stage, and the consultation period on the government White Paper closed only recently on 1st June. The responses are still being analysed. It is therefore too early to identify precisely who will be the beneficiaries or to provide details of the level of additional funding which it might generate. We do accept that the lottery should be additional funding and hope to introduce a Bill in the autumn.
There are a number of procedural recommendations in the reviewing committee's last report concerning the operation of the export controls, some of which have been touched on today. Most of them remain to be considered by my right honourable friend. For example, he is sympathetic to bringing natural heritage items within the scope of the controls, but a practical definition is still being sought. We also see a great deal of merit in encouraging private offers but will reflect separately on the committee's wish to circumscribe them with access and conservation conditions.
We agree with the noble Lord, Lord Donaldson of Kingsbridge, that the Waverley rules have worked well and have stood the test of time. The Government agree entirely with the sentiments expressed by the noble Lords, Lord Palmer and Lord Cobbold, on the importance to this country of the private owner and private collector. I shall study carefully the points that were made, particularly in regard to maintenance funds and grant aid to English Heritage.
A number of noble Lords, including the noble Lords, Lord Donaldson and Lord Mulley, referred to measures proposed by the Commission in Brussels. It may be helpful to clear up one or two misapprehensions and bring your Lordships up to date with developments.
A number of member states are anxious that the creation of the single market and the removal of internal frontiers may mean that many cultural items will leave their territories without the permission of the national authorities. Some of them may be national treasures which should not have left at all and which Article 36 of the Treaty of Rome allows as an exception to the operation of a free market in goods. Our Waverley system will continue after 1992 to define our national treasures. Some noble Lords no doubt regard the European Commission under Mr. Delors as an interfering busybody. But it does recognise our right to continue our own export system and the equal right of each member state to do the same.
The mania for harmonisation and approximation has not yet manifested itself where national treasures are concerned. But I am sure that it will, if we are not vigilant. I say to the noble Lord, Lord Mulley, that he will not be allowed to take his old master to Paris, Brussels or Bonn without an export licence. If he does we shall make strenuous efforts to seek its return.
Lord Mulley: Perhaps I may make it clear that I do not have any such picture.Lord Mulley: Perhaps I may make it clear that I do not have any such picture.
Viscount Astor: I am sorry that the noble Lord does not have one. If he should win the national lottery he

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may acquire one. We may have reason to feel flattered that the Commission and some member states have a high regard for our Waverley system, with its pragmatic approach and the balance it strikes between the interests of the nation, the art trade and owners.
With its current proposals the Commission is trying to achieve an extra level of protection over and above each national system, based on close co-operation between member states. Thus the directive allows for the return of national treasures which are found elsewhere in the Community outside the territory of the member state. The regulation requires individual cultural items falling into category and value limits along the same lines as our own system to be accompanied by an export licence when they leave the Community.
None of that will be retrospective. No object currently in public or private ownership in the United Kingdom is threatened by restitution, however murky its past. I must say to the noble Lord, Lord Beaumont of Whitley, that I disagree with him about what he said about our heritage. I do not believe that our heritage should have "Made in Britain" stamped on it. I believe that great works of art transcend national barriers and cultures. I hope that we shall always be able to appreciate the Elgin Marbles in the British Museum.
Lord Beaumont of Whitley: That is exactly what was saying. They transcend barriers and therefore they should not be kept in one country.
Viscount Astor: I apologise to the noble Lord if I misheard him. In that case I totally agree with him. The Government in negotiation have influenced the content of the Commission proposals away from the heavily bureaucratic, though in some ways idealistic, toward a more realistic, potentially effective system which should result in only the minimum uncertainty for buyers and sellers of cultural goods. In order to have that additional protection we shall have to accept that some uncertainty as to the correct provenance of items is inevitable. I am sure that we can do so, given the great importance that we all attach to protecting the heritage. Trade in legitimate works of art is a vital part of our economy. We have no intention of weakening it both in this country and in the Community generally.
The noble Lord, Lord Annan, raised the point about the Three Graces. I understand the frustration when an offer is made, whether it be from a public or private source, and it is refused. However, I am sure your Lordships would be among the first to raise the alarm at any attempt to legislate for compulsory powers of purchase over private property. That is an important point.
The noble Lord, Lord Gibson, who does sterling work as chairman of the House of Lords' Works of Art Committee, sensibly said that we must keep only the most important works of art. We have won support for that among European countries. Our system works but it is never easy to say that the built heritage should have a financial priority. It always has to be on the merits of each case or indeed on the merits of each crisis.
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It has been a stimulating debate. Financing the purchase of important objects has and will always remain a problem. However, I hope that I have gone some way to assure your Lordships of the goodwill of this Government towards meeting the problem with a variety of solutions. My right honourable friend the Secretary of State will be putting his considerable determination and skills into support for the heritage in all its manifestations. I should like to think that a similar debate in a year's time will record the results; and I look forward to that rumpus, in the words of the noble Lord, Lord Charteris.
5.20 p.m.
Lord Annan: My Lords, I am most grateful to the noble Viscount for replying at such length and so well. I do not wish to break any lance with him, but I congratulate him on the splendid statistic that the department dug out about 51 per cent. of all objects being saved. It does not deal with the value of those which were not saved; and it was those, the most valuable, which got away.
I also thank all noble Lords who have taken part in the debate. Like others, I cannot fail to single out the noble Lord, Lord Charteris. If ever there was a case of the right man in the right place, it was his appointment as chairman of the National Heritage Memorial Fund. It is characteristic of the noble Lord, and in the tradition of his regiment, that, although he could perfectly well have pleaded that he was today a walking wounded, he is present on the battlefield.
I believe that, unless something can be done in the fairly near future, we are bound once again to have some new scheme —not necessarily listing—raising its head. I look forward to the noble Lord, Lord Strabolgi, having conversations with M. Laclotte of the Ministre des Beaux Arts or M. Pierre Rosenberg of the Louvre, and trying to convert them to the English model. We are not European on this matter. Through the Commission we may be able to achieve some liberalisation of the export of works of art in other countries in Europe, but I would not put too much money on it.
I thank the noble Viscount again and all those who have spoken. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.
Baroness Trumpington: My Lords, I beg to move that the House do adjourn during pleasure for five minutes.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 5.23 to 5.28 p.m.]

Energy Strategy
Lord Tordoff: My Lords, it is with some regret that I have to inform the House that my noble friend Lord Hanworth appears to have become indisposed or to have met with an accident. Therefore it is my intention merely to move, in a rather formal way, the Motion on the Order Paper. It seems to me —and I have the agreement of the usual channels that this shall be done

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—that we should proceed with this important debate, if for no better reason than that the noble Lord, Lord HolmPatrick, will grace us with his maiden speech. It would be very unfortunate if he were deprived of that opportunity.
I am sure that my noble friend had many things to say in opening the debate which I cannot emulate. The long-term strategy for the generation and use of energy and the inter-relationship between nuclear and renewable fuels is an important matter. I only wish that we were in a position to hear my noble friend on those problems. Nevertheless, we have the opportunity of hearing other noble Lords give their views on the subject. Therefore, I beg to move the Motion for Papers standing in his name on the Order Paper.
5.30 p.m.
Lord HolmPatrick: My Lords, I am pleased to speak to the House for the first time and to do so in this important debate. In order to stay within the traditional guidelines of a maiden speech I shall say a few words on a particular aspect of this important subject, while sticking to the efforts being made in the British Isles.
There are in place in the British Isles a number of power stations which burn either non-renewable fossil fuels or are nuclear powered. I must say that without them we should not have much electricity with which to supply our domestic and industrial needs. I should not hesitate to say that the whole House is concerned about the polluting effect on the atmosphere of the burning of fossil fuels. I have no doubt that your Lordships are also aware of the increasing problems of the disposal of certain waste materials from power stations.
With the increasing demand for electricity new power stations will be built and some of the older stations will have to be replaced in the near future. But do they all have to be replaced with conventional power stations? I believe that there are alternative sources of power which should be given serious consideration. I am talking about renewable energy from the earth's natural resources. Hydro-electricity has been used for some time. It is clean and renewable but it has its problems. Any major projects tend to have a large and somewhat distressing environmental impact. It is now a little difficult to find new sites. Only recently has the technology for smaller hydro-electric generators been good enough and now a landowner or small community wishing to install a small turbine can take advantage of the considerable price reduction in the installation of such a machine. They can now also rely on the co-operation of their local electricity board.
Energy can be obtained from various wastes. That which strikes me as being the most significant is the landfill site. Properly-buried waste will gradually break down and the organic matter contained will produce methane gas which can be used for all kinds of purposes, including the generating of electricity. My local site has recently installed a small plant to collect the gas which is then taken away in a tanker. That is a small reward, if you like, from what is an
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ever-increasing headache; namely, the disposal of domestic rubbish. That source is renewable but it is not quite clean.
Solar power is not a strong contender and must be further researched and developed before we have much use for it in this country. I am sure that many noble Lords have already made arrangements to receive during the Recess a guaranteed supply of that renewable source of energy while in other parts of this planet.
Perhaps I may at this stage remind the House of the non-fossil fuel obligation which came about in 1990. There is an 11 per cent. levy on all electricity produced by fossil-fuel burning power stations. The money accumulates and is held by the non-fossil fuel purchasing agency. The power companies can draw from that fund enabling them to buy in at a premium price any electricity produced from non-fossil fuel sources.
One such renewable source of energy which has been able to take advantage of that important act is the wind farm. I should like to congratulate Wind Electric, National Power and South-Western Electricity Board for their combined effort in setting up the first commercial wind farm at Delabole in Cornwall. Wind Electric was formed in 1989 and was the result of 10 years' research and hard work by a determined individual. Cornwall County Council granted planning permission in August 1991. A company in Denmark was approached to supply the 10 machines required. At the beginning of December everything needed to start the installation was on site. By 15th December Delabole Farm was producing its first electricity, which was fed into the grid system by means of a small substation.
Not only must a great deal of money have been saved—the on-site operation lasted only 15 days—but the environmental disturbance and the disruption to local traffic was kept to a minimum. Your Lordships might be interested to know that the 10 wind machines at Delabole represent 12 million kilowatt hours per year, which in real terms represents one year's consumption by 3,000 average households. Wind farming has attracted a great deal of interest from landowners because in these difficult times it offers an alternative to producing crops and raising animals. I believe that it will be many years before even the most ingenious and hardworking farmer will find a way of overproducing electricity.
There has been insufficient time to assess how much distress is caused to local people either by unsightliness or by noise from wind farms. But there is nothing more unsightly than a pylon in your own backyard—and we all had to get used to that. The sceptics, in particular those who support alternative forms of energy but "not in my backyard", should go and see for themselves as I did. I believe that the number of machines that we shall see in future will be limited by common-sense and by normal planning permission. Legislation is the only way in which we shall see a dramatic increase; the same legislation that brought us pylons.
I have dared only to come up with a few simple facts and figures. Multiplied by the number of wind

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machines on proposed sites throughout the British Isles they present a strong case and show that wind farming has a great future in Britain.
5.36 p.m.
Lord Wade of Chorlton: My Lords, I am delighted to be able to congratulate my noble friend Lord HolmPatrick on his maiden speech. His splendid effort was made even more remarkable by having to make his speech in rather unusual circumstances. We are all aware of the nervousness of the occasion. To see a huddle of noble Lords at the end of the Chamber before being called upon to speak must make the experience even more nerve-racking. Your Lordships might not he aware that he is also an important member of the House of Lords' tug-of-war team. Let us hope that he pulls as well as he speaks. The House of Lords will then again win a great victory. I agreed with his comments about the importance of alternative energy, in particular wind power which undoubtedly has an important part to play.
I am sure that all noble Lords pass on their best wishes to the noble Viscount, Lord Hanworth, if he is indisposed. We thank him for bringing forward the debate.
I wish to talk about two issues; the first is combined heat and power and the second is the opportunity for the use of bioenergy and biomass. Combined heat and power brings together the opportunity to reduce the use of energy and to use it more efficiently. Energy is the key to creating development, opportunities, growth and wealth. The sudden development of cheaper and easier forms of energy has created the great economic surges in our history. Since the middle of the last century we have been dependent upon oil as a cheap source of energy. It has generated the engine which has created the enormous improvements in people's lives and has led to the tremendous economic development during the past 100 or so years.
Inevitably there will be a change in that engine which creates and makes energy available not only to us in the West but to the rest of the world. It may well be that the great opportunity of the future will not be the discovery or development of a new source of energy but a more efficient use of the energies which are now available to us. The development of the technology will make those energies more available to the world at large and will make the use of our energy sources more economical and cheaper. That is the great opportunity now before us. Combined heat and power will, by bringing together all the technology needed to create from the use of one energy the development of another, be one of the key issues that we can develop.
There are certain opportunities that others in Europe have which we do not. Certainly to be able to sell automatically into the grid the electricity produced from combined heat and power would be another great stimulus and encourage many more companies to use it. There are more opportunities within our health service and schools to use and get the benefit of combined heat and power, which would reduce their costs very considerably.
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In my view, the other area at which we must look is eastern and central Europe. Certainly when considering the way in which they run their industries it is apparent that the tremendous cost of energy has been one of the great difficulties in developing their economies. I hope that the Government will find ways to encourage those who can help in central and eastern Europe to develop combined heat and power and show the benefits of renewed energy systems because that will do a great deal of good for the developing economies of those areas. That is a great opportunity because Britain is so well ahead on combined heat and power technology, which we can sell and develop in the rest of the world.
The other matter to which I wish to refer is biotechnology and the opportunity in the future to produce energy from crops. Your Lordships may remember that last year the House of Lords' Select Committee on agriculture, under the chairmanship of my noble friend Lord Middleton, produced a report on non-food use of agricultural products. It used as its analysis a report published in 1986 which then estimated that in order to make crops viable with other energy sources —oil, at that time—there would have to be a subsidy of £67 per tonne, bringing wheat prices down to £45 per tonne before energy from wheat could compete with the price of oil.
However, it is interesting that in the past three weeks decisions have been taken as a result of the renegotiation and reform of the CAP that will bring down wheat prices within three years to £65 or £70 per tonne. In 1986 the price of oil was about 11 dollars per barrel. The price of oil now is around 22 dollars per barrel. There is considerable talk on the world scene about having further energy taxes which again will increase the price of oil. Some noble Lords may remember an interview which took place a few weeks ago with the oil Minister for one of the oil producing Middle East countries. He said that if the western nations wish to gain by taxing their oil—"our oil" as he described it—the producers should increase the price of oil so that they also get something from it. In other words, if the West increases the tax on oil, the producers will want more for it. Putting those two matters together there is every indication that, over the years ahead, the price of oil will increase and the price of our cereals will fall.
In addition, it is estimated that within the UK alone some 500,000 hectares will be taken out of production within the next three or four years, again as a result of the CAP reform. Therefore, it seems to me that decisions based upon facts emerging in the mid-1980s have changed dramatically and there is an important opportunity for us to look again at the use of crops for development into oil products and energy. Now is the time to take up that opportunity. We should not leave it until the fall in prices suddenly makes that possible because time is then taken to develop the technology efficiently.
I hope that in both those areas the Government can play an encouraging role—because I do not believe that governments should play too great a role—in the development of those two technologies.

