Lords Sitting of 11 November 1992

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

Lord Woolf
The Right Honourable Sir Harry Kenneth Woolf, Knight, a Lord Justice of Appeal, having been appointed a Lord of Appeal in Ordinary and thereby created a Baron for life, by the style and title of Baron Woolf, of Barnes in the London Borough of Richmond—Was, in his robes, introduced between the Lord Wigoder and the Lord Taylor of Gosforth.
Lord Balfour of Burleigh—Took the Oath.

Algeciras-Gibraltar: Ferry Service
2.48 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
Whether the Spanish Government have now offered any explanation of their ban on the ferry service between Algeciras and Gibraltar.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, the Spanish Government drew a link between the Algeciras Ferry Agreement and the Gibraltar Airport Agreement. Until the airport agreement is implemented, they will not allow the ferry service to resume. The British Government are not satisfied with the situation. Therefore, I shall take the opportunity to raise the matter this weekend at my bilateral meeting with the Spanish Government.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that Answer and wish her all good fortune at the meeting to which she referred. However, is she aware that many of us realise that this petty little bit of hostility on behalf of the Spanish Government is thoroughly bad for relations between the two countries? Surely it is a case that if they have any sense they will drop it.
Baroness Chalker of Wallasey: My Lords, my noble friend Lord Boyd-Carpenter puts it far better than I could; it is a petty matter. I hope to explore what may be done to bring this stupid business to an end.
Lord Cledwyn of Penrhos: My Lords, we wish the noble Baroness well in her efforts to resolve this long-standing dispute. However, can she say whether there is an EC policy on the subject and whether the Transport Commissioner of the EC has taken any initiative in the matter thus far?
Baroness Chalker of Wallasey: My Lords, the law under Article 59 of the Treaty of Rome (the provision of services) provides for a company based in one member state to be allowed to operate in a second
176
member state. One of the problems with the whole affair is that it is a Spanish company that wishes to operate the ferry service and which is seeking to gain permission to do so from the Spanish Government. Therefore, it is not really covered by Article 59. However, as I said, I shall explore the situation and, having done so, we shall return to the Transport Commissioner to see what more can be done.
Lord Bottomley: My Lords, does the Minister agree that, in the long run, it would be in the best interests of Spain to be more generous to Gibraltar?
Baroness Chalker of Wallasey: Yes, my Lords.
Lord Merrivale: My Lords, I understand that HMG wrote to the Transport Commissioner in 1990 expressing dissatisfaction with the interpretation that the Commission was placing on the issue. Can my noble friend say what reply was received from him?
Baroness Chalker of Wallasey: My Lords, the British Government approached the Commission not only in 1990 but also in 1991 when the then Secretary of State for Transport wrote to the EC Transport Commissioner asking him to look into the problem. The Commissioner, Mr. Van Miert, replied that the Spanish action did not break Community law. In fact, that is legally the situation as I explained it when I referred to Article 59. One of the possibilities that I am exploring is whether there is some other way of going about the matter. At present, action before the European Court of Justice is not an option, but it may become one under certain other circumstances.
Lord Boyd-Carpenter: My Lords, although, as my noble friend says, the company that seeks to operate the service is a Spanish one, will she confirm that the operation of the service is of substantial importance to the Gibraltar tourist trade?
Baroness Chalker of Wallasey: My Lords, my noble friend is right, but it is not just in the interests of the Gibraltarians that the ferry service should he resumed. It would also be in the interests of local people in the Algeciras area of Spain. It seems to me to be one of the curious examples where we have to put the Community right.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that this is a good example of the lack of affinity in the European Community? It is a matter which is just outside the legal rules, but an affinity is necessary if the whole idea is to work.
Baroness Chalker of Wallasey: My Lords, my noble friend is right. We need a little pinch of common sense here, and perhaps we will put the matter right.
Lord Merrivale: My Lords, in view of the attitude Spain has taken for a number of years on this issue, have Her Majesty's Government tried to enlist the support of other member states to solve the issue which affects, as the Minister said, various interests?
Baroness Chalker of Wallasey: My Lords, my noble friend makes a valuable suggestion. I shall see whether we can do it all by ourselves. If we cannot, I am quite prepared to ask for assistance.

Recreational Facilities: Schools Opting Out
2.54 p.m.
Lord Howell Lord Howell asked Her Majesty's Government:
Whether they are aware of the threat to the provision of local authority facilities for sport and recreation implicit in a recent decision of the assets board arising from the opt-out of Great Barr School, Birmingham.
The Minister of State, Department of Education (Baroness Blatch): My Lords, the Education Assets Board has not made a decision: it has made recommendations and referred the case to the Secretary of State. The Government do not consider that that case represents a threat to the provision of local authority sports and recreation facilities as user rights are protected under the Education Reform Act 1988.
Lord Howell: My Lords, I am grateful to the Minister for that Answer. Is it not the fact that 731 schools have sports facilities of excellence because the local authorities and the Sports Council have added money to educational money so that the schools will benefit and the community will have seven-day facilities available to it throughout the year? The absurdity of the asset board's recommendation can be seen in respect of Great Barr, where it suggests that the school should have the £1 million sports hall but the local authority should be left to pay the £120,000 a year interest charges; and, furthermore, that the ownership of the recreational field should be divided. That seems to be an absurdity to anyone who knows anything about the management and control of recreation grounds. Will any local authority in its right mind in future put any of its resources into dual-use sports facilities if they can be taken off it immediately a school opts out?
Baroness Blatch: My Lords, the Great Barr case is under consideration, and therefore it would not be appropriate for me to enter into the detail of it. This country has a proud record of dual facility use with schools and the community? As I said in my original Answer, there is no threat to the community using the facilities because the rights of all users, whether they are community users and/or education users, are protected under the law.
Baroness David: My Lords, is the Minister aware that it is not just sports facilities that are affected? A great many arts and cultural activities go on in community and adult education in schools. Many people involved in community education are worried about what may happen in this case. I hope that the Minister will use her influence to see that such people retain their rights to use the premises.
Baroness Blatch: My Lords, again I repeat that where dual arrangements have been entered into those rights are protected.
Lord Skelmersdale: My Lords, will my noble friend confirm that there is no bar to a grant maintained school renting out any facility that it happens to have on its campus to a local authority or anyone else?
Baroness Blatch: My Lords, that is true, but it is also true of LEA maintained schools.
Baroness Blackstone: My Lords, following the Minister's answer to the last question, will she confirm that it would be inappropriate for a grant maintained school to rent out such facilities? They should be available freely to the local population, which has paid for those facilities through the community charge. Is she also aware that the Sports Council has frequently invested money in such facilities and was not expecting schools to charge for them?
Baroness Blatch: My Lords, the noble Baroness ignores the running costs of such facilities. That is important. If they are to be free to all users, then of course their use will be limited. Where there can be an income stream, it means that the facilities are extended to more people.
Lord Howell: My Lords, is the Minister aware that on 4th March during the Committee stage of the Education (School Premises) Bill in another place when I led for the Opposition, the then Minister for sport, Mr. Robert Atkins, gave a specific undertaking that the ownership of such facilities would be protected in the Bill and that the Government would make the necessary provision by order? That being the case, it was recognised that a major policy matter arose out of this incident, and so why have the Government not acted to redeem the promise made by the Minister as recently as 4th March?
Baroness Blatch: My Lords, the noble Lord is probably aware that the contents of that Bill are resurrected in the Education Bill which is now before another place. It is hoped that it will ensure that all dual-use arrangements which have been entered into and which will be entered into in the future will work for the benefit of the school community and the wider community.