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Biotechnology and the more effective use of crops —crops can be more adaptable for this aspect—will also take great strides. The bringing together of all those new technologies can mean the rebirth of a new energy level which can be the stimulus to continual growth during the next century.
5.45 p.m.
The Earl of Shrewsbury: My Lords, I too congratulate my noble friend Lord HolmPatrick on an excellent maiden speech in fairly difficult circumstances. I hope that we shall often have the pleasure of listening to him giving us the benefit of his knowledge about various energy and environmental matters.
I have listened carefully to what my noble friend Lord Wade has just said about biomass and alternative forms of fuel through cereals and other methods. I agree with everything that he said but I should like to speak about more conventional fuels.
My particular interest within the field of energy is concerned with the opencast coal mining industry in this country and also the waste management industry, and in that I must declare an interest.
First, the opencast coal industry plays a vital part in the production of coal for the national generating bodies. I congratulate the Government wholeheartedly on the soon-to-be-privatisation of British Coal. We have a vibrant, indigenous coal industry in this country and it is my view that privatisation will open the doors to produce a much more competitive industry where a cheaper product will be produced to the benefit of industry in general and the individual customer.
A major constraint on the private sector in the past in the opencast business has been the tonnage licensing system. Although relaxed over recent years to a maximum extraction limit for private sector opencast operations of 250,000 tonnes, I hope that, as a part of the new legislation which will soon come before us, that tonnage limit will be scrapped.
In purely economic terms, there are economies of scale involved. It is much cheaper to win, for example, 500,000 tonnes of coal than 250,000 tonnes of that mineral. Thus, coal becomes cheaper to the generators and it follows that then, as a fuel, it can compete in economic terms with alternative fuels used in the production of electricity into the national grid.
However, even after privatisation there will still not be a level playing field in European terms as subsidies to the coal industry will still be in force in Germany and Spain. That anomaly will almost certainly have to be addressed at some stage in the very near future as this country cannot be expected to compete in Europe on unequal terms. As I have said before in this House on a number of occasions, there are many matters coming from Europe where we in this country find ourselves at a serious commercial disadvantage when conducting business with our European counterparts.
To sum up this particular subject, by the removal of the present tonnage licensing system, there will be provided cheaper coal and less need for foreign
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imports of this basic fuel. Therefore, that will bring considerable benefit to the Exchequer and the balance of payments.
As regards the landfill and waste management industry, as other noble Lords have already said, landfill of household waste is an increasing problem and such sites produce considerable amounts of methane, which is often dispersed through a venting system, into the atmosphere. However, there are some such sites which have already harnessed that problematic gas and are producing electricity into the national grid. I suggest that that process has a great future. Each year every household produces increasingly more waste and it must be disposed of in an environmentally friendly way. By producing and harnessing a potentially useful byproduct—methane —considerable benefits can be achieved. Although such a method of energy production makes but a small dent in the country's total energy requirement, it is a useful contribution, and one which has a long-term future.
5.48 p.m.
Lord Skelmersdale: My Lords, it is many months since I last referred in your Lordships' House to the, to my mind, great English satirists of the 1960s—Flanders and Swann. One of their themes seems to me to be appropriate for today's Motion on which I congratulate the noble Viscount, Lord Hanworth, in his most regrettable and unfortunate absence, for bringing the views of my noble friend Lord HolmPatrick to our attention. Never can a maiden speech have been made by a hereditary Peer in such unusual circumstances. I congratulate the usual channels on going on with the debate and my noble friend, not only for his bravery, but also for getting this debate onto the rails with such verve by talking about alternative energy.
Perhaps I may say in passing that, contrary to what one might gather from the list of speakers today, there is no north west or perhaps western Mafia in the energy field on this side of your Lordships' House, although my noble friend Lord Wade may have known some of the maiden's thoughts as I thought the two speeches went together hand in glove and worked together extremely well.
The theme to which I refer is the Flanders and Swann reformulation of Sir Edward Boyle's famous chemical law. As I recall, it went, "The greater the external pressure, the greater the volume of hot air". As debates in your Lordships' House have shown over the years, we are great agents of external pressure but are the exception that proves the rule. We rarely if ever get hot air from governments of any persuasion as a result. I am sure that we will not do so from my noble friend Lady Denton who has the unenviable task of responding to what I anticipate will be a wide-ranging debate this evening.
Many years ago I met what can loosely be described as "hot air" in Costa Rica. A British veterinarian under contract to the ODA had spent much of his time in a veterinary research institute developing a simple methane generator. He had joined a number of thick black fertiliser sacks together, laid them on a slight

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slope in the sun and channelled slurry from the cow shed through them. A pipe led from the centre of the contraption to a twin ring gas burner. When I saw it a large saucepan of water was boiling away merrily. Ever since—that was 10 years ago—I have believed that that could be the start of an energy policy for rural areas in the third world. At no cost a waste product goes in and gas and a low-grade fertiliser or fuel comes out at the other end.
I am ashamed to say that the ODA did not share my enthusiasm. The vet in question nearly got the sack from his contract, in spite of the enthusiastic support from the then Ambassador. To the best of my knowledge unsophisticated technology of the type I described has never been widely taken up. Cheap energy is as much a human requirement as cheap food or water. After all, all those things sustain life on earth.
Moving closer to home, in recent weeks, since visiting British Gas in the Recess, my thoughts have become much more high-tech. I have been trying to work out for myself what the Government's electricity policy actually is today and how, or rather whether, things have changed under the new regime of the primary sources of energy being treated as industries in the same way as, for example, the car industry under a ministerial team in the DTI.
I congratulate my honourable friend Mr. Eggar on his appointment as Minister for Energy. He comes to this newly created post at a time of both opportunity and challenge for energy. It is a time when stocks of plutonium will last for something like 400 years if used wisely and consumed not in a fast breeder reactor of the type we know at Dounreay, which was indeed designed to breed, but of the type which is being developed on the continent—one that consumes all its own nuclear waste. I suggest that that is a better solution than the potentially dangerous long-term storage of such wastes which have half-lives of thousands of years.
Be that as it may, around 5 per cent. of our electricity comes from nuclear power. As I understand it, that is to continue as it is a good way of producing base-load electricity. Many of us cast envious glances at the French with their much higher proportion of nuclear and hydro-electric schemes leading to extremely cheap electricity. That electricity is imported into this country at moments of stress through the under-Channel link.
Coal has always been the primary fuel for the bulk of energy generation. The trouble is that British coal expensively mined, as it has been in the past, had been pricing itself out of the market until the Government began a massive £8 billion investment programme with the objective of producing cheap coal for the nation. As my noble friend Lord Shrewsbury said, our imports have been growing at an alarming rate. That may be healthy for the generating companies but it certainly is not healthy for the long-term future of our coal industry. In passing, I have noted the words of my noble friend the Lord Privy Seal in another place when, as Secretary of State for Energy, he said that the way to achieve cheap electricity was for British Coal to achieve new long-term contracts when they came up
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for renewal in the near future. He was sure that they would. At the same time he inferred that he was not against imports as long as the exporting countries were not subsidising production unfairly. That was another point made by my noble friend. I noted that during the last Commons energy Questions before the election, Germany was specifically criticised in that respect.
It is not only cheap imports of coal that are putting pressure on the system. The potential of using gas in generators has been at least as great a challenge to the coal industry here as have imports. Not only is it cheap, but also it is a low polluter. It is easily and safely delivered direct to the consumer's premises without the need for unattractive road and rail transport. It is no wonder that we are seeing what has come to be known as a "dash for gas". That is an expression on which I am not keen but it works as a descriptive phrase.
My right honourable friend the President of the Board of Trade said that he does not want to see that taken too far. But how far is too far? The electricity industry has a duty to go for the cheapest primary fuels available. That must mean the cheapest after environmental costs are taken into account. At least, I assume it must, but to say the least the signals are a little opaque in that respect at the moment. Perhaps my noble friend will be able to give us some guidance.
The point the department must bear in mind is that by influencing either the generators or any one of the primary fuel producers, there will be an inevitable knock-on effect on the others in the chain. With the exception of nuclear, they are all either in or about to be in the private sector. That has a direct effect on their ability to raise capital. It was that more than anything that persuaded me that they would be far better off in the private sector. My noble friend Lady Denton will recall that I have made that point before—and recently. I make no apology for repeating it.
Up to now capital has been available from the City for the investment that is so badly needed and doled out sparingly by governments over the years. Money is needed for the replacement of generators, for cleaning up the environment and for the prevention of leaks. Years ago I knew the figures for the leakage of electricity, water and other fuels. Today I have only been able to check the gas figure, which is around 1 per cent. and I am told is falling. It is falling because of the replacement of cast iron pipes by the new alkathene piping and the development of the intelligent pig which identifies weakness in pipes before they actually crack.
Of course, all that is at a cost, and a cost which must be paid for. If the companies are so bound up by regulators and the Office of Fair Trading that the net result is that capital becomes more and more difficult to attract, nobody wins—the consumers because costs will rise; the environment because leakages and airborne pollution go on far longer than they should; and the shareholders, whether large or small, because they will not receive the profits that they were either promised at the time of the various privatisations or have come to expect subsequently.

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It is fashionable for government Ministers to tour the world looking for better ways of doing things in this country. I hope that my honourable friend will go to America for exactly the opposite reason. It is true that he will find the ultimate in competition. But he will not find a happy state of affairs in the gas industry. Information has reached me that, although it is cheap and environmentally friendly, it has been losing market share consistently throughout the 1970s and 1980s. From 1970 to 1988 figures show that the gas market share fell from 39 per cent. to 34 per cent. of the United States energy market. That is a different picture from that in the United Kingdom where, over the same period, it has quadrupled.
A little research will show whether or not my information is correct. I am told that supplies are becoming more and more unreliable; the regulatory authorities have changed policy several times and the market is fragmented, often resulting in the purchaser being responsible for the transport from the wellhead. The last point I take particularly seriously as, not only is the leakage figure said by some to be an unbelievable 15 per cent., but also because I was proud to play a part in the Oil and Gas Enterprise Bill in the early 1980s which not only put transport of gas firmly where it rightly belongs—with the supplying company—but also opened the pipelines to other producers of oil and gas. When that was reformulated in the Gas Act 1986 it was extended to cover any supply company, a form of competition of which I am sure the whole House would approve.
I have not answered my own questions. All I have achieved is to produce a few thoughts for the Government's consideration. In this House we are delighted that the Government have agreed with your Lordships' Select Committee on the European Community that energy and the environment are inextricably entwined; that they believe in cheap energy and a multiplicity of primary producers. I hope that this debate will result in showing how the Government intend to unify all these rather disparate strands.
6 p.m.
Viscount Mersey: My Lords, in his absence, I would like to thank the noble Viscount, Lord Hanworth, for making this debate possible. I am sure that we all join in wishing him a speedy return to this Chamber and completely fit. I also congratulate my noble friend Lord HolmPatrick on making such a splendid maiden speech in adversity, one might say.
In such a wide-ranging debate as this I think it important to narrow down to specifics. I wish to speak about three things; the first is the Drax power station, the second is the Lloyd's building and the third is birth control. All three, strangely, form a sort of trinity or the three legs of a tripod, one could say. The first leg of the tripod is Drax. It is our biggest power station and generates five gigawatts electric. Noble Lords will know that National Power are retrofitting scrubbers to this mighty edifice, which is coal-fired and which therefore emits sulphur dioxide. The scrubbers will cost more than the original power station and they will
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need power to operate them—indeed, 4 per cent. of Drax's total generating capacity. Thus, while Drax will emit less sulphur dioxide it will emit 4 per cent. more carbon dioxide. In terms of greenhouse gases the Drax scrubbers are bad news.
At Drax there are also material handling problems. On top of the thousand of tonnes of coal fed into Drax 24 hours a day there will be thousands of tonnes of limestone hauled in and then converted by the scrubbers to gypsum. Then thousands of tonnes of gypsum will be hauled out. All that movement will generate more heat. The good news is that Drax is using some of its heat. The greenhouse gases are ripening tomatoes in a vast complex of real greenhouses nearby. It is thus a rather peculiar type of combined heat and power plant.
At this stage I must declare my interest as being the present president of the Combined Heat and Power Association and also tell noble Lords the good news that my noble friend Lord Wade of Chorlton will soon be succeeding me. From what he has said so far, he clearly has a much better grip of the subject than I have gained in the past three years. But I hope that my specific example of the tomatoes at Drax has illustrated to noble Lords that CHP is a versatile, elegant and sophisticated technology that is certainly environmentally friendly. It is not necessarily simple enough to solve the greenhouse gas problem worldwide. Even at Drax one problem begets another. The scrubbers emit the carbon dioxide; the carbon dioxide grows the tomatoes; but then the tomatoes themselves have to be moved from Drax in their millions and the vehicles carrying the tomatoes emit yet more carbon dioxide.
The second leg of this somewhat peculiar tripod is the Lloyd's building in the City. I must mention that on my way there, as it were, CitiGen's new combined heat and power station in Charterhouse Street will produce 90 megawatts electric when completed. It is similar to the Lloyd's system, in that they are not really combined heat and power stations so much as combined cooling and power stations. The need in high-rise office blocks nowadays is to lower the temperature and not to raise it. I gather that even on the coldest January morning that is the case. True, at around 7 o'clock on a Monday morning in particular, the underwriting floors at Lloyd's are cold and they should be heated up to around 20 degrees centigrade, which I believe is the optimum working temperature.
But by 2 p.m. that 20 degree centigrade will be 23 or 24 degrees and that is simply due to the body heat of the 5,500 underwriters, each of whom gives off 200 watts. In fact, the underwriters are generating 1.1 megawatts thermal themselves. Lately, indeed, some might have had cause to wonder whether underwriting insurance is not a rather less attractive option than turning oneself into a very small power station. One syndicate of five underwriters equals one single bar electric fire. Syndicates apart, it proved very difficult in the early days to keep the Lloyd's building cool enough. Parts of its rose to 120 degrees Fahrenheit. Once more, the solution lay in combined heat and power.