EC: Short-term Currency Speculation
3 p.m.
Viscount Hanworth Viscount Hanworth asked Her Majesty's Government:
Whether they intend to put forward proposals for limiting short-term currency speculation for discussion with partners within the European Community and elsewhere.
The Minister of State, Department of Transport (The Earl of Caithness): My Lords, no.
Viscount Hanworth: My Lords, I thank the noble Earl for that unsatisfactory reply. I only wish to ask him to continue to consider the problem because he would surely agree that it is important. Does he realise that in the past it was a capital offence if someone tried to gain money personally and not in the national interest when the country was in difficulties?
The Earl of Caithness: My Lords, the noble Viscount will be aware of the importance of London as probably the world's major trading centre for foreign exchange. If one pursues the noble Viscount's line of thought, one would have to look, first, at the desirability of any action and, secondly, at the practicality.
Lord Bruce of Donington: My Lords, will the noble Earl agree that one of the difficulties in this instance is that short-term speculation is not defined in any way in the Treaty of Rome, much less in the wretched Treaty of Maastricht? Does he agree that in any event if it were possible to define it and legislate against it, it would put half the banks and financial institutions in the United Kingdom completely out of business?
The Earl of Caithness: My Lords, the noble Lord is right to say that the banks were trading on the foreign exchange markets. But, as he will know as well as anyone else, so were a great many other people.
Lord Moyne: My Lords, is it not the case that, were any proposals such as the noble Viscount suggested put into effect, the minimum lending rate would now be 2 per cent. higher than it is and the pound would be at an unacceptably high rate in the foreign exchanges? Do we not owe a vote of thanks to the currency speculators?
The Earl of Caithness: My Lords, what happened in September showed certain strains within the ERM.
Lord Stoddart of Swindon: My Lords, following the noble Earl's Answer to the noble Viscount, Lord Hanworth, does that mean that we shall make no efforts, early or late, to re-enter the exchange rate mechanism?
The Earl of Caithness: My Lords, I seem to remember the noble Lord, Lord Stoddart, asking me precisely that question not so long ago. It is not relevant to the Question on the Order Paper.
Lord O'Brien of Lothbury: My Lords, will the Minister agree that it would be far better for the Government to concentrate their energies on minimising the economic financial uncertainties now existing than on taking the course of action proposed by the noble Viscount, Lord Hanworth? It is these uncertainties that lead to speculation.
The Earl of Caithness: My Lords, my right honourable friend the Chancellor of the Exchequer will be making the Autumn Statement tomorrow. I hope that the noble Lord will be clearer as to the policy then.
Lord Donoughue: My Lords, while recognising that any action to curb speculation must be on a global basis in today's international markets, will the noble Earl agree that the best solution is for the British Government to conduct a sensible monetary policy so that speculation does not arise?
The Earl of Caithness: My Lords, I thought that the party opposite was in favour of the ERM and welcomed the fact that we went into it. Perhaps I misunderstood the situation.
Lord Marlesford: My Lords, will my noble friend agree that we must deplore the large profits made by certain banks, particularly overseas banks, at the expense of the British taxpayer? Will he agree that the blame for this must be placed with the Bank of England for not having made it clear to Her Majesty's Government that the kind of intervention in which they indulged was quite futile, and predictably so?
The Earl of Caithness: My Lords, I am sure that my noble friend will agree with me that it would have been quite wrong for the Government not to have tried to defend sterling in the way that they did on that occasion.

Vehicle Clamping: Privately Owned Land
3.4 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What further conclusions have been reached on the legality in the United Kingdom of clamping vehicles on privately owned land and the imposition of penalties, following the finding by a Scottish court and comments by Ministers on 17th June (HL Deb. Col. 183) and 23rd June (HL Deb. Col. 383).
The Minister of State, Home Office (Earl Ferrers): My Lords, the judgment in the High Court of Justiciary in Scotland would appear to provide only a limited precedent for England and Wales, where the legality of the practice is likely to be governed by the particular circumstances of each individual case. The Government, however, intend to publish a consultation paper depicting the law as we see it and canvassing a range of options for addressing the problem.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply. Is he aware that the subject of clamping is of keen interest to the public? Many of their daily lives are bedevilled by problems of parking. Does the noble Earl's statement mean that the situation would be determined more easily in England and Wales if there were to be a test case?
Earl Ferrers: My Lords, if there were to be a test case, obviously the law as it stands at the moment would be clearer. When my noble friend says that there is keen public interest—because I think he inferred people hated being wheel-clamped—the answer is that of course I understand people disliking it. But the purpose of wheel clamping is to enable traffic flows to continue. People are only clamped when they have been illegally parked.
Lord Hailsham of Saint Marylebone: My Lords, if and when the consultation paper appears, will it tackle the question of whether wheel clamping on privately owned land—to which the Question refers—is a trespass to goods?
Earl Ferrers: My Lords, I think that my noble and learned friend is quite right. If one parks on private land, the parking is itself a trespass. If one clamps a

181
car on private land, the clamping can also be a trespass. But there are defences for trespass such as consent. An example of that might be that if a person illegally parked his car when there was a notice warning him of its illegality, he would know that he would be carrying out an illegal act if he parked. That would be a defence.
Lord Morris of Castle Morris: My Lords, will the Minister do everything in his power to publish the Government's proposals on private wheel clamping as soon as possible, because the problem seems to be growing almost by the hour? Can he tell the House whether the proposals include the Government's reaction to Mr. John Spellar's Private Member's Bill on the issue in another place?
Earl Ferrers: My Lords, obviously that is one of the matters about which the Government are concerned at the moment. Our idea is that the consultation paper should canvass all the details and also all the possible solutions.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that clamping on private land is not the only problem? Not only do people clamp but they then demand extortionate charges for removing the clamp. They are then in the position of demanding a fine, which is not open to anyone else, to satisfy their own sense of being in charge.
Earl Ferrers: My Lords, that is one of the problems. The learned judge in the Scottish case said clearly that the clamp was theft and to ask for a fee to remove the clamp was extortion. But under Scottish law, theft is the dishonest appropriation of property; in England, Section 1 of the Theft Act 1968 states that theft requires dishonest appropriation, as in Scotland, as well as the intention permanently to deprive the owner. Whether or not a person is entitled to levy a fee for releasing that car is one of the matters which will be discussed in the consultation document.
Lord Hailsham of Saint Marylebone: My Lords, if I may pursue my noble friend one stage further, has he considered the possible application of the Unfair Contract Terms Act 1977 to the levy of this degree of penalty and to the legitimacy of that in relation to the law of trespass?
Earl Ferrers: My Lords, I have addressed my mind to many points on this subject, but not that one. I should tell my noble and learned friend that it would not be for me to address my mind but for the court to address its mind, were a case to come before it. As yet, no case has come before it.

Business
3.9 p.m.
Lord Hesketh: My Lords, after the short debate on small business and before the short debate on the work of voluntary agencies, my noble friend Lord
182
Arran will, with the leave of the House, repeat a Statement that is to be made in another place on Northern Ireland—Political Talks.
With the leave of the House, I should like to say a word about the two debates standing in the names of my noble friends Lord Caldecote and Lord Elton. 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 my noble friend, Lord Caldecote, this means that all other speeches should be limited to a maximum of eight minutes and in that of my noble friend Lord Elton seven minutes. If any noble Lord were to speak at greater length, he would be doing so at the expense of subsequent speakers in that debate.
It may be worth reminding noble Lords that the digital timing devices record historical fact rather than the present. Thus when they indicate eight, the ninth minute has started.

Small Businesses
3.10 p.m.
Viscount Caldecote Viscount Caldecote rose to call attention to the contribution made by small businesses to the economy of the United Kingdom and the importance of stimulating growth in this sector; and to move for Papers.
The noble Viscount said: My Lords, I am delighted that there are to be two maiden speeches in this debate. I know we are all greatly looking forward to hearing them. Before introducing this Motion standing in my name I must declare an interest in that I am chairman of a small company employing four or five people.
There is no doubt that small businesses make a most valuable contribution to the economy. Those employing fewer than 20 people employ more than one-third of the private sector workforce and account for about one-quarter of the GNP. Those employing up to 200 people employ nearly 60 per cent. of the total. Some recent research has shown aggregate job creation in small firms to be remarkably stable throughout changes in the economic cycle. However, size itself is less significant than the structure of small independent businesses in determining the special contribution which they make to the economy.
The great majority of small businesses are managed by their owners, so management is free to concentrate solely on the long-term interests of the business without fear of takeover and other pressures. Many founder shareholders have sunk all their savings, or a legacy from the mythical Aunt Agatha, in the business: others less fortunate have mortgaged homes or given personal guarantees to banks to raise the initial investment. So these owner-managers have a strong personal commitment to the future success of their businesses.
At one end of the spectrum achievement may be no more than bare survival providing minimum personal income and constant worry over many years. At the other extreme, healthy profitable growth brings real

183
prospects of sale or flotation in the foreseeable future and the dream come true of making that first elusive million. It is the prospect of the rewards of success that encourages enterprise, hard work and risk-taking in these small companies. Those rewards, fairly earned, must never be denied to the successful by taxation or regulation.
Although life in independent small companies is tough, it is also relatively simple, with clear objectives, short lines of communication and close personal relationships as well as inbuilt motivation. These attributes give such companies many advantages, particularly in flexibility and quick reaction to changing market needs to which owner-managers are very sensitive. There is no inhibition to taking a long-term view of investment and growth. I remember a good example of quick reaction in a small company making knitted socks in which 3i had an investment. Sales were falling because customers disliked the patterns, so the joint owners, who knew every detail of the manufacturing process, worked flat out through a weekend to reset the machines for new designs. Soon the socks were selling like hot cakes.
An example of being able to take a long-term view bringing ultimate success is Oxford Instruments plc, which was founded many years ago in 1961 by a scientist who brought an idea out of an Oxford laboratory and developed it into the substantial, publicly quoted company of today. Long years of hard work and little financial reward were eventually crowned with success by flotation in 1983. That success owed much to singleness of purpose and independence of ownership. But although these factors give strength to small companies, their vulnerability to hard times is much greater than that of a large company. They usually have little fat to shed through cost reductions, nor family silver to sell. Accommodation, plant and equipment are often leased and as they are normally single-product companies there are no fringe businesses to sell off to raise cash and see them through a financial crisis. That puts an even greater premium on good management, especially cash control. That also applies in larger businesses.
There is evidence that a change in the optimum style of management occurs as the company grows to employ more than about 10 people. So training for managers, and advice obtainable from training and enterprise councils and similar sources, is of great value. I remember once attending a meeting of an enterprise agency. I spoke to many of the young people who were present who had started their own businesses. Without exception they all said the advice they had received from the enterprise agency was of great importance to them in making a success of their businesses. They said that advice was a far greater help to them than help in raising money and other such help. Management training for people in small companies is of the greatest significance.
It is important to appreciate the strength and the problems of small businesses so that they can be given the most effective support and encouragement, for their value to the community and contribution to the economy is immense. Not only are they the acorns
184
from which great trees such as Thorn, Tesco, Oxford Instruments and Trust House Forte grow within a single lifespan, but they are also substantial job creators; for virtually every investment in a small company is for growth, creating job opportunities, whereas the objective in large companies, particularly in manufacturing, is very likely to be the reduction in labour costs and consequently a smaller number of jobs in the admirable pursuit of greater competitiveness.
Small companies also play a vital part as specialist suppliers to big companies. That fact is not always as well recognised as it should be in terms of the treatment they receive. Therefore, it is encouraging that in the past 13 years of Conservative government we have seen valuable progress in the growth of small companies. Between 1985 and 1989 they created about 1 million new jobs; that is twice as many as in larger firms. Self-employment has increased by 75 per cent. since 1979. Virtually all of that has occurred in small firms. Most significantly, the number of small manufacturing businesses rose by an average of 5,000 per year between 1979 and 1990 compared to 1,500 a year in the previous 16 years.
Of course small businesses have not escaped the effects of the deep recession and lower interest rates are as welcome to them as they are to larger firms. Although badly managed companies of whatever size are obviously most likely to fail, even well-managed small ones can all too easily be put out of business by circumstances entirely out of their control, such as rapid changes in the economic situation. Even so, over the past three difficult years new business starts have continued at a rate of over 400,000 a year.
The enterprise allowance scheme has been of real value in providing income support to entrepreneurs during the difficult initial stages of a new business. In 1991–92 new starts supported by this scheme averaged about 1,000 per week, which shows what a help it is for these young people who are starting new companies to have an income through the enterprise allowance scheme while they are building up their businesses. However, in spite of the success of this and many other schemes designed to help small companies, there are many problems still to be tackled and much more support is needed for small companies if they are to play the full part in society of which they are capable.
Probably the most important way forward is the continuing deregulation and removal of red tape. In view of the limited management resources of small companies it is absolutely vital that they should be concentrated on managing the businesses and not be diverted by protracted negotiations and complex paperwork when seeking support from the various schemes available. The same applies to negotiations with banks and other financial institutions.
Similarly, large company customers should not take advantage of their strength to delay payments beyond the due date nor to rely on legal niceties to disclaim responsibility for payment which a small company cannot afford to challenge. The CBI's code on prompt payment is most welcome, and I was glad that it was relaunched at the CBI's national conference this week.
Two further ideas to help solve the problem should be actively considered. Small businesses should be allowed to pursue claims up to £5,000 through the small claims court procedure, and the professional accounting institutions should include in their codes of professional conduct a requirement to promote prompt payment to small companies in a responsible way.
In the interests of helping managers of small businesses to use their time most effectively, I also welcome the plans to establish "one-stop shops" recently announced by the President of the Board of Trade. There they will more easily be able to discover which support schemes can best help them. If those shops are to be fully effective the whole procedure for participation in the schemes must be simplified and the time from application to implementation greatly shortened, even if that offends against the Treasury principle that every transaction must be fully documented.
I hope, too, that those shops will also be able to give clear guidance on the sources of finance most likely to meet a small company's needs. In that connection, the business expansion scheme has performed a most useful function in filling the equity gap between the limited funds available to the founders of a business and the lower limit of investment which venture capital funds will make—around £150,000.
I am concerned that the BES scheme is to be phased out at the end of 1993 without any plans having been announced for its replacement. BES investment in approved small businesses can be deducted from the taxable income of the investor, and that provides a real incentive to risk-takers. The demise of the scheme will further increase the difficulties of raising the relatively small amounts of capital which are often required in the early years of a growing company and will force companies to rely to an unhealthy extent on loans from banks, making them more vulnerable in difficult times.
As pressure on small companies has mounted during the recession the clearing banks have been severely criticised for their treatment of small companies trying to survive. The fact is that the managements of those banks have little experience of assessing business risks, particularly in small companies, which they seldom have time to visit. They cannot therefore be expected to support small companies through equity investment, which is the only practical way of achieving a profitable balance between risk of loss and potential reward in the long term.
Therefore, the importance of creating better ways of financing the growth of small companies cannot be overestimated. I very much hope that my noble friend who is to reply will be able to comment constructively on that issue.
The successful control of inflation will always be of immense significance to small businesses, particularly those which export, for it is extremely difficult for them to absorb inflationary cost increases. The
186
achievement, therefore, of lower inflation through Her Majesty's Government's policy has been of real value to small companies.
We should also look at experience in other countries, particularly the USA, where much of the growth over a long period was due to the attention given to the small company sector through the Small Business Administration. One requirement of the SBA has been that a specified proportion of sub-contract work in government procurement contracts must be placed with small companies. In current circumstances that example could be followed here to great advantage.
Similarly, large companies should help their smaller suppliers by giving notice well in advance of requirements. Suppliers then have a much better opportunity to meet them rather than being forced to respond to demands at short notice in competition with overseas suppliers. The good example set by such firms as Marks and Spencer and Rolls-Royce should be more widely followed.
In those and in many other ways, which I am sure will be covered later in the debate, we can support and strengthen our important small business sector. Above all, small businesses need stability of economic factors. They can readily react to market and other changes relating to their own businesses but even the best managed are very vulnerable to major changes in external conditions. Neither have they the resources to deal with unnecessary red tape and paperwork. Therefore, economic stability and simplicity through deregulation must always be kept in the forefront of policy to enable the small business sector to flourish in the interests of us all. I beg to move for Papers.
3.25 p.m.
Lord Clinton-Davis: My Lords, the House will be indebted to the noble Viscount for having initiated this significant debate, not least because it will give the House the opportunity to hear a maiden speech from the noble Lord, Lord Weatherill. I look forward to that particularly having served with him in the House of Commons for some considerable time and served under him when he was Speaker, and a most distinguished speaker too. He did not call me often enough, but that is another matter. We shall also be able to hear a maiden speech from the noble Lord, Lord Inchyra, who will give us the benefit of his banking knowledge, which is so relevant to the debate today.
As the noble Viscount said, small businesses and medium-sized enterprises are critical to the strength of the economy and to employment. They need rather more help than the lip-service which, by and large, this Government have given them. Because their success is indivisibly linked with that of industry and other commercial enterprises, at a time when we are facing raging storms of recession and slump they are peculiarly vulnerable. That could not be more graphically illustrated than by the recent pit closure fiasco. It was not only 31,000 miners' jobs which were at issue but also 100,000 or more jobs elsewhere, and not least the price to be paid by small businesses.