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Lloyd's air conditioning system is complicated indeed. It is based on an Alice Through the Looking-glass law of thermo-dynamics which seems to be that cold air rises and hot air sinks. The cold air is pumped through vents in the floor and extracted by fans in the ceiling. It is drawn up to the top of the four service towers, by which time it is fairly hot. It is then pumped down through voids in the windows, which are triple-glazed. Then it is cooled by water. The water in its turn becomes lukewarm at about 90 degrees Fahrenheit.
The elegance of the system is that this warm water is then further heated until it is hot enough for the washrooms, showers and kitchens. Thus, Lloyd's has a remarkably efficient combined heat and power system which both cools its building and produces cheap hot water. But, as with Drax and the tomatoes, there is a much more serious downside, or danger. The tanks of cooling water at 90 degrees Fahrenheit provide the perfect environment for the growth of the legionnella bacterium. Noble Lords will recognise how deadly that can be when they recall that similar water tanks on the roof of the BBC in Portland Place became infected and killed people walking in the streets below. The only way to stop that bacterium multiplying is to clean the tanks to the point of sterility. There is thus a downside to every elegant solution that heats as it cools as it lights and as it powers efficiently. The downside can usually be overcome, but at a cost.
CHP is certainly a very attractive option abroad, as my noble friend Lord Wade has already remarked, particularly in the former communist bloc—for instance in countries where there are already rather inefficient networks, such as Poland. Poland has a district heating network of pipes carrying water which is very hot at 200 degrees centigrade, but at least half of that escapes through cracks in the pipes and is wasted. At this stage, I should like to ask my noble friend on the Front Bench this question: is there yet a successor body to that headed by Colin Moynihan in the previous Parliament? In short, which Government Minister is at the moment in charge of alternative energy, or is no one yet in charge of it?
As the combined heat and power president, I am tempted to plead specially that our technology is the ultimate answer to all the world's energy problems. But on economic grounds I cannot do that. CHP has its place, but the main place must be taken up by the third leg of the tripod, which is contraception; a simple rubber sheath, cap or coil. People use energy; more people use more energy; fewer people use less energy. Birth control is cheaper than clean technology. It is cheaper than efficient technology. The least polluting power station is the one that is not built. It is for that reason that the ultimate challenge for those at the Rio summit must be to limit the world's population. That is indeed our best long-term energy strategy.
6.9 p.m.
The Earl of Lindsay: My Lords, I am grateful to the noble Viscount, Lord Hanworth, in his absence, for raising such an important issue and to the noble Lord,
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Lord Tordoff, for stepping into the breach at such short notice. I must also congratulate my noble friend Lord HolmPatrick on an excellent maiden speech and on a very good choice of subject matter. Wind power may seem rather distant to many of us but it is an important issue. It is one to which I intend to return later in my own thoughts.
I start with the problems being created by our current dependence on coal burning for energy. At present 80 per cent. of British coal is burned in coal-fired power stations to produce 77 per cent. of our current electricity consumption. Whatever the future of British-mined coal, sources of cheap imports elsewhere in the world ensure that coal will remain a significant source of electricity for us. However, burning coal in power stations is environmentally disastrous, resulting in substantial emissions of both carbon dioxide and the two principal constituents of acid rain—sulphur dioxide and nitrous oxide.
It is somewhat chilling when one learns that 64 per cent. of British trees show some damage from acid rain; that 25 per cent. of our trees show moderate to severe damage and that severe damage also affects roughly 35 per cent. of Europe's trees, equating to an area of approximately 50 million hectares. The extent of the damage reflects the fact that, for every single tonne of coal burned, 12 tonnes of wet flue gases are released. Therefore, a medium-sized 500 megawatt power station pumps out about 15 million tonnes of those gases every year—and those are just acid rain gases.
Acid rain is also responsible for the corrosion of buildings and other structures, and for the leaching of heavy metals from our soils into our watercourses. While rain in Britain is now between 10 and 16 times more acid than it was, a 1988 sample in Pitlochry recorded rain with a pH as low as 2.4, which is 1,000 times more acidic than pure rainfall. At this level, the aquatic life of our rivers and lakes is seriously threatened—not to mention those downwind of us in Norway and Sweden.
However, the dilemma lies not so much in what is happening as in how we should be responding. The flue-gas emissions of coal-fired power stations must be tackled, but the task is hugely expensive, costing some £200,000 per megawatt of installed capacity. Therefore, for a 1,000 megawatt power station, the bill will be £200 million. For a new power station to be built with ready installed flue-gas desulphurising technology, capital costs rise by 30 per cent. Our obligation at present is to treat 8,000 megawatts of our current 35,000 megawatt installed coal-fired capacity. From a purely environmental standpoint, that may be disappointingly small, but financially the capital cost of treating just 8,000 megawatts could be £1.6 billion —and there are operating costs on top of that.
Who is going to pay? Is this a burden that falls to the taxpayer—or, on the principle that the polluter pays, should the operator, and therefore the user, be paying—or should it be a combination of both, with some government grants and some loans? Charging it all to the user will be controversial for those users who do not have any choice and will attract the attention of the Office of Electricity Regulation, which is obliged

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to hold down electricity price rises. Where users do have a choice, coal-fired sources will have problems competing with cleaner sources of power. But where does this leave the prospects of a privatised coal industry, given that the power stations are its principal market?
Charging the taxpayer, however, ignores the polluter-pays principle and distorts the marketplace by subsidising the external costs of coal-burning. This will act as a disincentive both to cleaner sources of power and to market-led environmental research and development.
This is an important repercussion. Clean coal and coal gasification technologies, for instance, remain too primitive for power stations exceeding 250 megawatts, and it is estimated that it will be 18 years before they will be sufficiently advanced to install in 1,000 megawatt power stations. My noble friend the Minister could perhaps tell us whether the Government intend to continue, and if so to what extent, their research into clean coal-burning technologies. It is also important, in the shorter term, to know who is going to be funding the cleaning up of existing flue gases in the light of the privatisation of the coal industry.
There are no easy answers to many of these problems. The only solutions that could be effective in the short term are massive in their scale and consequences. For the next two decades, coal has got to be either unacceptably dirty in terms of its environmental repercussions or unacceptably expensive in terms of its economic and social repercussions. Furthermore, paying for and installing FGDs not only fails to tackle carbon dioxide emissions but actually increases them. My noble friend Lord Mersey has illustrated that point.
There are two other complications. By the year 2010, for instance, two-thirds of our existing coal-fired power stations will be at or beyond the end of their designed lifespan. What happens next? And what decisions should be taken now in anticipation? The complexities underline the importance of a long-term strategy for energy generation and use; and, as with any long-term strategy, it is only going to be effective if it provides the framework within which short-term decisions are made.
The future of coal-fired power stations is just one fundamental issue where short-term policy must not lose sight of long-term strategy. There are others. Already subject to considerable debate is the role of gas-fired and nuclear power stations, and their relationship in the marketplace with electricity from coal sources.
Also subject to some attention are the means of encouraging energy conservation and efficiency. On this issue, there is the need for yet greater determination, as such measures promise to be extremely cost effective. One likely problem, however, is that, if the sources, generators and distributors of energy are private companies, the market will be dominated by interests vested in greater consumption. How, then, does one drive home effective energy conservation and efficiency initiatives? One possible
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solution has emerged in California, where the power companies sell not only power, but also the goods and services that are required by their customers for its conservation.
One of the most important elements of a long-term strategy on energy generation, and therefore deserving of comparable status in short-term policy-making, is the role of renewable sources, which several noble Lords have mentioned. Many are familiar with hydro-electricity and pump storage; but what remains poorly acknowledged is the potential of other methods of water-driven generation, and the potential of solar, wind and biomass sources. Even where potential is actually proven, organisation, incentives and funding are very often disappointing. We are still waiting for the publication of the findings of the Renewable Energy Advisory Group, which was due first at the start of the year and then in March. Perhaps my noble friend the Minister can tell us if and when this will happen.
Altogether more significant is the 1998 cut-off of the levy on fossil fuels. The immediacy of 1998 is constraining those involved in the research, development and operation of renewable sources of energy. Such technologies can often take 15 to 25 years to bring into full production. Perhaps I may suggest that we should have a rolling period rather than a cut-off that operates right across the board.
It is misguided and misleading to treat renewable energy sources as a Cinderella while lavishing attention on the older and uglier step-sisters. The United Kingdom, for instance, has the best wind potential in Europe, with 40 per cent. of the continent's wind energy resources. In 1988 the Department of Energy estimated that 20 per cent. of our total electricity consumption could be met by our on-shore wind resources, while 50 per cent. could be met by our off-shore winds. Energy experts, furthermore, point out that this off-shore study assumed that wind generator sites would be more than 15 kilometres from the coast. Without this parameter, the potential contribution of off-shore wind generation could be considerably more.
The important point is that for the United Kingdom wind generation is not a marginal asset and should not be treated as such in short-term policy. However, without sufficient recognition and encouragement, the technologies involved and the benefits that will accrue will both be unnecessarily delayed.
Also subject to delay will be the proper resolution of any perceived drawbacks that attach to wind generation. Wind power, after all, throws up an intriguing dilemma. It is a perfect alternative to the polluting emissions of coal-fired power stations and to the consequences of acid rain; but to exploit this potential effectively may involve siting wind generators in sites noted for their natural scenery.
Wind power remains an unfamiliar concept and therefore the prospect of generators being visible either from one's own backyard or from an area such as a national park is unnerving. My noble friend Lord HolmPatrick touched on that point in greater detail. The public's perception will be important to the

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development of wind generation. My noble friend mentioned the wind farm at Delabole in Cornwall, to which there has been a surprisingly good response, much better than the backers and operators had anticipated. Of passing interest is the fact that it has been popular with the local tourist industry because the wind farm itself has become a visitor attraction. In Denmark, where the wind generation industry is much better developed, there has been a good public response to the technology that has had to be installed.
Looking ahead to the possibility of many machines in many areas, the public should be made fully aware of what the benefits and options are. On a national level, the benefits are obvious, but at an immediate local level, the impact of wind generators may be less digestible. My noble friend Lord HolmPatrick mentioned the noise problem. I understand that the latest wind machine technology is considerably less noisy than the earlier machines.
The fact that wind machines are visibly intrusive has been unwittingly aggravated by the 1998 cut-off of the fossil fuel levy. The uncertainty and the ever-shortening timescale is forcing wind energy operators to seek average wind speeds of no less than 7.5 metres per second in order to cover costs. They therefore have to be sufficiently high on hillside sites, which increases their propensity for intrusion. If the protective timescale was extended, making average wind speeds of 6.5 metres per second viable, the number of potential sites would double to include many less conspicuous locations.
Notwithstanding what I hope is only a short-term aberration, the positive reaction in Cornwall bodes well. That assessment would be further enhanced if the districts and communities involved could become more closely involved. It might, for instance, be possible for them to derive some benefit from that wind power which is locally produced but sold to the national grid. Local surpluses are highly probable in some areas. A 1990 study for Dyfed county council concluded that, with existing technology alone, the county's entire electricity consumption could be met from renewable resources, while anticipated technology could enable it to produce 12 times that figure. Also of relevance to the public perception is the fact that wind generators should not be confused with the blundering severity of pylons. It is important to counter the assumption that anything that smacks of being a wind generator must automatically be ugly. They need not be ugly, and they need not be unpopular. But, despite this, wind generators will present a challenge for planners and will be an interesting source of comment for the public.
It is also important to realise that being relatively well endowed with renewable resources allows us not only to exploit them for our own needs but to exploit the associated technology for everyone else's needs. One source predicts that, at a global level, as environmental problems increase and the reserves of fossil fuels decrease, the development and export of this technology will be as valuable to the next generation as the trade in computer technology has been to this generation.
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The United Kingdom must not miss out, though, if we hang around, we shall. Denmark has had many successful onshore wind energy projects and now has two offshore wind energy projects. The Swedes have joined them on this offshore bandwagon. India is aiming for 5,000 megawatts of installed wind power by the year 2000 and California is probably the furthest ahead of the game. On a global basis, it was estimated last year that wind energy alone is already offsetting some 2 million tonnes of carbon emissions per year.
How sensible, therefore, is the uncertainty that surrounds the finish of the fossil fuel levy in 1998? My noble friend the Minister might take this opportunity to remove the uncertainty. It is becoming a disincentive to valuable research and development; it is undermining potentially huge export earnings in the future; and it is slowing the advent of one of the most environmentally friendly methods of power generation. As with the future of coal-burning power stations, this, surely, is an issue where a long-term strategy is fundamental to short-term policy.
6.22 p.m.
Lord Addington: My Lords, I have the very pleasant duty of being the first speaker from these Benches to congratulate the noble Lord, Lord HolmPatrick, on his excellent maiden speech. If he can make such a good speech under somewhat unusual circumstances, I very much look forward to hearing his future contributions.
When we deal with a Motion on energy policy we find ourselves touching on a large variety of subjects. Modern society is addicted to energy. The noble Earl, Lord Lindsay, referred to computers. Computers use electricity. We need electricity for most things. There is always a price to be paid for any consumption of energy.
The speech of the noble Lord, Lord HolmPatrick, dealt largely with wind power. Even with wind power we have to put up with a little noise pollution and a slight inconvenience to one or two views. Ultimately we have to pay a certain number of prices. It is probably better to look at an environment which has a few trees remaining on it and has one or two wind farms than a place which has been completely stripped of all foliage by acid rain. We must be more realistic about these choices. If we are to live in any way that relates to our current energy-rich lifestyle, we must encourage lower consumption of energy by utilising the technology that is available to us now. We must be capable of cutting down dramatically the amount of energy we use in what we regard as our daily way of life; for example, on the way we heat and cool our houses and offices.
We must also consider transport policy. In this country the fact that the subsidy given to company cars is around five times that given to British Rail suggests that we shall have a hard decision to make in the future. Is the car to be regarded as a normal mode of transport for virtually all forms of journey, short, medium and long term, or is it to be restricted to medium-term transport, allowing public transport of various types to take over the longer and shorter term journeys? I suggest that the many pressures on us with

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regard to environmental damage and the conservation of fossil fuels, such as petrol and oil-based fuels, mean that we shall have to look hard at trying to produce some form of carbon tax which will create a disincentive to using cars as frequently as we do at present. We must also have education on this issue. It is regarded as a status symbol to have a large car. We have a cycle of expectation which means that there is less incentive for central authorities or even private investors to provide other forms of transport. If the Government have more initiatives on education about the consumption of energy and the way we live our lives, I shall be pleased to hear about them.
On these Benches we are also concerned about nuclear power, a subject which has already been mentioned in the debate. Nuclear power carries a terrible latent risk. No matter what happens there is always a risk. On these Benches we are keen to see nuclear fission reactors taken out of mainstream use. We believe that that could be accomplished by the year 2020. It is not because we are completely opposed to nuclear power. It is because we realise that there is always a waste product and there is always danger.
Many of the points that I wanted to make have already been made. However, I wish to ask one or two questions of the Government. Although they have taken certain initiatives—for example, on lead free petrol—when will there be a more centralised energy policy with longer term objectives? I appreciate that the Government intend to stabilise carbon dioxide emissions by the year 2000 as opposed to the year 2005. When will they finally form a policy which attracts all the different strands of energy consumption? How does energy consumption tie in with their vision of how the rest of the world will be living? Will we, for instance, be having tighter regulations about maximum efficiency in the use of machinery?
6.27 p.m.
Lord Donoughue: My Lords, I join other noble Lords in congratulating the noble Lord, Lord HolmPatrick, on an excellent maiden speech. We look forward to hearing from him on many occasions in the future. I congratulate the noble Viscount, Lord Mersey, on an excellent speech which gave us a wholly new angle on Lloyd's insurance. I wonder whether the fact that five Lloyd's brokers equal a one-bar electric fire may explain why so many members get burned. I worry that his explanation of a further down side, as he called it, at Lloyd's of a lethal disease lurking on the roof will worry many and lead to a further exodus. I also wonder in passing whether stop loss policies could be adopted and adapted to the energy sector.
If I may focus on the central issue, the Motion is wide and very important. I should like to take up the international dimension from the original Motion and point out that the future increase in demand for energy will come from the developing countries. Their total consumption will soon overtake that of the developed countries. That has important environmental implications. I note in passing that Eastern Europe is responsible for nearly a quarter of the world's carbon dioxide emissions. With China and India
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industrialising, the pollution problems in the future are potentially quite terrible. The world's atmosphere knows no environmental boundaries. That situation, linked to Rio, points to programmes of technology transfer—for example, in the clean coal technology area—which will enable economic growth to continue in the developing world, while being compatible with environmental protection. Such programmes are of importance to us all.
Even more pertinent to the main issue, I should like to ask both the Minister and the House: how can the Government develop an international dimension to energy policy? How can they develop their part in the EC energy policy or in the real aspects of environmental protection when, basically, we do not have a national energy policy for the United Kingdom? I feel that that was symbolised by the abolition of the Department of Energy. I, for one, certainly regret that development. It gives the wrong signal in this crucial area.
Historically, the United Kingdom's approach to energy has, admittedly, always been pragmatic and usual reactive to international oil crises. I believe it is true to say that we have not actually had a White Paper on fuel policy since 1967; that is, before oil had been discovered. Of course, since the 1980s that pragmatism has been replaced, or perhaps larded, by the ideology that positively rejected the idea of energy policies and strategies and relied on the free market through privatisation, coupled with a touch of regulation. I believe that the result is the present confusion in the energy area and certain damaging developments.
Energy privatisation has not created competition; it has produced private monopolies and oligopolies. It has led to a situation where the electricity generators are dashing for gas and we have had massive coal imports. Moreover, our coal industry has been rushed towards extinction and our natural gas reserves are being rapidly depleted. In fact, that energy muddle —as I would call it—cannot be allowed to continue, bearing in mind that the United Kingdom faces a future where our energy self-sufficiency will end early in the 21st century, where the environmental constraints will grow and where, specific to the sector, I believe that all our generating plant must be replaced within 25 years. Therefore, I think that the Government must develop a coherent energy strategy. It cannot be left to the regulators who have no responsibility for an overview, and no responsibility for the national interest.
Government must develop that coherent strategy. They must do so for a number of important reasons; namely, energy, economic, environmental, social and industrial reasons. The intrinsic energy reasons exist because it is necessary to identify a desirable balanced mix of energy sources which will ensure security of supply. The latter must be a basic objective. We must also ensure a responsible depletion of the limited indigenous sources that we have. That particularly concerns gas and oil which are in limited supply and coal which is virtually unlimited but environmentally difficult.