187
One only has to go through virtually every high street, and indeed side street, of our towns and cities to observe the "To Let", "For Sale" and "Closing Down" signs which represent vivid testimony to the collapse of so many small businesses and the hopes and dreams of so many families who are dependent upon them. Last year 70,000 houses were repossessed. That is an issue which is integrally related to the one that we are discussing this afternoon. All that represents heartbreak, heartbreak produced by the catastrophic failure of confidence and equally the catastrophic failure of the Government, which combines inertia and ineptitude to a remarkable degree.
I have no doubt that, as in all economic debates in this House and in the other place, the Government will express sorrow. I shall believe it from this Minister. I like this Minister. She knows that. She always has to clutch the short straw; that is the trouble. She will express sorrow about the 70,000 small business failures, the 3 million plus unemployed and the decline of manufacturing investment, which is lower today than it was in 1979. However, I believe that we shall hear little about the resources squandered on a massive scale. It is a fact that we have squandered our North Sea oil reserves and the privatisation revenues, and we have squandered £14 billion in trying to rescue the poll tax. Will the Minister express sorrow about our balance of payments deficit, which is massive even for a time of slump? We have a manufacturing deficit, which was unheard of before 1983. Manufacturing has not been in surplus since that date. However, somehow or other it is never the Government's fault —it is the fault of the trade unions, the teachers, the work-shy, the short-sightedness of industrialists paying themselves too much, the Bundesbank, the Civil Service or the Opposition. It is never their fault. The worse the situation gets, the more the Government go on floundering almost daily from one crisis to another. Evidently, the more Mr. Lamont sings in his bath —the Pavarotti of the bath tub—the worse the situation becomes.
Confidence has oozed away and small businesses face an ever worsening prospect. They are frightened about it. They find themselves buffeted by high interest rates. Businesses are collapsing all around them and engulfing them. They are the victims of late payment by often unscrupulous activities on the part of bigger businesses. By and large their pleas to the Government have gone unheeded.
Warning after warning has been given to the Government about the plight of small businesses by their own federation. On 4th February 1991 we read:
"Tunnel vision at the Treasury is writing off Britain's small businesses".
On 13th March 1992:
"The 1992 Budget measures would not put money into the pockets of ailing small businesses".
So it has gone on. There is a call for some of the measures referred to by the noble Viscount: simplification of PAYE, reforms of taxation, mitigation of the system of fixed penalties for VAT regardless of the seriousness of the offence, and other VAT reforms; as well as more and cheaper access to
188
the courts. Indeed, many other proposals have also been put forward. What are the Government doing about it?
Like so many others, businessmen are bewildered by the Government's extraordinary contortions. They simply do not know where we stand on devaluation. On 11th September 1992 the Prime Minister said:
"I was under no illusion when I took Britain into the ERM. I said at the time that membership was no soft option. The soft option, the devaluer's option, the inflationary option would be a betrayal of our future and is not the Government's policy".
It became the Government's policy.
Lord Gridley: My Lords, my name is not down to speak in this debate but I am a life president of a small business. Would it not be better to hear some constructive suggestion from the noble Lord as to how we can help small businesses? That is what we want to hear from Her Majesty's Opposition.
Lord Clinton-Davis: My Lords, I have just referred to propositions put forward by the federation. The noble Lord was deaf to them. The fact of the matter is that the success of small businesses depends upon the success of our economy and this economy is floundering, even if the noble Lord does not like to hear it. The Government have gone from one crisis to another. They have contradicted themselves. They have failed business and failed small businesses.
Yesterday Mr. Gordon Brown put forward a number of propositions which evidently the noble Lord does not want to hear. He spoke of new enhanced capital allowances for manufacturing industry in plant and machinery—that is necessary; a new investment programme, offering advantages for expenditure in new machine tools and production processes; providing engineering firms with special help; and giving individuals benefits when investing in new and growing manufacturing companies and those with technological bases. Those are some of the ideas that have been put forward. I recommend them to the House.
In addition to the present 100 per cent. allowance for research and development, why not have a 25 per cent. tax credit for additional investment? Why not have grant and loan assistance for innovative ideas in relation to small and medium sized industries to aid in developing new products and technologies? Those are ideas that the Labour Party put forward before, during and after the election. They are ideas which the Government ought to consider instead of brushing them aside and walking out, rather like the noble Lord did just now.
I welcome this debate and the opportunity to canvass such ideas and I congratulate the noble Viscount on having initiated it.
3.34 p.m.
Lord Ezra: My Lords, I should like also to add my congratulations to the noble Viscount, Lord Caldecote, for introducing this debate. I can think of no one more qualified to do so. He has had a most distinguished industrial career. He is an eminent

189
engineer and above all he introduced in this House recently the report on innovation in industry, which was exhaustively debated and of great importance.
He was quite right to draw attention to the vital importance of the small business sector. In terms of numbers of enterprises it dwarfs all other sectors in the economy: 97 per cent. of all firms are small business firms. I have tried to find out the number of small businesses but there are so many classifications of small businesses that I cannot work out whether there are 2 million or 3 million. But whichever number one chooses it is very large.
Another factor to bear in mind is the enormous growth of small businesses in the 1980s. They grew by no less than two thirds. They were buoyed up by the apparent growth of the economy in that period and by the end of the decade they formed a larger proportion of the economy than ever before. But, like all businesses, they have suffered since then. I am afraid that the burden of business failures, which we have all seen repeatedly reported in the newspapers, has largely fallen on small businesses. In 1990 there were 24,000 business failures; in 1991 that figure rose to 48,000; and in 1992 the rate could be as high as 60,000. The whole process has been reversed. Regrettably, one reads stories in the press of small businesses with sales falling having to shed labour and spending less on investment, training and innovation. In this important debate we have to consider how that situation can be put right.
The small business sector plays a very large part in the economy as a whole. Any measures that the Government take to try to improve the conditions under which the economy can recover obviously will have an impact on small businesses. It is a pity that this debate is not taking place on Friday rather than today because tomorrow we shall, we hope, hear much of great interest to the whole economy. What small businesses need in particular and the economy needs in general are a recovery of confidence, more orders and a stable economic and financial environment.
But there are specific problems associated with small firms. The noble Viscount and the noble Lord, Lord Clinton-Davis, also mentioned them. First, I believe that they suffer more than larger firms from the high and fluctuating levels of interest rates. I speak of fluctuating rates because sometimes we forget that in the past decade there has been an enormous fluctuation in interest rates. Perhaps I may remind noble Lords that interest rates in October 1981 stood at 16 per cent.; by mid-1983 they were 9.5 per cent.; in February 1985 they were 14 per cent.; in June 1987 they were 9 per cent.; and in October 1991 they stood at 15 per cent. The base rate is now 8 per cent. and may fall. It is fine that interest rates are falling. But will we have stability or will we be permanently on a see-saw of fluctuating interest rates? As someone involved in business, I find it difficult to plan for the future not knowing whether one will be up or down in that crucial element.
My second point specifically in connection with small businesses is to ask whether we should not have a dedicated loan fund providing medium and
190
long-term financial support at stable and affordable interest rates. Other countries do that. In Germany they have an organisation known as the Kreditanstalt fur Wiederaufbau, which has existed since the end of the war for the specific support of small businesses. It works through the banks and manages to provide money at low interest rates on a consistent basis. The same is done in France with the Credit d'Equipement des Petites et Moyennes Entreprises. We should study very carefully what is done in those other countries to overcome the particular difficulties faced by small businesses.
In recent times there has been much criticism of the relations between small businesses and the banks. Many small businesses feel that they were overstimulated by the banks to invest in the good days of the 1980s and that now in many cases the rug is being pulled from under their feet. However in recent times the banks have issued codes of practice stimulated by the Chancellor to indicate the way in which they would deal with small businesses. I believe that the situation is improving. Nonetheless it must be watched with great care.
The question of late payment has been mentioned. Dun & Bradstreet estimates that the average payment to small firms is made on average 81 days after invoice. That is 51 days after the normal 30 day period. In Germany the delay after the normal 30 day period is 18 days. Such delay is an appalling imposition on small businesses. It pushes them into having to raise more money on overdraft in order to pay for those delays. That is a matter which needs attention.
I wish to be quite fair in what I say. The Government have taken action to ensure that the procedure is tightened up with regard to government organisations. I see that the noble Baroness nods. She was no doubt going to refer to the subject; I mention it for her. The Government have laid down that their subcontractors also should apply those more effective payments. Nevertheless, delay is still a serious problem. Whether there should be some statutory regulation on the subject leading to an obligation for interest to be paid on late payment is a matter now being debated. I shall be glad to hear the noble Baroness's views on that subject.
For small businesses, the uniform business rate, the VAT regime and national insurance charges appear to take priority. Even if they should be in great difficulty, those tax obligations seem to come first. The question therefore arises whether there should be greater flexibility in the tax regime vis-à-vis small businesses.
I should like to end on a positive note. Recently a number of organisations have been established which give advice to small businesses. The DTI has a very good advisory service. The banks have now set up such a service. We have Business in the Community, an organisation with which I have had the honour to be connected for some years. All those organisations are anxious to offer good advice to small businesses. But what is required above all else is that small businesses should be treated in a way which enables them to get over the difficult times and to look forward to times when the regime in which they operate is a more stable and beneficial one.
3.42 p.m.
Lord Weatherill: My Lords, it is with some trepidation that I make my maiden speech in your Lordships' House. First, I should like to express to your Lordships my deep appreciation of the kindness of the welcome that I have received since I came to your Lordships' House, both from noble Lords and from the staff of this House.
I speak on this Motion because for some years before I entered Parliament I was actively involved in the family business which had been founded by my father in 1912, after he had led the last really successful strike of tailors against the sweat-shop conditions of that time. Unemployed and unemployable, he was forced to become self-employed. In February 1967 I was horrified to win the debate on the ballot for a Private Member's Motion in the other place. I put down a Motion very similar to that which we debate today. I well remember that on the following day I was sent for by Mr. Ian Macleod, the Shadow Chancellor of the Exchequer at the time, who first asked me my name and then complimented me on my speech. As I was a rather modest person in those days, and nervous about speaking, I said something to the effect that I was rather reluctant to speak in this place, "unless I really know my subject". I always remember his generous reply to me: "Dear boy, I am not certain that we shall be hearing you very often".
In truth he was quite right, because shortly after that I became a Government Whip serving under the noble Lord, Lord Pym, in 1979 the Chairman of Ways and Means, and in 1983 I had the great privilege of being chosen Speaker on the proposal of the noble Lord, Lord Colnbrook, seconded by the noble Lord, Lord Dormand, both of whom I am proud and pleased to say are noble friends of mine. I shall always he grateful to them for the confidence which they showed in me at that time. I join them in your Lordships' House, 10 years later, with my predecessor, my noble friend Lord Tonypandy, and with the noble Baroness, Lady Hylton-Foster, the Convenor of the Cross-Bench Peers, who as your Lordships well know not only is the daughter of a Speaker, but the wife of a very distinguished Speaker.
I am well aware that it is not good form in this Chamber to speak unless one does know one's subject. It should be done briefly and there should not be too much repetition. My credentials for speaking are simply that I was and still am connected with a family business. In 1967 the Motion I chose for the debate led directly to the setting up of the Bolton Committee on Small Firms. The later implementation in 1971 of most of its recommendations helped to improve the environment in which small businesses operate, and gave rise to a special small firms department in the Department of Trade and Industry and to a Minister for Small Firms whom I am delighted to see on the Front Bench this afternoon.
In this short debate I shall not have much time to do more than remind your Lordships that our country's 5 million small businesses employ one-third of the private sector workforce. They produce almost one-quarter of the United Kingdom's turnover. They are indeed the life-blood of the economy. It never
192
ceases to amaze me that 97 per cent. of all businesses in our country employ less than 20 people. Yet the emphasis of government policy is heavily focused on the big companies—the remaining 3 per cent.
As the noble Viscount stated, it is not the big companies which provide the lion's share of employment. Even ignoring the recession and the increasing trend towards rationalisation, larger firms are much more likely to discard jobs than to create them. My figures are from the Federation of Small Businesses. From 1985 to 1989 large companies created 120,000 new jobs compared with about 1 million created by businesses with under 30 employees. Therefore, is it not crystal clear that a healthy and thriving small firms sector is the key to future employment and to the future prosperity of our country?
A report recently commissioned by the National Westminster Bank entitled Bolton 20 Years On concluded that Government policy on small firms was still piecemeal and that administrative burdens had multiplied rather than decreased. I have been informed by the Federation of Small Businesses that the average owner of a small firm spends at least one day per week, and sometimes more, dealing with government paperwork for the Inland Revenue, Customs and Excise, the Department of Social Security, the Department of Employment and the Health and Safety Executive. Therefore it is no wonder that he sees himself as an unpaid tax collector for the Government.
If our country's economy is to recover, measures to help small firms to survive the recession and incentives to growth are urgently required. This short debate is not the occasion to go into detail but I ask the noble Baroness to ensure that the fiscal inequalities on small firms are removed, in particular the major deterrent to their growth which has already been mentioned; that is red tape. That would be of enormous encouragement and relief to them.
I promise that your Lordships will not be hearing me too often. However, as regards this subject I shall return to the charge from time to time; that is, unless the noble Baroness is able to put our minds at rest.
3.50 p.m.
Lord Joseph: My Lords, on behalf of the whole House, it is a pleasure to congratulate the noble Lord, Lord Weatherill, on his maiden speech. Those of us who come from another place scarcely recognise him without his wig. He is gentle and warm in character and yet in his great office he conducted himself with firmness and dignity. He maintained the status of what has been and still is a great office. Now he need look forward no longer to scolding, guiding, advising and sometimes controlling a turbulent House. He has come into gentler waters, a harbour, where he can make civilised and constructive speeches as often as tempting possibilities arise. In spite of his last words we hope to hear him often in this House.
Noble Lords: Hear, hear!
Lord Joseph: My Lords, I wish that I could speak with similar warmth about the contribution of the