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The environmental reasons are that our economy must have secure supplies at reasonable prices. Therefore, in my view, it must not be wholly subject to the whims of overseas suppliers or to the fluctuations of import prices at various currency variations. I should like to ask the Minister whether the Government actually have a view on the value of energy self-sufficiency for the United Kingdom. Alternatively, are the Government content to expose our economy to the uncertain costs of energy imports?
The environmental reasons are obvious to anyone following the current conference in Rio. The Government obviously must have an environmentally-sensitive energy policy. The four main causes of pollution are all energy related. They are, first, electricity generation; secondly, transport consumption; thirdly, industrial consumption; and, fourthly, household consumption. The three energy technologies which are the most clean are conservation, renewable sources—that is, sun, wind and water—and nuclear. Against that background, the Government must encourage the correct environmental priorities among the energy-sourcing options available to them to constitute a coherent energy policy which is sensitive to the environment.
The social reason, which very much concerns this side of the House, is that the changes in the pattern of production and supply have profound implications for employment and social life in our regions. Here, one is especially referring to coal. The industrial reason why the Government must be involved in the matter and cannot stay out of it is that the electricity and gas industries are monopolistic. Therefore, the energy market is fundamentally imperfect. The public interest cannot be left to ad hoc regulation; it needs government policy and intervention.
That is the case for a coherent energy strategy which is mentioned in the Motion. But what should it be? I shall try briefly to set out the components involved. We should begin with greater conservation, which must be pursued more vigorously. In 1988 the then Department of Energy said, and most experts agreed, that there was scope for 30 per cent. energy savings through conservation. Can the Minister say how much of that 30 per cent. has been achieved, and when the new department responsible will achieve the remainder?
Therefore, conservation comes first. The next consideration must be a policy for electricity generation which is at the heart of many of our energy concerns and problems. I believe that government policy should place a series of obligations on the electricity generating industry. First, there should be an obligation to maintain security of supply which used to apply before privatisation. That, by implication, includes maintaining the UK coal industry and ensuring that there is care for the rate at which natural gas is depleted. Secondly, there should be an obligation to encourage conservation, which I have already mentioned. That should apply specifically to the electricity generators because, currently, their sole incentives are to expand production and sales and not to conserve. Thirdly, there should be an
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obligation to pursue environmental protection especially as electricity generation is a major source of carbon dioxide and sulphur dioxide emissions.
It follows that the electricity industry should be expected to devote more research and development expenditure to clean coal technology, and not less, as has been the case since privatisation. The generators should also be required seriously to encourage renewable energy sources. That means through long term contracts. I support very much the remarks of the noble Earl, Lord Lindsay. Those are all matters of national interest for government, not just for regulators.
More specifically, and as I have already mentioned, the coal industry has been rushed towards extinction, with perfectly viable and profitable pits recently closed as the power generators have turned to foreign coal and to gas. That process of industrial assassination has apparently just been halted under pressure to preserve some coal profits for privatisation. But, again, there are wider policy concerns and considerations than simply the commercial profit interests of British Coal and the generators; namely, security of access to domestic coal. For that reason, I repeat the fact that the development of clean coal technology for the UK to transfer to the new industrial nations such as India and China should have the highest priority in a coherent energy policy.
Energy policy must cover transport, now the largest energy using sector. It overtook industry and subsequently the domestic sectors in the late 1980s. Transport demand has increased by more than 100 per cent. in the past three decades. That will continue with enormous environmental implications. We need government initiatives affecting the individual use of cars through regulation, fiscal instruments, road pricing, vehicle standards, traffic management and above all the provision of more efficient public transport.
Finally, I turn to energy research where the Government's expenditure is very low by international standards; mainly on nuclear research. I link that again to the need for more research into clean coal technology and transport consumption of fuel.
I believe that we lack a proper energy strategy as called for in the Motion. We need such a strategy, meeting our energy, economic, environmental, social and industrial considerations in a coherent way. I have tried to set out the basic necessary components and I look forward to hearing whether the Government have any such vision of Britain's energy future.
6.42 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield): My Lords, I am extremely sorry that the noble Viscount, Lord Hanworth, was unable to introduce today's debate. The cause of his absence must, by its fact, be serious. I am sure that noble Lords will join me in hoping that it is temporary. We must be grateful to the noble Lord, Lord Tordoff, for allowing us to continue with the debate, in particular so that we could hear the maiden speech of my noble friend Lord

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HolmPatrick. I join wholeheartedly in the congratulations. I shall only say that I hope that the risk factor of tug-of-wars does not mean that injuries will prevent him from speaking to us again in the near future.
The subject of this debate is important and it was important that the debate took place. There is no doubt that the production and use of energy is fundamental to the development and growth of economies across the world. The substantial increase in energy consumption which has occurred since the end of the Second World War has been instrumental in helping to raise the standards of living of people throughout the world. If developing countries are to enjoy the benefits which the developed world has taken for granted, then a future rise in the demand for energy will be inevitable. Advances in energy technology, improvements in the efficiency with which energy is supplied and used, and the continued discovery of new energy resources have so far managed to out-strip rising demand. The world's proven reserves of oil and gas are seen to be higher than ever before. Coal and uranium reserves remain enormous. The potential also exists for considerable supplies of energy from renewable sources, as we have heard this afternoon, if and when they can be harnessed in an economically feasible fashion. But, that does not mean, of course, that we can afford to be profligate in using these resources. Nor can we afford to ignore the implications for the environment. Quite the contrary, for no source of energy is totally environmentally benign. That is why we all—governments, producers and users of energy—have a responsibility to work to limit the environmental consequences of supplying energy needs.
In the UK we are in the fortunate position of having considerable resources of coal, oil and gas and long experience of civil nuclear power along with the potential to make greater use of renewable sources of energy. I am pleased to reassure the noble Lord, Lord Donoughue, that there is not the muddle that he fears. The Government's policy is to ensure that the nation has adequate, secure and diverse supplies of energy at competitive prices and in an environmentally responsible fashion. I hope that that policy statement will reassure my noble friend Lord Skelmersdale too. This requires that we maintain diversity and flexibility in the types of fuel we use to reduce the risk of dependency on any particular fuel. I am sure that it was not necessary for a Gulf War in order to bring that message home. It requires that an efficient and effective regulatory regime is in place.
We have given effect to this policy through the following measures: privatisation of gas and electricity; liberalisation of the energy market coupled with effective regulation; supporting nuclear power and renewables through research and development and the non-fossil fuel obligation and the fossil fuel levy; ensuring that the taxation of our considerable oil and gas resources provides companies with the incentives to explore and develop fully these resources; by carrying out a major investment programme to modernise our coal industry to enable it to compete—and the size of that investment was
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referred to earlier; and by devoting considerable effort and resources to energy efficiency. By these means we have ensured that the UK has substantial energy resources covering a broad balance of fuel types capable of meeting the requirements of our consumers well into the future at the lowest possible cost of supply.
In the past, UK governments have tried to reconcile the competing claims of coal, gas and oil and nuclear energy by centralised planning. In fact, central planning and energy policy became synonymous in the minds of many and, unfortunately, there are still many who think this way. Without exception, these indicative plans failed. Governments are simply not omniscient in predicting future relative prices of fuels and levels of supply and demand in energy markets nor, indeed, in anything else. And, more important, concentrating decisions in this way stifled enterprise, ensured that when mistakes were made they were made on a major scale and made decision-making vulnerable to special pleading of organised interests.
The exploration and production of energy resources has long since been a global business. More recently, the global dimension of energy consumption has been recognised in the debate over environmental pollution and global warming. The UK Government have been very much at the forefront, taking a constructive role in this debate. I am pleased to reassure my noble friend Lord Shrewsbury that we are very much concerned with policy in Europe.
Within the European Community we attach considerable importance to the completion of the internal market in energy. The Commission has produced draft directives on electricity and gas designed to reduce the very considerable barriers which currently exist to trading these fuels. The Government fully accept this objective and intend to make it a high priority during the forthcoming UK presidency to facilitate these moves towards an open and more transparent energy market in Europe. It is ironic that these most basic of commodities are not yet traded in a single internal market. I am sure that all noble Lords will be pleased to hear of the government's focus in this area.
The European Commission announced on 13th May that it proposed to send a draft directive for a carbon and energy tax to the Council. We have yet to receive a copy of their proposal, but we will clearly need to study it carefully. There is no question of taking premature decisions on this important issue. We understand that the Commission has said that the introduction of the tax would be conditional on other countries adopting similar measures. We see this as a welcome development on their previous proposals for a unilateral European tax.
I have referred to the global issues raised by energy consumption and the growing concern about the ability of our planet to go on absorbing the waste and related products from continued increases in energy production without causing growing damage to our global environment. This matter concerns many noble Lords who have spoken today. The UK Government are pleased that a Framework Convention on Climate Change has now been agreed for signature in Rio.

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Under the convention, developed countries will be committed to taking measures aimed at returning emissions of CO2 and other greenhouse gases to 1990 levels by the year 2000.
The UK announced on 30th April that, provided other countries take similar action, it is ready to return CO2 emissions to 1990 levels by 2000, rather than by 2005, as previously announced. To achieve the conditional target, UK measures in the short to medium term include increased energy efficiency, switching to less polluting fuels for electricity generation and more renewable energy. In the longer term, we accept that energy prices will have to rise by taxation or other means.
As my noble friend Lord Mersey pointed out, the energy needs of developing countries are rising, reflecting population growth and economic development. It is essential that these are met in an environmentally sustainable fashion through the responsible use of all economic energy resources. This represents an enormous global challenge. Far too many countries, both in the developed and developing world, subsidise or otherwise manipulate energy prices for social or other policy reasons. That encourages wasteful use of energy.
However, I am pleased to note that there are signs throughout the world community of a much greater understanding of the role energy markets play, particularly of pricing, in the production and consumption of energy. This was seen, for example, in the conference organised by the International Energy Agency in Paris earlier this year.
Meeting the world's rising needs for energy in an environmentally sustainable fashion has been one of the major underlying themes in the deliberations of the Preparatory Committee for the Earth Summit taking place this week in Rio and in the negotiation of the Framework Convention on Climate Change. In those and other contexts, some have argued that sustainable energy development requires agreement by governments on global energy strategies which they would then impose on their economies.
I have already indicated that such policies did not work in the UK and the common experience of top-down command and control strategies the world over is that they do not succeed. At best, they lead to gross inefficiency and mis-allocation of resources and at worst they directly lead to the tragic economic collapses we have witnessed, for example, in Eastern Europe and the former Soviet Union.
Indeed, it is highly relevant to record the comment of a representative of the Russian Federation at one of the Rio Preparatory Committee meetings during a discussion of this approach. He observed that his country was emerging from a 70-year experiment in centralised state planning which had demonstrated beyond doubt that such an approach led to economic and environmental disaster. That is why his country and many others are eager to convert as quickly as practicable to market-based economies.
Accordingly, the market operating within an effective framework of arrangements to safeguard health, safety and the environment is widely and increasingly accepted as the most effective and efficient
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mechanism for meeting world energy needs. The pricing of energy at its full cost, together with improvements in energy efficiency, is the key to ensuring sustainable energy development and consumption. These issues are vital and much has been done to improve the general understanding of the problems and the role of markets. We owe it to ourselves and future generations to build on international co-operation and understanding, to ensure that all countries in both the developed and the developing world use energy resources efficiently and responsibly.
My noble friend Lord Skelmersdale expressed sympathy for me at the range of topics that would be covered in today's debate. The great range of experience and knowledge of noble Lords did not prove him wrong. My noble friends Lord Wade of Chorlton and Lord HolmPatrick drew attention to the fact that biofuels offer a particularly attractive response to heightened environmental concern. There can be a net benefit to the local environment from waste disposal and alternative farming and forestry practices which provide a source of renewable energy.
In addition, in common with all renewables, global and regional environmental impacts are reduced when biofuels displace fossil fuels. If, simultaneously, it helps the rural economy, for which my noble friend Lord Wade has continuing anxiety, it will be a bonus.
The use of crops as fuel is an important area. We agree that there is a significant future potential for the use of willow by short rotation coppicing. The Government have extensive research and development programmes involving trial plantations and harvesting. The Forestry Commission has introduced grant aid, through its woodland grant scheme, to encourage planting. Several noble Lords raised important points about this.
The question of combined heat and power was raised by my noble friend Lord Wade of Chorlton and, with much skill, by my noble friend Lord Mersey. I agree that there is significant potential for combined heat and power and community heating to be applied to domestic dwellings in urban areas. Although progress is slow at present, I am nevertheless encouraged by developments in this field. There are now large, established schemes running, for example, in Nottingham and Sheffield. In addition, there are medium-scale community heating schemes and a number of smaller schemes in residential developments such as sheltered housing, using small-scale combined heat and power units. Like my noble friend Lord Wade, I should like to see our skills sold abroad.
I must congratulate my noble friend Lord Mersey on drawing attention to a Lloyd's problem, to which there is an effective and welcome solution. I wonder whether he has considered that there could be a possible market opportunity for combined cooling plants not too far away from this Chamber. In talking about DRAX, my noble friend illustrated the difficulty of environmental decisions and how there will never be simple solutions.
We were fortunate to have a major contribution from my noble friend Lord Lindsay who brought much knowledge to the debate, for which we are