193
noble Lord, Lord Clinton-Davis. Many of us—and I doubt whether all are on this side of the House—would agree with what was said by my noble friend Lord Gridley. I am not one who flinches from a proper debate on government mistakes, and during the past 10 years there have been government mistakes. However, to turn this debate on an important subject into a rehearsal of all the legitimate headlines in newspapers is unworthy of the noble Lord and of his party.
I am sure that I am one of many in this House who welcomed the way in which my noble friend Lord Caldecote set the scene for the debate. I shall not try to repeat or add to his figures. I wish to make a couple of general observations. Although I do not believe that there are figures to support it, my impression is that this country no longer has as many small businesses to compare with some of the rival economies. I think in particular of Germany, which has a long and historic interest in apprenticeship and in the support of small and middle businesses. According to the Anglo-German Industrial Foundation there is a greater proportion of what it calls high-technology new businesses, which span both the manufacturing and service sector, than we have. Furthermore, one has the impression that there is in Italy a great flowering of small businesses.
I wish to draw attention to some of the reasons for the situation which exists in this country. In recent years the birth rate of small businesses has been impressive. As was said by the noble Lord, Lord Ezra, there was a remarkable surge in the 1980s. Presumably there is a lesser surge in the difficult conditions of today. Many are one-man or one-woman businesses, but they are valuable for their potential and performance. Of course, there is always a high mortality rate among small businesses and therefore there has been a high death rate. Nevertheless, there has been a significant and fairly regular increase in the number of small businesses.
Ideally, we in this country wish to see a shade more of the talent, vitality and shrewdness of people setting up small businesses, which may or may not grow into middle or large businesses. As my noble friend Lord Caldecote reminded us, and the noble Lord, Lord Ezra, repeated, tax is important, as is regulation and the climate of the economy. However, the most important factor is far more difficult to grasp or to talk about; it is the culture of our times.
In a free society what on earth can be suggested about the culture and its effect on the decision of parents and their children about the career of adolescents? I imagine that all noble Lords will remember that lilting, catching, beguiling song which ran, "Don't put your daughter on the stage, Mrs. Worthington". I sometimes wonder whether that should not be translated today into, "Don't put your children into trade, Mrs. Worthington". Whether the reason is snobbery or a search for what is non-existent security, there appears to be an antipathy among many people to go into trade. I fear in particular that among our more highly educated people—and we all know of the Government's aspirations sharply to
194
increase the number of people who go into higher education—there is a hostility to what is seen as the vulgar and easy activity of trade. I hope only that the polytechnics, now promoted to university status, do not catch the infection because it would be sad if the proportion of our shrewdest people going into trade were to diminish.
All that is made the more relevant because today entry into many trades depends for success upon a grasp of science and engineering as well as on marketing and other necessary skills. What can be done? I repeat, what can be done? A scheme was imported from America called Young Enterprise. The importer was a man called Sir Walter Saloman; an awkward man but effective banker. It is a form—I do not want to call it playschool—of playing at trade involving schoolchildren supervised by local businessmen. Those schemes purport to produce annual profit or loss statements of accounts. It is a method of encouraging those with a propensity to trade to obtain an impression of what it might be like. I hope that the Minister will tell us whether Young Enterprise still survives in schools and whether it is growing.
I do not know what else can be done. Sometimes I think, although without sufficient knowledge to support the argument, that women's magazines would be a fruitful place in which to get across to mothers the argument that their children might not become policemen, doctors, lawyers, civil servants or social workers but in some cases opt for trade. Those are tenuous thoughts and I hope that the debate will produce more effective suggestions as to what could be done.
The impact of the Japanese in raising the standards of subcontractors and suppliers to the industries which they set up here may be having an effect on the performance of those businessmen. It may even induce some people who might not otherwise go into trade to become suppliers and subcontractors to firms which, like the Japanese, demand high standards.
I draw attention to one source for small businesses. It is not the school leaver but the man or woman who is dissatisfied with the confinement of working in a large firm. A man may leave, take the risk of taking a second mortgage on his house and may say to his wife, "The monthly salary, the pension and the company car will end. We are going to try it on our own".
Those are acts of considerable moral courage. We need to recognise the significance of those who make such a decision. I suppose that there are people who would say that we should hope that some television producer will take it into his or her head to make a series on small businesses without descending into the kind of scandalous coverage which might be followed.
I used to visit a number of schools and I asked the children what they thought lay ahead. They all spoke of having a job or not having a job. Very few of them spoke of self employment or of being an employer. We need to give them the perspective that that is the choice.
4 p.m.
Lord Carr of Hadley: My Lords, I begin by saying to the noble Lord, Lord Weatherill, what a tremendous pleasure it is to have him with us. I feel happy to be once more in the same House of Parliament with him. I know that he spoke from great experience. The only part of his speech about which I felt a slight query is that I find it difficult to believe that he considered it to be a great ordeal to address your Lordships' House, when I think of the Seat in which he sat in another place over the past few years. I am sure that we all welcome him and look forward to many contributions from him in the future.
I thank my noble friend Lord Caldecote for introducing this debate. I must declare an interest in that I am the chairman of a very small company, which employs five or six people. Therefore, I speak from some experience.
I am in no doubt about the great importance to any economy of a large, thriving small business sector. There is no doubt that the small business sector in this country had become dangerously small by the end of the 1970s. Therefore, the big surge which took place in the 1980s was particularly welcome. It has obviously suffered some setbacks during the past two or three years, and it is extremely important that a new surge should take place in the 1990s.
I have a considerable amount of experience in this field because in the early 1980s I was chairman of what was known as the CBI's special programme unit and for the last part of the 1980s I had the privilege to be chairman of an organisation called Business in the Community, working particularly in the field of small businesses. While there were other instruments of importance in bringing about that expansion, I have no doubt that the nationwide network of local partnerships, commonly called local enterprise agencies, must take great credit for what was achieved in the 1980s. The advice and help which they gave led not only to a large increase in the birthrate of small businesses but also—just as important—a considerable decrease in the infant mortality rate of newly-formed small businesses.
The essence of those associations is that they were local and were partnerships with local authorities, local business communities, including the chambers of commerce, local leaders of the professions and also local branches of nationwide companies and organisations in each locality. That was building from the bottom and giving each and every community a feeling of owning its own opportunities and responsibilities. Interference from outside came only in the form of help to help themselves rather than in the form of imposition from above.
That network still exists. I believe that it is the right tested and tried basis on which to bring forward a new surge in small businesses in the 1990s. We must recognise that the past three years have given the small business world—the enterprise associations and small companies—a fairly heavy battering. I trust that the Government will look carefully to see whether anything needs to be done to revitalise it. Small businesses do not want dictation; they want help. They do not wish to be swamped with money, even if
196
the Government showed any desire to do so. In order to revive themselves they may need more financial pump priming, such as they had at the very beginning of their lives. Newly set up local enterprise associations had some pump priming for the first two or three years, before they were made to become wholly self-supporting.
Moreover, some help may be needed in financing again an adequate supply of properly trained managers for local enterprise agencies, and more help may be needed from the TECs in each area, because those are extremely important complementary agencies in every area. Although they are a splendid idea, I am afraid that there are indications that they may not be functioning as effectively as they should be in all areas. That may be due not only to the inadequacy of the funding but also to the form of the funding that they receive.
When I speak about more financial input from the Government, I wish to state my belief that it should be a vital general guiding principle that any money must follow the customer and not be given to the producer. There must be payment by results. In the health service, the money should follow the patient; in this case, any funding provided should follow the customer who comes to use the service.
The Government should try to market more effectively their own schemes of help. In the 1980s I was in no doubt that many government schemes of help were not well marketed. They seemed to come from a variety of directions which were difficult to understand. Schemes were not always well designed, either to tackle the problem which they claimed to tackle or to match in with other schemes. The idea, mentioned by my noble friend Lord Caldecote and spoken about by Mr. Michael Heseltine as President of the Board of Trade, of a one-shop service in each area is an extremely important possible way forward. That would mean that there would be one place to which people could go in order to be directed to all kinds of advice. It is then possible to co-ordinate the information and give more information about all forms of advice, including the best places to seek finance.
I ask the Government to look also at the Chamber of Commerce movement in this country. Where that is good, it is of enormous assistance in this sphere. Where it is not good—and it is quite variable—there is a large gap. I hope that the Minister will see whether anything can be done to bring the general standard of chambers of commerce in this country up to the standard of the best.
Finally, I hope that industry, government—both central and local—and the science and technology institutions will take very seriously and urgently into account the need to form a strong tripartite partnership within regional and national frameworks as advocated in the final report, published a few weeks ago, of the Working Group on Innovation. I believe that that is an extremely important way to achieve a natural growth of small companies which need to have a higher input of technology and other management skills. If we do all those things, we shall bring about a

197
new surge in the 1990s, as we had in the 1980s, which will be of great benefit to society as well as to the economy throughout the country.
4.9 p.m.
Lord Inchyra: My Lords, I hope that it is not out of order for me to commence my maiden speech by thanking the noble Viscount, Lord Caldecote, for initiating this debate on a tremendously important subject. A thriving small business community is of vital importance for the future prosperity of the country. It is also of great importance for the banking industry in which I have spent the whole of my working life, as the noble Lord, Lord Clinton-Davis, was kind enough to remark earlier.
Although it is several years now since I was directly and personally involved in handling the accounts of any small businesses, nevertheless I like to think that I am quite well informed on the subject because I am currently director general of the British Bankers' Association, the representative body for all the banks of all sizes and nationalities authorised to do business in this country. It is part of my job to speak out on behalf of the banking industry. In doing so today I very much hope that your Lordships will not judge that I have strayed unacceptably far from the guidelines offered to maiden speakers.
I would like to try to dispel some myths which have become widespread about the relationship between banks and their small business customers. In a deep and enduring recession it is inevitable that there will be a high number of failures especially among those fairly recently established who did not have time to put down more than shallow roots before the economic downturn began. I believe that it is also inevitable and very understandable that many people find it hard to accept that their business venture has failed and that their hopes and dreams have been shattered. It is hardly surprising that some should be so resentful that they complain volubly to the press and others that they have been treated outrageously by their bank on whose support they have become almost totally reliant in 99 cases out of 100.
The most common complaint is that the bank has been over-hasty in forcing the closure of a business by refusing to lend more money or to extend agreed repayment periods. It is frequently alleged that the unfavourable decision came like a bolt from the blue; in other words, with no prior warning that the bank thought that the business was in danger of going under. Such allegations are meat and drink to journalists who enjoy the current popular sport of "bank bashing" because they know that the bank is very unlikely to obtain permission from the customer concerned to disclose the other side of the story. It would of course spoil their sport if it had to be reported that the bank had been pointing out the danger signs and recommending possible remedial action for some weeks or even months, but that that advice had been persistently ignored by the borrower.
I know from my personal experience that it is very tempting always to give the borrower the benefit of any doubts and to provide the extra finance or the
198
additional time that is being requested. That is the soft option, but it is rarely the right one. It is not often that it will help the borrower or the bank in the long run. One has to face the facts. To decline a request, particularly when it will have serious effects on the local community, requires moral courage in good measure. It is never a decision which is taken lightly.
Unless there are very exceptional circumstances or the borrower cannot bring himself to face the facts or to be completely open about his trading position, the decision to foreclose will always be the culmination of combined efforts by the bank and its customer to find ways of nursing the business through its difficulties. Throughout that process continuous and very careful assessments will have to be made of future prospects. But in the end it will boil down to what can be an extremely finely balanced judgment about a business's chances of survival.
If and when the axe has to fall it is only to be expected that some borrowers will find it very hard to accept that the bank has not been precipitate in judging that the business does not have a viable future. As their own livelihoods and those of their employees are threatened, borrowers cannot be criticised for believing that a little more time or a little more money would have enabled them to turn the corner. But equally, bankers cannot be criticised if, despite their efforts to nurse the business back to health, they find themselves led inescapably to the conclusion that the business has passed the point of no return. Knowing how hard it is to break that news to a customer who may be a neighbour, a long-standing acquaintance or friend, the banker is, as I have already said, often tempted to provide more money or more time. If one looks at the rate at which the big high street banks are piling up provisions against bad and doubtful debts, I believe that one will see that they succumb to that human frailty all too often. What that record cannot possibly suggest to any dispassionate observer is that the banks are giving their small business customers inadequate time or help to find ways to trade through and then out of the current recession.
The number of reported business failures certainly remains distressingly high, but it does need to be set in perspective. The big banks—using a different source from that used by my noble friend Lord Weatherill —reckon that they have in excess of 3 million accounts of small business customers. On any given date approximately half of those accounts will be running in credit with total deposits in the region of £24 billion. The other half borrow around £47 billion, which is something over £27 billion on overdraft and £19 billion on term loans. Those at least were the figures at the end of 1991 which are the most recent and reliable ones available.
What I regret that I do not have is a figure for the percentage of borrowing customers who are struggling to stay afloat. However, I am told by the banks that as long as the difficulties are diagnosed early enough they expect to be able to nurse four out of five cases back to health. They have set up special units to provide the active assistance which is required. Their success rate

199
hardly suggests that the banks are not devoting enough time, effort and resources to try to help their small business customers who have problems.
It is not my intention to portray the banks as paragons of virtue. I know that they are not and so do they. They make mistakes and misjudgments like every other commercial undertaking. But because of their central role in the economy and their crucial role above all as the main financiers of small businesses, their shortcomings tend to get blown up out of all proportion leading to their portrayal as hard-hearted villains with no concern at all about the impact of their decisions on individuals.
As I hope I may have been able to demonstrate, without excessive bias, that portrayal is unjustified. But it is also doing untold harm by undermining the mutual trust and confidence which are the essential ingredients for a successful partnership between banker and customer. That trust and confidence needs to be restored as quickly as possible because without it there will be many fewer businesses around to take advantage of the recovery when it comes.
It would be a very helpful step along the road to correcting public perception of the banks if the noble Baroness, Lady Denton of Wakefield, were able to acknowledge when she speaks that the banks recognise the importance of, and their responsibilities to, small businesses. It would be even more helpful if the noble Baroness were to feel able to go a little further and give some credit to the banks for the considerable efforts that they are making to be as helpful as possible to their customers in a time of extreme difficulty for everyone.
4.19 p.m.
Lord Wade of Chorlton: My Lords, on behalf of the whole House it gives me great pleasure to congratulate the noble Lord, Lord Inchyra, on his maiden speech. It was a splendid speech and we hope to hear from him on many occasions in future. The speech was particularly useful as it was a banker's view within this important debate. It is not perhaps a view with which all those who are struggling out there in small businesses would agree, but it is one which it is right and proper for noble Lords to hear.
I must also declare an interest. Like my noble friend Lord Caldecote, I am involved with small businesses. One of the small businesses with which I am concerned as chairman is called Nimtech, which is the north-west technology centre. There we are particularly involved in encouraging new technology in small companies: I shall refer to it in a moment.
I agree, as is almost always the case, with everything that my noble friend Lord Caldecote said. I wish to enlarge on a point which he and many others made as regards regulation. In the eye of the small businessman regulation is probably even greater than we think it is on the outside; it is becoming of still greater importance set against the difficulties small businesses are experiencing. Since my time in this House I have seen regulations and controls placed upon businesses without any recognition of the build-up to which each little regulation leads. We are
200
inclined to see each new idea on its own without seeing the build-up that it creates and the pressures on companies.
I congratulate the Government on its deregulation unit, but there is an urgent need also to bring in an impact assessment of regulations likely to affect small businesses. This applies particularly to the environmental aspect. It is of some interest that we now have environmental impact assessments where businesses may be affected. It is now reaching the stage where we need to have environmental impact assessment of the regulationary aspects so that we can see what is happening and judge the full effect on small businesses. This applies particularly to EC regulations. Before they are brought into law we need to he able to assess exactly how such regulations are going to impact.
I mentioned that I am chairman of Nimtech. Information technology can be a great engine for growth, particularly in small industry. There is a large amount of technology in big companies that could be brought out if those involved with the technology within those companies could be encouraged to develop an entrepreneurial spirit. There is an opportunity here to bring together venture capital and government grants.
One of our activities within Nimtech is to act as an agent for government in grant aid in technology areas. Because of the pressures on the Government, which we understand, we now find that we are not able to receive the grant levels that many technology companies might have expected. In fact, grants that they have already been given might be reduced. There is an opportunity here. If government cannot meet a certain grant level needed for a research and development exercise in a major technology company, venture capital could be brought in alongside the government money. I have spoken to venture capitalists who are interested in this concept. It would enable a programme to go ahead that would otherwise not be possible. I should like the Government to look at that matter.
Recently the Government established the Energy Saving Trust under the chairmanship of Lord Moore. It takes its money not from the Government and the taxpayer but from the major energy companies, and particularly British Gas. The energy trust acts as agent for a considerable sum of money—the total is, I believe, about £100 million for the industry altogether —which it can then make available for energy-saving enterprises. A large amount of housing that needs to be made more energy efficient in terms of heating arrangements or insulation is inhabited by people who do not have the resources to do it. If we could use the money available to the energy trust to stimulate investment in this property that would encourage a large number of new businesses. They would be small companies, and if trade could be encouraged particularly in areas where unemployment is high, and therefore where the housing problem is great, we could utilise industrial money and not taxpayers' money to stimulate a great many new businesses.
I am sorry that the noble Lord, Lord Clinton-Davis, is not in his place at the moment. It is not right