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grateful. I am pleased that the future of the Renewable Energy Advisory Group is currently under consideration by Ministers. I acknowledge the considerable role that Mr. Moynihan played in setting it up and keeping a focus on it.
The question of the 1998 removal of the levy for renewables was also raised by my noble friends. Again I am pleased to say that the Government are in discussion with the European Commission with a view to making any future renewables orders under the non-fossil fuel obligation extend beyond 1998.
The Government's policy on renewables is to stimulate their development and application wherever they have the prospect of being economically viable and environmentally acceptable by research, development and demonstration programmes removing barriers to their deployment and providing an initial guaranteed market via the non-fossil fuel obligation. Today noble Lords made clear how important in their minds that was.
I was interested to hear my noble friend say that wind farms offered small firm growth potential in the tourist market. I have seen the one at British Nuclear Fuels which has generated considerable income in the area. That byproduct is perhaps not always mentioned.
Several speakers have touched on clean coal technology. The Government recognise the importance of the development of this technology and careful consideration will be given to it in the context of privatisation. The department is providing £170,000 to enable a working party to examine what needs to be done to take the Topping Cycle to the next stage of development.
My noble friend Lord Shrewsbury correctly identified the fact that the coal industry can look forward to privatisation. The Government's privatisation policy stems from the belief that business flourishes and provides the best service to customers where management is free to manage without interference in commercial matters from government.
Both my noble friends Lord Skelmersdale and Lord Shrewsbury touched on the matter of methane generation from waste. I agree with them that there is potential both in the UK and overseas to use methane from landfill sites and from farm waste as a fuel. I am pleased to point out that the UK's use of landfill gas is second only to that of the USA. There are 37 commercial plants operating and many more are expected to come on stream as a result of the non-fossil fuel obligation.
My noble friend Lord Shrewsbury also asked about the relaxing of the regulations concerning the tonnage of coal taken from opencast sites. Those of us with Midlands connections have seen the prosperity that that process can bring to an area. The relaxing of the regulations will be considered in the context of the main privatisation Bill on the coal industry to be introduced later this Session.
I realise that some noble Lords are concerned about the Energy Select Committee. That is a matter for the Leader of the House in another place but I understand that it is under consideration. My noble friend Lord
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Skelmersdale emphasised the need for cheap energy. He assessed its importance correctly as being equal to the need for cheap food. Cheap energy is a prime factor in nations achieving a worthwhile quality of life. My noble friend said it was fashionable for Ministers to tour the world looking at examples of good practice. I should point out to my noble friend that Ministers involved with small firms seem to tour the UK. Wolverhampton and Rotherham are towns that loom large in their tours. I shall take pleasure in drawing to the attention of my right honourable friend the need to look at some of the mistakes that have occurred in this area and some of the examples of bad practice in the United States. Attention has been drawn to that bad practice.
The noble Lord, Lord Addington, drew attention to the need for conservation. That is absolutely clear. Conservation is an aspect of this matter where solutions can be found that offer the least number of disadvantages. In terms of the conservation of energy the problem of risk benefit is easier to solve. I hope the noble Lord will be pleased with the new energy saving trust that my right honourable friend at the Department of the Environment launched last month. The noble Lord also drew attention to the problems that the car creates in terms of energy conservation and to the difficulties that will arise as regards drawing up cost benefit formulae in that area. The noble Lord rightly pointed out the necessity for cultural change as regards the attitude towards the motor car.
The noble Lord, Lord Donoughue, mentioned the international aspect of atmospheric pollution. This is obviously a global issue. The developing world's emissions of carbon dioxide are growing and will continue to do so. It is important to note that the UK's emissions of carbon dioxide are less than 3 per cent. of the world total. We agree that co-operation in technology has a key role to play in promoting sustainable development in all parts of the world. It is sometimes forgotten that a solution to environmental problems will have to be provided through technology and engineering. Our education system must consider that issue.
We have had a wide-ranging debate. I hope I have not missed too many of the points that were made. However, if I have done so, I shall be happy to consider them outside the Chamber. I am grateful to those who have participated in the debate. I hope that when he reads this debate, the noble Viscount, Lord Hanworth, will be delighted with the contributions that have been made. I thank the noble Viscount in his absence for having given us the opportunity to draw attention to a responsibility that we all have as regards protecting our assets for future generations.
7.5 p.m.
Lord Tordoff: My Lords, I am grateful to the noble Baroness for that wind-up speech. I fear that I have no further news to give to the House about the noble Viscount, Lord Hanworth, but clearly he has had an accident or is feeling indisposed and has been detained somewhere. I noticed that the noble Lord, Lord Colwyn, who is about to speak on his Unstarred Question was not in his place, and, realising that the

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debate could have been allowed to last for another 55 minutes, I made a few notes, most of which I shall not now use.
I hope the House will permit me to say a few words on energy, as it is a subject that is close to my heart, having been associated with the petro-chemical industry, and therefore indirectly with the energy industry. It is my view that fossil fuels should be used for making chemicals and should not be used as a form of energy. That is a basic tenet that I hold.
It is quite clear that fossil fuels, however great a quantity may be left in the ground, are finite. For the sake if not of our children then of our grandchildren and great-grandchildren, we must ensure that at some stage in the future when fossil fuels begin to run out there will be alternatives available so our successors may sustain their lifestyle.
I regret that for obvious reasons I was not able to be present during the whole of the debate. However, I noted a few remarks that were made. If for no other reason than being able to hear the maiden speech of the noble Lord, Lord HolmPatrick, on the subject of wind energy, I was glad I was able to get this debate under way. The noble Lord's speech was extremely interesting.
I am sorry that I missed the speech of the noble Lord, Lord Skelmersdale, as I understand that he said something about the developing world. The Minister mentioned coppicing, which is obviously an important aspect of the third world's production of wood fuel. We should not forget the need for improved intermediate technology to make sure that the wood which is being burnt in the third world is used efficiently. One of the most damaging results from an environmental point of view of third world countries' use of wood as a fuel is the deforestation of even marginal scrub land, as that can lead to soil erosion and all kinds of other problems. This is a complex subject and it ranges over the whole area of fossil fuels, nuclear fuel and various kinds of replaceable forms of energy. The subject also covers the whole area of intermediate technology.
I was interested to hear the remarks of the noble Viscount, Lord Mersey, as regards Lloyd's. The noble Baroness has stolen the only joke about Lloyd's that I had in my book but I must say that the way this House is ventilated, or rather not ventilated, being hot in summer and cold in winter, is a matter that the Science Research Council or some other body could look into. I am quite sure there is a resource here, even if it is only the kind of hot air that I am turning out at the moment.
I am grateful to everyone who has taken part in this debate. As the noble Baroness said, I am sure that, when my noble friend reads this debate, he too will be grateful to those who have taken part in it. On his behalf I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Dentistry
7.9 p.m.
Lord Colwyn Lord Colwyn rose to ask Her Majesty's Government what proposals they have for the future development of dentistry in the United Kingdom.
The noble Lord said: My Lords, I am grateful to the noble Lord, Lord Tordoff, for giving me an extra couple of minutes in which to recover. I normally expect to travel from my surgery to the House in about 12 minutes, but I had reckoned without Beating Retreat on Horse Guards and I had to walk my bicycle a rather long way round. Hence my late arrival.
I am grateful to the usual channels for allowing me to raise this important subject this evening and to other noble Lords who are to contribute to the debate. Your Lordships will be aware that discussions about dentistry and its future within the National Health Service have been in the news during the last few weeks. I hope to be able to make some constructive comments which may help the department in its considerations.
I declare an interest as a practising dental surgeon. Following qualification in 1967 I had 15 years' experience of working in the National Health Service. My sentiments this evening are purely personal, although I have consulted the British Dental Association and the Dental Practice Board. I am also grateful to Tom Farrell, David Phillips, Kevin Lewis and the Forum for the Future of Dentistry for information and advice. Regrettably much of the paperwork arrived too late for inclusion this evening but I know that it will be useful for future discussions on dentistry.
As I said in the debate on Her Majesty's gracious Speech on 12th May, the next few months will be the most significant for the dental profession since 1948. Just before the election my right honourable friend the Prime Minister intervened to suspend the proposed 13.8 per cent. cut in fees which the Department of Health had suggested, potentially ignoring the normal processes by which dental remuneration is decided. During the past three months payments have continued at the 1991 level and the department has now estimated that a cut in the region of 23 per cent. is necessary to balance the budget.
There have been various meetings between the department and the British Dental Association, which have resulted in a proposed reduction of 7 per cent. in fees and a promise from my right honourable friend the Minister of a fundamental review of the way in which dentists are paid. I hope this evening to be able to make some suggestions for her consideration, as it is quite clear that the present system needs complete overhaul.
I am also concerned that, unless there can be a period of relative stability, dentists, who will be uncertain of their financial future, will try to balance their budgets by working even harder, causing a continued increase in payments and substantially compounding the problem, or even opting out of the National Health Service to the detriment of patient care and government commitment.
Although the dental remuneration system has worked well in the past, it has evolved into a highly complex scheme which is simply not working now. Although the Government are implementing in full the 8.5 per cent. Dentists and Doctors Review Body settlement and allowing a continuing excess payment, the result is generally perceived as a reduction in income.
That 7 per cent. cut drives some fees back below the October 1989 levels and will not spread the burden of recovering the overspend. For the practice with low or average practice expenses the effects are serious, but for the practice with above average costs the results are devastating. In 1991–92 the average practitioner's overheads consumed about 60 per cent. of gross fees earned. Assuming the same workload in 1992–93, a 7 per cent. fee cut would see that dentist's profits falling by 29 per cent. Lower practice costs of 50 per cent. or higher costs of 70 per cent. would see profits fall by 22 per cent. or 41 per cent. respectively, but there are many practices where costs are as high as 75 per cent. or 80 per cent. Here profits would fall by 51 per cent. and 65 per cent. That will cause serious problems.
A brief history might be useful. Dentistry came within the NHS at its conception in 1948 as a free service for all, and dentists were paid on a fixed fee per item of service basis. It was not until 1951 that charges were first introduced and patients made a contribution towards the cost of false teeth. That was followed in 1952 by a charge for other treatment as well as dentures, with all treatment limited to a maximum patient's charge. In 1977 separate charges were made for crowns in addition to dentures and other treatment, subject to an overall maximum. In 1985 the concept of a maximum charge of £17 plus 40 per cent. of the excess over that figure was introduced for other treatments in addition to charges for dentures and crowns up to an overall maximum. In 1988 non-exempt patients were required to pay 75 per cent. of all fees up to the maximum.
The new contract introduced in 1990 used a basic capitation system of registration. It is the success of the new contract, which was accepted by the profession under duress but made to work by the profession, which has caused the problems we see today. That new contract has greatly changed dental practice, which, despite reports to the contrary, is a great success and not in danger of imminent collapse. At the end of March about 27 million patients were registered, with an overall take-up rate of 52 per 100 adults and 57 per hundred children. Now 18 per cent. of all children under the age of two years are registered with GDS dentists. Very few children of that age would have been seen under the old contract and the introduction of young children to dental care involving dietary advice must be a move towards prevention, one of the objectives of the new contract.
It is the success of the new contract which has caused much of the trouble. Any increase in treatment means that the funding available for dentistry has to be shared out among more treatments, thus necessitating a cut in fees. The amount of money paid to GDS dentists in England and Wales in 1991–92 was
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20 per cent. higher than in 1990–91. That increase is higher than was expected and occurred for a number of reasons. When the new fee levels were set to achieve the average dentist earnings recommended by the Doctors and Dentists Review Body, they were calculated on the basis of a forecast drop in output of 3 per cent. That resulted in a fee scale increase of 8.6 per cent. from 1st July on new courses of treatment. In the event, output increased during the year. Had that level of output been forecast, fee scale increases would have been lower or non-existent.
Some of the increase in output—about 2 per cent. —was the result of the work flow at the Dental Practice Board, which was able to decrease the amount of new contract work accumulated at the board. That made a significant contribution to the increase in output, but the larger part of the increase in claims was generated by dentists. They can do that in a number of ways: by working longer hours or faster, or by making greater use of auxiliary personnel for those treatments or advice they are qualified to provide. The changes made by the new contract, involving many changes to the narrative, may have had an impact on the balance of child and adult patients, the range of patients seen and the treatment pattern provided. For example, there may have been changes in the type of examination required, the type of treatment needed and the laboratory cost involved, and the dentist may have been called out to provide emergency cover. Any such changes have an impact on total GDS gross fees.
Dental remuneration is determined by a simple formula. The average dentist should earn the target average net income (TANI) of £35,815 as recommended by the Doctors and Dentists Review Body, plus an element in excess of £45,000 to cover practice expenses. The total is referred to as the target average gross income (TAGI).
I very much regret that my right honourable friend the Secretary of State in her various interviews on dental remuneration repeatedly referred to the fact that:
"a third of dentists earned over £100,000—which is a very substantial figure".
She also said that:
"a third over £100,000 is quite a lot—gross".
Although I cannot argue with her figures I believe that the statement gives the false impression that that is the sort of figure that many dentists actually take home. Practice costs, which can vary from between 40 per cent. to 70 per cent., are deducted from that figure. Therefore, I believe it is a mistake to give an impression of dental earnings being in the £100,000 range. A view of net earning potential would have provided a fairer comparison.
A substantial part of the expense element is made up of staff wages and rent, so that the average dentist is reimbursed for those items, plus other expenses, via the fee scale. Not all dentists are average. They do not all treat an average number of patients with an average amount of treatment of average quality. The aim is to enable the average practitioner to reach the target gross income, but the calculations are so

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sensitive that one false assumption can change the fee for a given item, which might affect the prescribing pattern in favour of or away from that item.
Over the past two decades 55 per cent. to 60 per cent. of all practitioners have not achieved the target gross income. Some exceed the target quite easily and some can achieve three or four times the target. That is why so few practitioners can relate to that average label.
I remind noble Lords of the Tatersall Report in 1964, which stated:
"In short, nobody can assert with conviction that any individual dentist is getting what he is entitled to, let alone what he deserves".
The fee scale is meant to be neutral, in that it rewards all types of treatment at exactly the same level, but that is not the way the system works. In the current NHS system the winners inevitably will include those who have low fixed costs, can work very quickly and stick to basic dentistry, referring out anything troublesome or unprofitable, as well as those who invest as little as possible of their profits in their equipment and practices and use the cheapest materials. The losers are those in high-cost areas where overheads are more expensive and where the practitioner may take more time and trouble setting high standards and investing in modern equipment, a pleasant environment and good quality laboratory support and materials.
Nothing epitomises the folly of NHS averaging better than capitation. Although I am well aware of the differential in need for dental treatment in different parts of the country, to be paid the same rates whether one is treating the high-need or low-need patients, whether one's area is fluoridated or unfluoridated, or whether one practises in the cheapest or most expensive locality, is divisive, hurtful and demoralising to those on the wrong end of the system. If one sets high standards, works more slowly and is in a high-cost area, the NHS holds nothing but problems; movement into the private sector becomes the only alternative.
The uniform expense factor is of great concern to most dentists. Not only is it uniform throughout Great Britain, taking no account of varying overheads around the country, it acts to the advantage of the large practice and the high earning dentists. The constant overhead costs, such as rents and, to a certain extent wages —which are not directly proportional to the number of dentists in a practice—are spread among more than one dentist and the expense element for those items is a lower percentage per dentist in multiple practices. Also, for the high earning dentist, the expense element represents a smaller percentage of gross fees.
For those reasons there is a good case for the direct reimbursement of staff wages and rent as well as business rates—which already occurs. At present medical practitioners receive direct payments of 70 per cent. of expenses. That would probably be about right for dentists. Indeed, the concept of the fund-holding practice, which is already a great success in medicine, could be considered a valuable alternative.
Dentists are aggrieved by what they see as the inequalities of the balancing mechanism which,
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because it operates three years in arrears, seems manifestly unfair to many dentists, especially newcomers, those earning below the average and practitioners nearing the end of their career. The Dental Rates Study Group calculations have resulted in over-payments to dentists in each of the last three years, building up a very worrying potential debt for future dental practitioners to face. On the other hand, it must be government policy to encourage dentists to work hard, increase their productivity and give a better service. I am sure that serious consideration must be given to finding alternatives to the balancing procedures.
In the longer term—I appreciate that fundamental change to the new contract would probably not be considered at this time—moves toward a larger measure of capitation than exists at present for adult patients would be an advantage to the average practitioner. At present dental practitioners receive 47 pence per month for each adult registered with them. That figure could easily be increased to cover, say, the cost of any examinations and diagnostic procedures provided. Again, that would slightly reduce fee levels and dampen down high earners' gross fee levels. Overall, dentists would still receive the majority of their income from item of service fees, which is important.
An added bonus which would result from the inclusion of some small common items in capitation is that it would reduce the paperwork, since dentists would not have to submit an estimate to the Dental Practice Board if the only treatment required was that covered by the capitation fee; namely, examination, radiograph and reference models. I am informed that that represented about 20 per cent. of adult claims in the quarter ending March 1992.
One of the difficulties of moving adult treatment slightly more into capitation is the problem of patients' charges, which at present are 75 per cent. of the cost of treatment up to a maximum of £225. The monthly continuing care payments are free of patients' charges at present. The question of how to claim the patient's charge would have to be resolved, but I am sure that it is not insoluble. I suggest that the Government could easily reintroduce the free dental examination within that slight move towards adult capitation without having to return to the original system.
The proposed lowering of the prior approval threshold to £200 is a dramatic quick-fix control on the fee-per-item overspend. It was predictable enough in principle, if not in scale. But, for it to be effective in slowing or reducing costs, it will have to entail increased bureaucracy and delays in treatment. Prior approval for the more complex dentistry represents more stringent prescribing restrictions than for very many years, although now targeted to total treatment volume rather than the type of treatment. However, I have to say that a review of treatment patterns at the Dental Practice Board does not suggest long-term swings as prior approval requirements are changed. From that it is safe to assume that the vast majority of dentists provide treatment that they consider to be clinically necessary. The increase in some items and

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the decline in others is more likely to be related to other factors, such as changes in treatment philosophy.
The cost of a course of treatment has moved from £3.40 in 1964 to £28.20 in 1989–90, before the new contract came in. When those figures are adjusted to the 1989–90 level the figures are £25.30 and £28.20 respectively. In other words, the cost of a course of treatment has not increased as prior approval restrictions have been lifted. Those practices which never had a serious option of leaving the NHS may even be relieved that the fee cut announced is only 7 per cent., but they must remain disheartened. To maintain the same income the average practitioner will need to increase productivity—to work longer hours at the expense of time that he should be able to spend with his family.
In conclusion, I urge the Government to undertake the promised fundamental review of dentistry. It should be wide-ranging, comprehensive, independently led and, above all, free from domination by the representatives of the provider groups, such as the General Dental Services Committee. Unless that is assured, it is difficult to maintain the public interest in the context of determining the priorities of dental health and public expenditure. We cannot allow another meddling exercise to occur between the GDSC and the department, leading to another short-term solution.
There is no doubt that individual general dental practitioners in the United Kingdom give the most effective and efficient dental service in the industrial West. The NHS already represents very good value in terms of public expenditure. Nevertheless, the system of payments to dentists, particularly with regard to the provision of services to those in greatest need, is in need of urgent review. I have great doubt whether the profession's existing negotiators will be able to bring that about. Ordinary family dentists are not convinced that the negotiators are totally representative. Evidence must be heard from a full range of dental practitioners and interested parties, including the most important people in the scenario: the consumer and taxpayer.
In view of the debate last week on the Committee work of the House and the conclusion that the work of the ad hoc committees was impressive and should be widened, I venture to suggest that your Lordships' House should consider the appointment of a committee to inquire into the future of dentistry. I should be delighted to help in any way possible.
7.28 p.m.
Earl Russell: My Lords, I thank the noble Lord, Lord Colwyn, for introducing this topic. Having been yesterday in the situation in which he is today, I should like to offer my heartfelt sympathy. Unusually, I should like to declare an interest. It is one not where I fill but where I am filled. I declare an interest as a consumer and taxpayer. The noble Lord said that I am therefore one of the most important people. I should like to think so.
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Over the years I have got to know my dentists very well, sometimes—I hope they will forgive me for saying this—rather better than I should have liked.
A long time ago during the Prime Ministership of Sir Edward Heath, I came to the conclusion that never again should we elect a Prime Minister with good teeth. That view, alas, has not yet gained general currency. One of the reasons that made me return to this country from the United States was the availability here of the National Health Service dentistry. I was finding its absence serious indeed. Therefore when I declare an interest in the debate I mean it literally. We should note how consistently the producer and the consumer—allegedly opposed interests—in fact speak with a single voice against the intrusion of a state which has got its costs wrong.
During the debate we shall hear a good many figures. The Secretary of State gave some. The Conservative Central Office press release contains some. I should like to know who are the dentists with whom the Secretary of State has talked. From what source does he receive information about figures?
The noble Lord, Lord Colwyn, described the system of the target average gross income. It is easy to mistake a hypothetical income for an actual income. The hypothetical income is what it would have been if the dentist's expenses had been as predicted. The noble Lord, Lord Colwyn, is entirely right about averages. A great many dentists' expenses are not as predicted. Therefore the dentists' actual net income may have nothing to do with calculations taking place centrally of what the dentists' income might have been.
I am briefed by my own dentist whose anxiety about the issue is deep and intense. He has always been dedicated to the health service. He has been extremely anxious about his future in it ever since the introduction of the dental contract which, in his view —it seems correct—is where the trouble stems from. If there is not an urgent resolution of the immediate issue, then I believe that he will leave the health service. Since he is a very good dentist—when I declare an interest, I mean it—that would concern me deeply.
We have not only a long-term problem. I agree with the noble Lord, Lord Colwyn, that there is a strong case for overhauling the way in which dentists' remuneration is calculated. There is also the urgent short-term problem of a shortfall of income, as many dentists perceive it. Since the Adam Smith principle that a deal must be in the interest of both parties is perfectly sound, if the dentists are not satisfied with the deal that they are offered they will not continue to undertake the work. Since there is private dentistry, there is competition. The Government must face that.
The contract calculated expenses by a gross formula applying a flat rate nationally. Every Londoner will tell you that that simply does not work. Anyone who pays the same rent for premises in Sheffield as he would pay in London is not a good man of business. Anyone who pays the same laboratory costs in London as he would in Sheffield is probably

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not a good man of business. The laboratory costs, in particular in a good practice, are a vital part of the costs.
Secondly, it is not only a national flat rate formula. It is also an inaccurate calculation of costs. Over the years this Government have been extremely prone to that. But it seems to be almost on the level of the miscalculation of the standard spending assessments at the introduction of the poll tax. If nothing is done about the miscalculation, the effects may be equally serious.
I understand that there is a need to watch costs, but it is not intelligent to pretend that items cost less than they actually do. If you are cutting costs you must do so by undertaking the work you can afford and by not doing the work you cannot afford. Cutting costs by pretending that costs are lower than they are is an exercise in fiction. Watching such a style of cost cutting I am sometimes reminded of a devastating onslaught by one literary critic on another when he observed on the fifth page, "He is not one of the abler practitioners of this form of criticism." Similarly one may say that the Government are not always among the abler practitioners of this form of cost cutting.
The effect of the contract was to reduce my dentist's income in a practice, newly and very well equipped, to £11,400 a year. Naturally he reacted as you and I would do by working all the hours that God sends and a few that He did not. I have much cause to be thankful to my dentist for doing so.
That extra effort by the dentists produced earnings which led the department to allege that there was an overpayment. It was money which the Government had not expected them to earn. They were given an economic incentive which they took. I believe that anyone holding Conservative principles would have recognised that they would do so and should praise them for it. When people have worked six days a week from 9 a.m. until 6 p.m. or on one of those days until 9 p.m., the shock at having such an incentive taken away makes them consider leaving the health service.
We should consider the steady trend towards longer hours in all the public services. The paradigm public servant of the 1980s was the signalman raised to unfortunate immortality in the Hidden Report who was working so long that he had simply lost any ability to concentrate on what he was doing. In medical matters, that is, to put it no higher, unfortunate.
The noble Lord, Lord Colwyn, also referred to the cut in the prior approval threshold from £600 to £200. As he said, that is an occasion for a great deal more bureaucracy which involves a great deal more cost. The department should consider whether the operation of that system will lead to a reduction in costs or whether the administrative costs may be close to the amount of dental saving. From the dentists' point of view, as from that of a university teacher, such a factor causes intense irritation and leads to remarks that one would not repeat in this Chamber.
I make one final point. During the election campaign I listened to the Prime Minister on the Walden programme repeating his pledge to a publicly funded health service, funded out of taxation, and free
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at the point of delivery. Unlike some, I recognised that pledge as totally sincere. On the other hand, as I listened I felt a great deal of doubt as to whether he would succeed in delivering the pledge. In order to succeed in doing so, he must get his costs right; and that is a matter on which the Government do not have a good record. He made no exception of the dental service. I did not understand him to intend to make any exception of it. Therefore if he is to make good one of the most significant of his election pledges—without which it is a wide open question whether the election would have gone the way it did—he must make sure that dentists make an honest living and stay in the health service.
7.40 p.m.
Baroness O'Cathain: My Lords, it probably seems strange to your Lordships that I have put down my name to speak in this debate. I did so for three reasons. The first is that dental health is very important to every consumer. Like the noble Earl, Lord Russell, I speak as a consumer. It is important to every consumer—to every person—in this country and I have always been intensely interested in anything that affects the consumer.
The second reason is that the future of dentistry seems to me to hinge on the absolute necessity to ensure that the management of change is effected in the most economic and socially acceptable way. As someone who has to cope with that difficult and demanding task on a daily basis I felt that I might have something to offer on that score. The third reason is that the future of any organisation, function or concept depends on the current state of that organisation, function or concept, and the current situation of dentistry gives me some cause for concern which I should like to share with your Lordships. That concern was described in great detail by the noble Lord, Lord Colwyn.
Both the previous speakers spoke in depth about the contract, TAGI and TANI. I shall not go over that ground again. I want to talk about the future of dentistry. Dental health is something that we take very much for granted. It looms large in our lives only when we have a raging toothache. My generation, and those of an even older generation, still regard a visit to the dentist as a really terrifying experience. In fact, I often say to my banking colleagues that a visit to a bank, with its forbidding surroundings and strict tellers behind bullet-proof glass, is third in the list of the least-pleasant forays of the average consumer after the dentist and the self-service petrol station. Incidentally, lest any of my banking colleagues should perchance come across what I have just said I must put the record straight; banks are improving their customer care. But a visit to the dentists is no less terrifying!It is a mark of how wonderful the developments in dentistry have been that today's generation does not have anything like the same level of fear. It is also a situation that leads one to the conclusion that dentists are now victims of their own success. Those of us who had a mouth full of fillings before the age of 12 and those of us who had schoolfriends who had false teeth

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while still at school, find it hard to believe that nowadays the young people who have fillings—even one or two—are the exception rather than the rule. The dental profession has achieved remarkable success during a relatively short period of time in being largely instrumental in bringing that about. It has been due partially to regular examinations and due partially to its mission to save teeth and not to drill and fill at random. The improvement in dental health is also due, of course, to better education—schoolchildren are encouraged to look after their teeth —and also, I am quite sure, to something as simple as TV advertisements. The third reason for improved dental health must be fluoride—however controversial that whole issue has been.
Those are some of the very real plus points. But I have already made the statement that I think that dentists are the victims of their own success; and that very success questions the future shape and size of the profession and the emphases that will have to be laid upon the training of the entrants to the profession. The future of the profession is fraught with the problems of change.
Change is one of the most difficult issues that face any of us in our daily lives and the management of change is the biggest single issue facing us in our business and commercial lives. Dentists are not immune to this problem and I believe that it will become an even greater issue in the immediate and longer-term future.
As I read the situation the demand for dentists is bound to reduce if the dental health of the nation continues to improve so significantly. That demand will not tail off for some time while people such as myself still have to rely on the dentist for considerable "care and maintenance" due to the problems encountered in early childhood (in another country, I hasten to add!). But I can see a situation developing where in about 10 or 15 years' time the numbers of new intakes into the profession could be reduced significantly. This change will have to be managed. That is no easy task as the management of change in a declining market is the most difficult problem of all.
In order to ensure that the great strides made by the profession are not jeopardised it is imperative both that cognisance is taken of that now and plans to cope with the future drawn up.
Of course, no one can foretell the future and my tentative assessment of what might happen is as likely as anybody else to be completely wrong. But one way of making an attempt to forecast what the future of dentistry might be is to extrapolate from the present. And what a sorry picture emerges to those not intimately connected with the profession. I confess that my knowledge of the current position is at best scanty, told to me by my dentist when he had me captive in his chair of torture while I had no chance of answering back or of asking questions. Doubtless the rights and wrongs of the current situation will be well detailed this evening and we have already heard many. Suffice it to say that I feel very sad that a profession
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which has served the consumer so well—the nation so well—should be threatening to strike, or the equivalent.
It is also a sad irony that the dentists, despite their tremendous service to the nation's well-being, do not have a great deal of support from the public. That is understandable: they are not a high-profile body; usually the dentist is not the person at the centre of a life or death situation; the dentists' waiting rooms are not filled to overflowing by the hypochondriacs who want a quick fix in the form of Valium. All of this suggests that they will have little or no support from the general public for their action. The dentists are demoralised and I believe it behoves the Government to try as hard as they can to sort out this problem.
It also behoves the dentist to defuse the situationthere— has been some fairly inflammatory writing coming from their side of the divide (if divide it is). I fear that such sanctions as the dentists propose will not grab the headlines and that the two groups of people to suffer will be the dentists themselves and those of the population who are genuinely unable to pay for the increased consultation and treatment fees.
Dentists admit that there have been some rotten apples in the barrel; that some people have charged for treatment not undertaken. It is sad that those dentists who do all in their power to help their patients are being tarred by the same brush. I am sure that there are many NHS dentists who, like mine, put themselves out constantly for their patients. My dentist opens on Saturday morning to treat people, like me, who cannot visit their dentist during the normal working week. He also insists on visiting my extremely disabled husband at home, after a long and hard day's work, in order to ascertain whether the problem can be dealt with at home rather than subjecting my husband to the difficult manoeuvring of a wheelchair in a dentist's surgery. There are rotten apples in almost every barrel one cares to look into. Proper policing of the new contracts must be undertaken until such time as we have a more widespread sense of honesty in our nation.
The action that is proposed must by its very nature be short term. Everybody refers to short-termism in the City—it is a pity that it should be present also in the professions. That short-term action could jeopardise the long-term orderly development of the dental service just at a time when all the indications are that some pretty fundamental examination should be undertaken into the services that in future should be provided by the dentists.
I should like to ask a couple of questions. Why should the taxpayer pay for cosmetic dentistry? Perhaps the answer is that the psychological health of the patient is impaired without it. However, the dental health of a patient is almost certainly not impaired. I am told that a truly permanent filling material is not yet available, but when it is the demand for renewals should be considerably reduced. The demand for dentists might be limited to maintenance and repair and to orthodontics, both of which should be provided under the NHS dental contract; but I believe

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that everything else should be paid for. It appears to me that we are in the age-old dilemma of needs versus wants.
There is only one way to solve the current problem which, in turn, will lead to an orderly development of the future of dentistry. It is that the heat should be taken out of the current situation and that the Government should assist the profession to plan for the changed future. The suggestion that the negotiations group should be widened is excellent. I hope that in reply the Minister will give us some hope that the current uneasy state of affairs is containable, and capable of being resolved in such a manner as to ensure that there is an orderly, managed process of change leading to a great future for dentistry in this country.
7.50 p.m.
Baroness Eccles of Moulton: My Lords, perhaps I may begin by thanking my noble friend Lord Colwyn for setting out the complexities of this Question in such meticulous detail.
I thought I might address the Question on the future development of dentistry from the point of view of the steadily improving oral health of the population and how that links with the aims of the health authority. As my noble friend said, the new contract has successfully changed dental practice and that is demonstrated by the increasing numbers of both adults and children now consulting a dentist.
As chairman of a district health authority, I am particularly interested in anything which contributes to health gain and the quality of life of the population for which my authority is responsible. Sounder teeth staying put for longer must count on both those scores. Under the National Health Service reforms, emphasis has shifted from funds attached to hospital beds and other health services funded on an incremental basis to capitation funding based on the health needs of the population. As we all know, the consequence is that the money follows the patient and health authorities enter into contracts with the providers of the services.
An important part of the process of deciding which services to purchase is assessing what will be needed. At the same time, we attempt to identify illness which can be prevented. Oral health has a substantial contribution to make to improvements in general health. One of the local indicators used by the health service as a measure of the general health of the population is the incidence of tooth decay.
In order to encourage the health service to concentrate on promotion and prevention, targets are set. In that regard, a thread of government policy can be traced through first, Working for Patients, continuing through the Citizen's Charter to the Patient's Charter. That policy advocates the setting of targets both nationally and locally. Local targets are of particular interest and also feature in the Green Paper, Health of the Nation. Those local targets could be relevant in the field of oral health.
Statistics show that there is a wide geographical disparity in the incidence of decay. I give just one example. The best record for a health district of
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decayed, missing or filled teeth per five year-old child is 0.5, or one for every two children, and the worst is 3.5 or seven times as bad. It may be that local targets would encourage an improvement.
It would be possible to continue that line of thought to consider the benefits of fluoride in the public water supply, but that subject on its own stimulates many lively debates which are perhaps better not continued with now.
The recent history of oral health and the contribution which the new contract makes, with its implications for continuing care, is another interesting aspect of the subject under question. A few facts and figures give us some insight into what has happened. Bearing in mind that the adult population increased by 11 per cent. between 1968 and 1988, the number of adults during that period with some of their own teeth increased by 41 per cent. The total number of teeth in the heads of the adult population increased from 0.5 billion to over 0.75 billion and the number of wholly sound teeth increased from just under 300 million to just under 500 million. Perhaps most remarkable of all, the number of teeth repaired and saved by dentists during that same period has increased from 156 million to 268 million.
Looking forward—and that is where the benefits which the contract brings come in—total tooth loss is predicted to fall over the next 35 years to 1 per cent. from a level of 20 per cent. in 1988. However, what is far more important than strings of numbers is the relief from stress, pain and discomfort that modern dental practice can bring. It is now well known that the new contract has resulted in more people attending the dentist, thus preventing decay and removal. As my noble friend Lord Colwyn said, children between 0 and two years old have been registered. That is new and is part of the scheme of continuing care with emphasis on prevention. However, we must not forget that it is early days. Prevention takes a while to shine through and 18 months is a short time in which to see results.
In order that the dental service should continue to attract the highest calibre of practitioner, it is clear that the present complexities which exist in the remuneration arrangements for the service need to be tackled. No doubt the proposed fundamental review will address those questions.
7.55 p.m.
Lord Butterfield: My Lords, I hope that your Lordships will excuse me for inserting myself in the gap but I wanted to make a few remarks in support of our dental profession. I speak because I am chairman of the School Council of the United Medical and Dental Schools of Guy's and St. Thomas' Hospitals. I wish to make it quite clear that I agree very much with what the noble Baroness, Lady Eccles, has just said about the need to attract good people into dentistry for the future.
Our dental profession has played its part with the rest of the world's dentists in ensuring that we face up to the problems of caries from sucrose and sticky sweets. It has faced up to the possibilities of prevention through fluoride in our water. It has done

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remarkable work in improving the technique of dental care following the Nuffield inquiry into four-handed dentistry, as it is called. I should like to say that those of us who have enjoyed four-handed dentistry have been moved quite quickly from the fear of the old dentist situation to a much happier circumstance. It is now true to say that one lies down in the kind of space-ship situation, one is given an injection to take the pain out of it all and it is all so quick. The super speed drills and the four hands managing the whole operation have greatly changed dentistry for the patient. I believe that our dentists should be given full credit for that.
As has been said, in some ways dentists are doing themselves a disservice. They have increased their productivity. I asked one of my professors at Guy's about this and he pointed out that in one group 6.6 million cases had been treated in 1980 and 7.3 million in 1981, which is a sizeable increase in throughput. Therefore, although four-handed dentistry involves more cost because you have to have an extra member of staff on your payroll, it provides a nicer form of dentistry.
The other important matter which I should convey in my brief intervention is that our dentists are accepting increasing responsibility for overall health; and I am glad to have heard that from an active member of the administrative side of the health service. Dentists are becoming oral doctors. At the moment we must realise that there is a very severe risk of AIDS affecting some young people, and AIDS is not infrequently diagnosed in the dental chair.
The other point which is neglected is that oral cancer has become statistically the sixth most common cause of new growth of cancer. That has been detected by our dentists much more than by the other parts of the medical/dental professions.
I hope that in their consideration of the future of dentistry, the Government will cosset the dentists and their morale. Indeed, as far as I am concerned, those who produce more work will be able to cosset their bank accounts and their holiday opportunities.
We did not welcome the Minister properly when she first appeared in a debate in this Chamber to speak from the Dispatch Box. I recognise that the noble Baroness, Lady Cumberlege, has a fairly tough assignment because she is coming into a situation where demand for community care will escalate, and there is no doubt that something must be done to help our dentists. I wish her well.
A few years ago I led an inquiry into dental research. We found that British dentists provided 9 per cent. of the world's published dental research. It is true that compared to some parts of the dental world our dentists were not using molecular biology and monoclonal antibodies to anything like the same extent. I believe that if they had the opportunity to use them in the dental schools, they would.
I must make a plea for more research in dental schools. Otherwise we will not attract the kind of people the dental profession needs. There has been a reduction in the number of applicants—boys and girls in school can find out about the fluoride effect on
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caries. There has also been a tendency for A-level standards to be worrying for dental needs. We must put the situation right. It is in our own interests to ensure that the dental schools attract good quality applicants and take in good students so that our children do not encounter the dreadful fears about dentists that we had.
I conclude by saying that my dentist has completely cured me of anxiety. I do not look forward to seeing him, but I do not fear it.
8 p.m.
Lord Winstanley: My Lords, I am delighted that the noble Lord, Lord Butterfield, was able to interpolate his remarks in the gap. They were extremely important and I hope that they will be carefully considered by the Minister and others interested in this subject.
Whenever the noble Lord, Lord Colwyn, addresses your Lordships' House he always does his homework with great care. As a result, his speeches, on whatever topic, are always worth listening to and studying. I suspect that on this occasion the noble Lord has not had to do much homework. He has been speaking to us on a subject with which he has lived for many years and which is at the forefront of his mind most of the time.
It is perhaps a pity that much of the noble Lord's speech, and other speeches made in this debate, concerned money. Although I say it is a pity, it is inevitable. I know a great many dentists. It always seems to me that they are starving fairly comfortably. However, that does not mean that they do not have genuine grievances regarding remuneration. They do. Unless those grievances are remedied the national dental service will disappear. They must be dealt with and soon.
The noble Lord, Lord Colwyn, went through the history of the matter and the way in which the present system of remuneration was arrived at. I go back to the beginning. When the National Health Service began on 5th July 1948 I was a general practitioner. At the time I regarded dental health as a crucial and vital part of ordinary health. I looked with great care at the way in which the dentists were then working. Noble Lords may remember that dentists' remuneration was fixed in a different way from that of general practitioners.
I perhaps wander from the point when I say that general practitioners entered the National Health Service on a system of pay which was unknown at that time. The Spens Committee was set up under Sir Will Spens and general practitioners were told that their remuneration would be in accordance with the recommendations of that committee. In the meantime they were paid provisionally. After around three years the Spens Committee reported and the Government fulfilled their obligation by adjusting the pay to that recommended by the committee. But they did not backdate it to the 5th July 1948. That caused a serious grievance.
In the end the matter went to arbitration and before the courts. The doctors and the Minister of Health went before Mr. Justice Danckwerts. He came down wholly on the side of the doctors and we all received

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back pay for the three years. As a result of that my children always went to sleep with the words, "God bless Mr. Justice Danckwerts".
There was another consequence. It meant that when one spoke about remuneration to a Minister of Health and mentioned going before the courts or to arbitration, the Minister of Health ran a mile. The department had been bitten once and did not intend to be bitten again. Therefore I say to my colleagues in dentistry, do not rely on going to arbitration or before the courts because it will not be allowed.
One of the most important elements of the history of the development of the dental remuneration system given to us by the noble Lord, Lord Colwyn, concerned expenses. Dental expenses are repaid by a calculation in which they are included in piece-rate pay. That is an absurd system. Of course, dentists were always paid piecework. As I said, when we started and waited for the Spens Committee to report, the dentists were immediately on piecework. The payments were based on what was then thought to be a proper level of chair hours' work which a dentist could do in a week. It was thought at that time that a conscientious and efficient dentist could manage only around 32 or 33 chair hours a week with real efficiency. In fact they were working 70 hours a week. My noble friend Lord Russell mentioned "all the hours God sends". Of course they earned a fortune. The rumour then got around that here were all these people making vast amounts of money. But in many ways they made it at the professional cost of dentistry. They worked far too hard.
Dentistry is now an intricate and delicate matter. It has changed a lot in my time. Whenever a friend tells me he has some delicate dental manoeuvring to be carried out by a dental surgeon, my advice to him is always to make his appointment for the morning, rather than the evening. By the time evening comes the dentist is dead beat and the standard of his work is nothing like as high as it is in the morning. I am sure that the noble Lord, Lord Colwyn, will confirm that.
The reimbursement of expenses was the method used with general practitioners in the National Health Service for many years. At that time Mr. Kenneth Robinson and Sir Derek Stevenson went into purdah and held discussions. They came out with a new contract for general practitioners which suddenly reimbursed doctors for the expenses that they had actually incurred. That is the only sensible way to proceed. If a dentist, for the benefit of his patients, provides extremely expensive equipment—and it is extremely expensive; if he has an efficient staff to help him, which again is for the benefit of his patients; if he spends a lot of money and always provides a good service, then he is entitled to direct reimbursement for what he has spent. Why cannot we employ that kind of arrangement? As the noble Lord illustrated, the present arrangement is absurd. It leads to a lot of anomalies and a great many injustices.
The noble Lord mentioned the capitation fee. The present one is derisory. The system has perhaps been a good one where at long last a patient is registered with a dental surgeon who becomes nominally responsible for that person's care. If a decent
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capitation fee was paid it could cover the provision of at least an annual dental examination which would be free, and any further investigations which arose as a necessity from that examination. That also is a point to which the noble Lord, Lord Colwyn, referred.
To arrive at a decent system of remuneration for dentists, when one is relying on a piecework system, is a complex matter. It will not be easy by normal systems of negotiation. It was calculated—and was certainly true in my time—that dentists tended to reach their maximum earnings capacity around the age of 32. They were fit and well and could do long chair hours and therefore get through a great deal of work. After the age of 33 or 34 their earnings dived sharply. That is the opposite to what happens in other professions. Some noble Lords may be barristers and I doubt that they would say their earnings dived sharply when they reached the age of 33. They do not even arrive at any earnings until they are much older. That is something to be considered and in doing so we must bear in mind that dental surgeons efficiently can only do a certain number of chair hours. They should not be induced to do a great deal more. It is important to remember that.
Both the noble Baronesses, Lady O'Cathain and Lady Eccles of Moulton, mentioned fluoridation and then both backed rapidly off the subject. I was astonished. They came along and dipped their toes into the water and then rapidly plucked them out again as if it were very cold. They should not be so reluctant. I am delighted to see the noble Baroness, Lady Gardner of Parkes, with us. I am sure she will agree with me that the fluoridation of water has been of immense benefit. It is partly responsible for the striking and spectacular decline in the incidence of dental caries. I do not know what it is like now, but there was a time when most of Birmingham's water was fluoridated. It had no patients with dental caries for the students to study, so patients had to be bussed in from places such as Dudley and other less fortunate places which did not have fluoridated water.
We spent hours and hours in your Lordships' House passing the water fluoridation Bill which removed any uncertainty about the legality of adding fluoride to water in certain circumstances. But many of the water authorities have been extremely reluctant to take the necessary action. In many parts of the country we still have water authorities which have not yet seized the opportunity which your Lordships' House and the other place gave them. That is also an important matter.
I repeat that dental health is a very important part of general health. It is important that we maintain a national dental service in the same way as we have a National Health Service. If the service proceeds as it is now, with the kind of difficulties which have been introduced in recent years, I can see a time when we shall have no national dental service at all. When the noble Baroness replies can she say whether it is the Government's intention to retain by some means or other a national dental service within the meaning of those words or whether they are prepared to see it gradually wither away and disappear?

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That could be done gradually. When I was last in general medical practice in Worsley and Salford, just outside Manchester, in a group practice, next door we had a dental practice with two partners who did very good work. They also had a private practice in Dusseldorf. These two chaps worked turn and turn about. One week one would be in Worsley and the other in Dusseldorf. The following week they would reverse their roles. With inducements a dentist can make an immense amount of money by leaving the national dental service and going elsewhere. There is an inducement for many dental surgeons working under the National Health Service to give it up and to go for wholly private work. In those circumstances we are doing the National Health Service itself very great damage indeed. When the noble Baroness replies to this debate I hope that she will tell us clearly whether it is the Government's intention to retain a national dental service or whether the Government are prepared to see it wither away.
8.13 p.m.
Lord Carter: My Lords, like other noble Lords I would like to thank the noble Lord, Lord Colwyn, for tabling this Question and to congratulate him on his impeccable timing, not just in getting here but on the date of the Question. I am not sure that the Minister will agree about the timing. Noble Lords know that I have an involvement in agriculture, both inside and outside this House. I believe that the Minister also has a family connection with agriculture. Does she agree with me that the complexities of the system for remunerating dentists make the common agricultural policy look quite straightforward?
The facts are quite clear. On 10th February this year the review body on doctors' and dentists' pay recommended an 8.5 per cent. increase in dentists' net pay. That was called the target average net income. The Government accepted the recommendation in full and without phasing. On the same day the Government announced that in order to achieve the 8.5 per cent. increase in net pay they proposed a reduction in dental fees of 13.8 per cent. from 1st April. On 20th February the Government panicked and suspended the proposed fee cut, ostensibly until the Dental Rates Study Group (DRSG), met in May. I note in passing that it was clear then that a general election was likely to be called some time before the DRSG was likely to meet.
We now have the new package proposed by the Government on 2nd June. The fee cut now proposed is 7 per cent., thus showing that there was something badly wrong with the 13.8 per cent. cut proposed in February. With all these facts in mind it is clear that the Independent newspaper got it about right yesterday in its leader column which said:
"The concept of overpayment in a system in which standard fees are paid, on a piece-rate basis, for particular services is one that would only occur to the most dedicated of bureaucrats. What has happened is that the dentists have been too successful for their own good in implementing the government policies".
The article continued:
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"The present system is complex, rigid, pays no attention to regional variations in costs and does nothing to encourage price competition between dentists. It should be replaced".
This whole exercise of two steps backward and one step forward calls into question the competence and quality of the machinery which is used for these complex calculations. The figures themselves are fiendishly complex. But there is an aspect of the calculations that I find puzzling. I understand that a departmental survey indicated that dentists' net income was of the order of 33 per cent. of turnover. That means that, by difference, expenses must be 67 per cent. of turnover. The department's estimate of expenses for 1992–93 is about £47,000. That implies a turnover of the order of £70,000 and not the much higher figure that the Government have calculated of £92,000.
Perhaps the Minister can explain this rather curious conflict in the calculations. The basis of the expenses estimate is in the order of £47,000. If that is 67 per cent. of the turnover then that turnover is of the order of £70,000 and not the £92,000 figure which the Government have used.
As regards expenses, I find it hard to understand why it took three years for these matters to be calculated. I do not know whether noble Lords have seen the advertisements in the newspapers this week which point out to company directors that if they do not get their accounts in within six months they stand to be fined by the Companies Office. One of the most worrying aspects of the situation is the declining number of dentists prepared to offer treatment on the health service. A departmental survey carried out earlier this year indicated refusals by 75 per cent. of dentists in some parts of London; 73 per cent. in Kingston and Richmond; and 67 per cent. in Bromley. Other figures apply to other districts and they reduce to 36 per cent. in Bolton. This matter was discussed on 16th January in a Starred Question.
Can the Minister tell the House whether the Government have updated the January figures? What is the department's estimate of the number of dentists who are likely to leave the health service as a result of the most recent proposals? We know that the Labour Party has been criticised by the Government for giving a number of warnings about a two-tier health service. That is certainly happening now in the dental service which is also most definitely not free at the point of delivery. The percentage of fees paid by patients has increased from 16 per cent. in 1976 to 38 per cent. in 1991.
The other aspect of the Government's proposals concerns reference to the Dental Practice Board (DPB) for approval of all courses of treatment which cost over £200. The figure was formerly £600. That is bound to lead to bureaucratic delay and thus to increased pain and discomfort for patients. In their statement the Government say that these proposals will apply to about 3 per cent. of treatments. Can the Minister say what is the number of references to the DPB represented by 3 per cent. of treatments? How many actual references will there be? Also, can the Minister tell the House of the Government's estimate of the time taken to process the applications? The British Dental Association estimates that it will be in

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the order of three to six months. Do the Government agree with that figure? If not, will the Minister say what is the Government's own estimate?
Entirely properly, the Government are worried about the reaction of the public and the dental profession to their proposals. To enable Conservative MPs to handle their constituents' questions the Conservative Research Department issued a brief to Conservative MPs dated 2nd June, the same date on which the Government's proposals were announced. It contains the following sections: "Key Points", "Questions and Answers", "The Dental Service—The Government's Record", and including,
"Annex A. Draft paragraphs for MPs to use in reply to letters from Dentists"
and,
"Annex B. Draft paragraphs for MPs to use in reply to letters from Patients".
The document is headed:
"Prepared For: the information of Members, to coincide with the Secretary of State's meeting with dental representatives".
The brief has the same date as the Government's proposals and clearly contains information that is part of the confidential position paper that was prepared for the Dental Rates Study Group. Indeed, it includes some figures that were not in the Government's Statement. Given that it, too, is dated 2nd June and contains information from the confidential paper, perhaps the Minister can tell the House how the Conservative Research Department obtained that information. Was there some consultation with officials at the department, or is it a specialised version of open government?
In February, the Government said that they were proposing a thorough review of the remuneration system—we can all agree with that statement—and that undertaking was repeated in the Statement of 2nd June. Can the Minister tell the House the timetable for the review? When is it expected to be completed and when will it report? Will the review result in the setting up of a system that is simpler and fairer and which avoids the miscalculations of recent years?
On 5th December 1991, the then Secretary of State for Health, Mr. Waldegrave, referring to miscalculations in 1988–89, said in a Written Answer:
"The principal reasons for the overpayment were that the calculation of the 1988 dental fee scale was based on forecasts which over-estimated dentists' practice expenses and underestimated the volume of treatment to be undertaken by dentists … We shall be reviewing procedures with a view to avoiding such large scale variations in processing rates in the future and to insulate the dentists' pay system from these". —{Official Report, Commons, 5/12/91; col. 201.]
That was in 1988–89, but despite that assurance from the Secretary of State the same mistakes were still being made this year. Obviously, therefore, the system had to be overhauled.
Will the proposed review deal with the cogent suggestions that were made by the Review Body on Doctors' and Dentists' Pay, which noted the lack of incentive to invest in modern dental equipment? That point was mentioned by the noble Lord, Lord Colwyn. The review body suggested the principle that a higher proportion of dentists' income should come from capitation-based payments as opposed to the more volatile "piecework" payments, to use the words
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of the review body. It also recommended greater direct reimbursement of both revenue and capital expenditure and said that any system should avoid the problems arising from the averaging of expenses and of target incomes. We are all familiar with the old phrase that averages murder all truth, —which is certainly the case with the calculation of dentists' pay.
The proposed review has a great deal to do and time is short. We must hope that while it is in progress the Government and the profession can find an interim solution that makes the care of patients a paramount objective and not just a secondary function of abstruse and extremely complex calculations.
When the new contract was formulated in 1990, I understand that it was expected that 18 million patients would be treated. In fact, dentists treated about 24 million people. I understand also that the Government actually advertised in order to encourage demand, incurring expenditure of about £3,000 for the family health service authorities. The noble Lord, Lord Colwyn, said that about 27 million patients are now registered, but I have been told that 30 million patients were registered in April 1992. It would be interesting if the Minister could give the House the up-to-date figure. It is certainly very much greater than the figure that was expected when the contract was formulated.
We all know that the Government believe in an internal market for health care. There are two sides in every market —supply and demand. The demand for dental services is clearly present. It is the Government's job to set up a system of remuneration for dentists which will produce the supply.
8.23 p.m.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, I should like to thank my noble friend Lord Colwyn for introducing this interesting and timely debate. As always, he was in tune and on time. During the debate we have heard many important and stimulating points and I should like to return in detail to some of them later in my speech.
However, I start from a position on which we can all agree. We should judge the success or otherwise of National Health Service dentistry by the quality of the service available to patients and by the state of the nation's dental health. Despite the concerns voiced this evening, I believe that on that basis we have every reason to judge the NHS dental service very favourably. I heartily endorse the view of my noble friend Lord Colwyn that, contrary to much of what is said, dental practice in this country is a success. That view was also expressed by the noble Baroness, Lady O'Cathain, and my noble friend Lady Eccles of Moulton, who has already been very active in counting the nation's teeth.
Over recent years dental health in this country has improved markedly, so much so that many other countries envy our progress. As has been said, the dental health of children in particular has advanced in leaps and bounds. We now look forward to the day when decay in children's teeth can be virtually

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eliminated. We have already met the World Health Organisation's target for the year 2000 of 12 year-olds having, on average, no more than three decayed, missing or filled teeth. In our Green Paper The Health of the Nation, the Government have proposed an even more ambitious target.
These improvements in the early years should be carried on throughout life—and they will be. Within the next 20 years, we can expect that only one person in every 10 will ever have to rely on dentures. As my noble friend Lady Eccles of Moulton said, that presents a remarkable comparison to the position just 20 years ago when nearly four people in every 10 had no natural teeth at all.
The advances have not come about unaided. To a large extent, they result from substantial improvements in the dental care available in this country over the last decade. The statistics bear this out. Since 1979, annual gross spending on NHS dental services has risen by 43 per cent. ahead of inflation. Over the same period, the number of dentists in Great Britain has grown by 27 per cent. There are now over seven million more courses of adult dental treatment carried out every year—an increase of nearly 43 per cent. since the Government came to power. That record underlines, as I am sure the noble Lord, Lord Winstanley, will note, the Government's strong commitment to the NHS dental service.
But an effective dental service is not built on numbers alone. It is the quality of care that counts. To improve that quality the Government introduced in October 1990 a new dental contract. The new contract establishes the concept of all-round continuing care. It promotes the prevention of disease and offers a full range of dental care to patients. It brings in emergency cover and treatment plans. Patients can now have certain restorations repaired or replaced for free if they go wrong. They have better information about dental care and oral health.
The new contract is not only good for patients. It is good for dentists. It gives them greater clinical freedom in the materials and treatments at their disposal. It encourages them to keep their clinical knowledge up to date, with the new post-graduate education allowance. We introduced new maternity and long-term sickness payments, and dentists can now get their business rates directly reimbursed. The new capitation payments for children and continuing care payments for adults give the dentists greater stability of income.
These are significant gains. They are the way towards a better dental service and better dental health, bringing tangible improvements in the quality of people's daily lives, as several of your Lordships have mentioned. It is against that background of advance and improvement that we must consider the current issues facing NHS dentistry.
I have noted what many noble Lords have had to say about the difficulties of finding an NHS dentist in certain parts of the country. However, we must be careful not to exaggerate the extent of the problem. Today's problems, to which the noble Lord, Lord Carter, referred, tend to centre around the South East
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of England. Significant levels of private dental practice are virtually unheard of elsewhere. NHS dentistry is available in all areas and there was, in fact, a small net increase in Great Britain in the number of NHS dentists in the first year of the new contract. Our most recent survey showed that over three-quarters of dentists were accepting all patients for NHS treatment, and 85 per cent. are accepting children as NHS patients.
Of course, the Government are concerned about the difficulties that do exist. Their commitment to the NHS dental service is neither partial nor regional. It is absolute. We will take what steps we have to to ensure that the commitment has true meaning for everybody. Patients who experience a problem finding an NHS dentist should contact their local family health services authority, which will be able to put them in touch with their local NHS dentists. If the FHSA has real difficulty in finding an NHS dentist, then it can, and should, employ a salaried practitioner who will provide NHS services for those who need them. The department will be writing to all family health service authorities shortly to remind them of this possible course of action.
A number of commentators have sought to make a connection between difficulties in finding an NHS dentist and the proposals for a reduction in dental fees made by my right honourable friend to the dentists last week. The British Dental Association is, I understand, considering whether my right honourable friend's proposals are a matter for resignation or other forms of industrial action by dentists. Like the noble Baroness, Lady O'Cathain, I hope that it does not come to that, for in the event it would be patients who suffered. Certainly, it need not, for I find the BDA's line of reasoning hard to follow. Even after the proposed reduction of 7 per cent. in dental fees, the average dentist would still be left with a net income of around £40,000 a year. Most people would, I think, be glad to earn as much. It is hard to see how such an income adds up to a case for resignation.
More generally, I believe that the proposals made by my right honourable friend are both fair and reasonable. They are fair to dentists, not least because the proposed reduction is substantially less than the full 23 per cent. cut that would have been needed to bring the average dentist's income down fully into line with the figure of £35,815 recommended for them by their independent pay review body. Dentists will be paid that recommendation in full. Moreover, even after the proposed reduction in fees, the average dentist would still earn some £5,000 a year above that figure.
The review body's recommendation itself represents an 8.5 per cent. pay increase above the figure for 1991–92. This increase is well above inflation and similar awards for doctors and nurses. It simply would not have been fair to other health service workers to have done nothing, allowing dentists to keep every penny of a substantial payment over and above the review body's recommendation, when that recommendation was itself well above the award for others. The Government's proposals preserve equity in the NHS.

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At the time that the review body made its recommendation of an average net income for dentists of £35,815 there was not, as I recall, a great outcry in the profession. There was no talk then of resignation or industrial action. So I am bound to wonder why there should be this talk now, when my right honourable friend's proposals would leave the average dentist with an income £5,000 above the review body's recommendation. Those prepared to work for an average £35,000 must surely be content with £40,000.
Some people look for the reason for the current unhappiness among the various calculations of dentists' expenses, a point raised by my noble friend Lord Colwyn and the noble Lords, Lord Winstanley and Lord Carter. But in fact the Government have been quite fair and reasonable here as well. The allowance for expenses proposed by my right honourable friend for this year is £47,228—
Earl Russell: My Lords, I beg the noble Baroness's pardon for intervening. Can she tell us how this figure, in particular the £40,000 a year, was arrived at? Is it based on actual income and expenses of individual dentists, or does it rest on an average?
Baroness Cumberlege: My Lords, I shall be coming to that point in a little more detail later on. It is of course an average and that is the point I shall come to in a moment.
But in fact the Government have been quite fair and reasonable with regard to expenses. The allowance for expenses proposed by my right honourable friend for this year is £47,228, 11.6 per cent. above last year's figure. Taking this together with the review body's recommendation for dentists' net income in 1992–93 of £35,815, gives dentists a gross income of £83,000. And of course, I repeat, that even after my right honourable friend's proposals, the average dentist would actually receive around £5,000 more than that figure. All in all, average gross earnings per dentist would be around £88,000.
Lord Carter: My Lords, perhaps I may return to the point which I made. On the figures that the noble Baroness has just given, which I fully understand, it means that the department is working on a figure that expenses as a percentage of turnover are 57 per cent. However, the department's internal survey, which I believe is unpublished, shows that the figure is 67 per cent. There is something rather odd in the calculations somewhere.
Baroness Cumberlege: My Lords, I cannot answer the detail of that point but I shall write to the noble Lord.
The Government's proposals are also fair to patients. As a result, many would pay less for their dental treatment than would otherwise have been the case. Those who allege that my right honourable friend's proposal is an act of "creeping privatisation" might do well to ponder on the fact that it is an odd sort of privatisation that cuts what people have to pay for their NHS dental treatment.
Finally, the proposals are a reasonable step to control expenditure. In fact, £1,400 million was spent on the general dental service last year—a vast sum.
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But, under the current fee scale, payments to dentists are running some half a million pounds above budget every day. The sensible control of public expenditure demands that action is taken to rectify this problem.
I should now like to turn to some of the specific points which have been raised in the debate. The noble Earl, Lord Russell, referred to his local dentist, whose earnings are low—under £12,000 a year, or they were originally before they were increased. They are without a doubt towards the very bottom of the scale of earnings for NHS dentists. Without more detail it is very difficult for me to comment on a specific case and I know that the noble Earl will appreciate that.
The noble Earl also asked about expenses and said that they did not reflect regional variations. I well understand that and I think that the fundamental review will have to tackle that issue head on. It also has to tackle the question of averages—average income, average dentists. I share the view expressed this evening that there is no average dentist. That person does not exist. That is one of the flaws in the present system. Again, hence the need for a fundamental review. However, to lift a phrase from the noble Lord, Lord Winstanley, it is not the Government's wish that anyone should starve, even comfortably.
I turn to the comments of the noble Lord, Lord Butterfield. As chairman of the Schools Council of the United Medical Schools, his views clearly carry great weight in this Chamber. I am sure he will he pleased to know that at present there are two applicants for each dental school place and that the standard of applicant, taking the United Kingdom as a whole, has slightly improved in 1991 over 1990. In other words, dentistry continues to attract many high quality candidates for the degree places available, a very necessary development, bearing in mind the increase in the incidence of cancer and the onslaught of Aids, as mentioned by the noble Lord.
The noble Lord, Lord Winstanley, set the historical scene for us. I am grateful to him for that and for giving us sound advice on making a dental appointment. I hope that I have covered many of the other valuable points that he and the noble Baronesses have made this evening in some of the comments I have made in summing up. I know that all these views will be taken into account when we come to consider the fundamental review. However, like other shrinking Baronesses tonight, I shall resist the temptation to enter into the fluoride debate. I shall also resist the temptation to get into the vagaries of the common agricultural policy, despite the seductive invitation of the noble Lord, Lord Carter, to do so.
The noble Lord, Lord Carter, asked about claims for prior approval. Lowering the cost ceiling for prior approval is still only a proposal. The administrative detail of processing claims at the Dental Practice Board will be worked out in detail if the proposal is adopted. I believe that we should bear in mind that the proposal will cover a mere 3 per cent. of treatments, or around 1 million, and the fact that the performance of the DPB has markedly improved over recent years. I do not believe that the BDA has real grounds for concern.

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Questions were also raised about the proportion of dentists' income which is expenses related. That refers back to an earlier point. The Government's current estimate is 57 per cent., not 67 per cent. Another question which needs to be addressed is: when will the fundamental review begin and why has it not started now? The review was delayed while we concentrated on the reasonable and fair proposals that my right honourable friend offered the dentists. She wanted to hear at first hand the dentists' views on the form of the review before deciding how to carry the work forward. She discussed the matter with the BDA at a meeting last week. Officials will meet with the association again tomorrow to talk it through. My right honourable friend will take a decision shortly afterwards.
In closing, I should like to say a little more about the fundamental review of dental remuneration, to which my noble friend Lord Colwyn rightly gave weight in his speech. I hope that the review will pick up some of the interesting points raised by the noble Baroness, Lady O'Cathain, which also have the support of the noble Lord, Lord Carter. The current problems have thrown into sharp focus the fact that the way in which dentists are paid is not all that it should be. That point was made by the noble Earl. The
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system is unnecessarily arcane and complex. It is not delivering the objectives that the Government would like to see.
It is important to the Government, to dentists and to their patients that the system by which dentists are remunerated is both fair and effective. We look to the fundamental review to deliver that objective. We all owe a great debt to the dental profession for its commitment and hard work. The Government want a better and more stable system for dentists' pay in the future. The points made today by noble Lords, and earlier by my noble friend, will provide useful grist to the mill.
The review will build upon the Government's substantial and enduring commitment to the NHS dental service. It will build upon the service's many strengths to improve the system for dentists, for patients and for the nation's dental health. I very much welcome today's debate, out of which, as ever, has come much wise and important comment. It will assist the Government in their task of building a better NHS dental service for the future.

Cattewater Reclamation Bill
Committed to an Unopposed Bill Committee.
House adjourned at sixteen minutes before nine o'clock.