201
for him to blame the Government for the problems of small businesses. I have heard more arguments from noble Lords opposite for regulations, controls, extra taxpayers' costs and government resources that would place enormous burdens on the small businessman than I have ever heard from anywhere else. There is no room for the noble Lord, Lord Clinton-Davis, to criticise the Government with respect to small businesses. No one did more than this Government during the 1980s to stimulate small businesses.
However, I appreciate the difficulty that the Government now have in balancing the books, with demands on one side for more social services, more handouts and support, and on the other, for finance to stimulate businesses and particularly small businesses. Government cannot do that unless there is support from the country to do it. In the early 1980s this Government spent a great deal of legislative time bringing forward support for small businesses. The noble Lord mainly responsible is sitting in front of me now.
However, in recent years there has been a tendency to look at other matters; to look at regulations, environmental controls and pollution controls to an extent which is probably unnecessary, and not to recognise the costs being imposed on industry. It needs to be understood not just by the Government but by the people of this country that the stage has been reached when economic growth, the support of small businesses, and the creation of wealth are the most important matters facing this country. If the Government are to bring that about they are going to need support from both Houses to make it happen. I give every support to my noble friend the Minister, and I hope that from tomorrow we shall be able to carry out such a policy.
4.26 p.m.
Baroness Platt of Writtle: My Lords, it is with great pleasure that I too support my noble friend Lord Caldecote in underlining the importance of small businesses to the success of our economy, which has also provided the opportunity today for two most interesting maiden speeches. It is of particular importance this week when the Government are considering how they can do more to create a climate for growth in manufacturing industry at a time of high unemployment and world-wide recession. It is important to remember that of the approximately 3 million firms in the United Kingdom—this is Department of Employment information at the end of 1989–97 per cent. employed fewer than 20 people. If one excludes all one-person firms the numbers drop to less than 1 million firms, but the proportion employing less than 20 people is still around 95 per cent. Nearly half the total workforce in 1989 was employed in firms employing under 100 people, who provided over 17 per cent. of the total turnover.
What happens to them is important therefore to the prosperity of our country. They are very different from large firms who can afford to break up their organisations into departments consisting of experts, accountants, marketing people, designers, engineers
202
etc. Very often the top 10 people or less in those small firms have to be knowledgeable in all these fields, and executive in directing their company's policies. It is a hard world, my Lords, and competition is fierce. Time is not on their side, and they rarely have time to spare. Deregulation; simplified forms to fill in; civil service and local government attitudes that focus on the vital importance of customer service, rather than satisfying the minutiae of bureaucratic systems—the red tape so eloquently referred to by the noble Lord, Lord Weatherill, in his maiden speech this afternoon—will contribute greatly to the oiling of the wheels of successful industry. I am glad that my right honourable friend the President of the Board of Trade promised a new attack on this front at the CBI conference yesterday.
The plain English campaign tests need to be applied to all forms and regulations. Also liquidity is a constant problem, and they need their large customers to pay promptly and their banks to be on their side on a long-term basis. Those in charge of small firms do not want Civil Servants second-guessing what they ought to be doing. They themselves need to decide where their markets lie and how they can serve their customers best. In today's sharply competitive world, they will then need to bring their costs and overheads down to a minimum in selling their products. They will need to raise productivity, as has been emphasised at the CBI conference this week. That will mean investment in innovation, from the early use of research through to its development in practical applications, which will probably mean the purchase of new and expensive machinery. I am glad to see that the Chancellor of the Exchequer was reported in The Times on Monday to be considering giving industry a boost by allowing firms to offset more of their investment against tax. That is vital to small firms and I hope that it will be included in tomorrow's Statement.
I am glad too that from December 1993 the Government's own accounts are to make a proper distinction between capital and current transactions. That should result in better national investment in road and rail infrastructure, another vital means of lubricating industrial success. Manufactured goods need to arrive at their customers on time and not be caught up in traffic jams or held up on late trains. That goes for the people working in those industries, whether arriving at their places of work or travelling on the roads to ensure customer satisfaction. Without customer satisfaction, both before and after purchase, firms will go to the wall. Serving the customer has to be the most worthwhile thing that anyone does in the UK today. That has to be taught in schools, colleges and universities. It has to be put across in all training schemes at work and appreciated throughout society. We want enlightened and entrepreneurial young people to put industry first in their career choices. For my part, I would want them, both girls and boys, to think in terms of engineering. I am glad to be able to tell my noble friend, who is not at present in the House, that Young Enterprise is still very much alive.
There will be people today who have been made redundant by firms no longer able to sell goods for

203
defence and armaments. We all want to retain as peaceful a world as possible. Nevertheless, their redundancy is for them a traumatic experience and they need to consider how their experience in that field can be turned to good account in civilian markets—literally turning swords into ploughshares. In this respect obviously export markets must be considered, and again the CBI this week is ambitious to raise our performance in world trade.
I am glad to hear that the value of our manufactured exports in the first eight months of 1992 was 2.5 per cent. up on the same period last year. However, imports have risen more rapidly, leading to a balance of payments deficit, and certainly there are markets in our own country where small firms could perfectly well compete. As I said in your Lordships' House recently, my husband and I have had great difficulty in purchasing British deep-freezers, nonstick frying pans, hammers, toasters, and my hairdresser uses Japanese scissors. Those are not hi-tech products and we should be making and selling them in Britain, not importing them. Nissan in Sunderland sets a very good example in producing and selling motor cars, and British productivity there, I understand, is even better than in Japan. Recent exchange movements will help firms both exporting and selling in home markets and we must continue to keep inflation down. The fall in interest rates will encourage investment, especially if coupled with fiscal incentives.
Much is being done in my own county of Essex, with DTI help, to encourage small firms both to sell locally and to export throughout Europe. That includes the formation of a technology club to help small and medium-sized businesses to apply and develop innovative technology with the assistance, I am glad to say, of local larger firms and higher and further education institutions. It is altogether a practical plan, near at hand, and not demanding long travelling time and communications for hard-pressed management in small industry. It deserves to succeed.
Finally, we are on the threshold of the free European market in 1993. It is important if competition is to be fair that governments support their industries equally. One reads of other European governments subsidising their industries in ways that we do not. Either negotiations must be carried out successfully to stop that practice or our industries will have to be subsidised here, too. The GATT talks which must also be made to succeed are anti-subsidy, so that must be the aim within European markets as well. In that atmosphere, I am sure, given national encouragement, that British small firms can compete with the best, both at home and throughout the world.
4.35 p.m.
Lord Orr-Ewing: My Lords, it is my privilege to congratulate the two maiden speakers. I knew the father of the noble Lord, Lord Inchyra, quite well. The noble Lord, Lord Weatherill, after making himself hoarse on an almost daily basis in another place with his "Order, order, order", must find addressing your Lordships' House almost like speaking in a goldfish bowl. He must have found
204
much greater appreciation from every quarter of the House for what he had to say to us. We hope that he will address us on many future occasions.
I am grateful to the noble Viscount, Lord Caldecote, who, with his experience in FFI, is first rate in this area and brings great knowledge to our debates. I want particularly to emphasise the effect on jobs and, indirectly, on the balance of payments. Many of these small firms are the subcontractors on which larger firms are deeply dependent. It is very important that they should be encouraged, enhanced and given the chance of growing.
Until 1979, 30 new firms were set up every week. Since 1979 100 firms have been set up every week. So the record is not all black, as one might suppose from reading our newspapers and looking at television. Those are net figures. Sometimes one wonders whether the figures take into account only the new firms and not firms that have died away. However, the figures I have given are net figures. The private sector provides 20 million jobs, of which 7 million are in small businesses employing under 20 people. It is amazing what a contribution small businesses make. This year 46,000 small firms employing about 500,000 people have closed. That is a tragedy to which we must pay attention. I hope that noble Lords will throw ideas in front of the noble Baroness, Lady Denton, and that she will take them all up. There is no harm in pinching other people's ideas when looking after small firms. I shall make that point again and again during my short speech.
Forty per cent. of new jobs come from very small firms with one to nine employees. I started my business career in a large firm, as do most people because large firms provide training. That is where people get their experience. I have four sons. For some inexplicable reason—I am not sure whether it is very profitable—they have all started their own businesses. They are practically one-man businesses and certainly three out of the four are paddling their own canoes and are only just afloat. On the occasions when they visit us at home, I hear of some of the problems which beset these small firms.
What can Her Majesty's Government do to help? The noble Lord, Lord Inchyra, spoke about the high street banks. Although there are some good ones, I have the impression that they are not all that friendly and sensitive. One becomes a little cynical when banks which have coughed up £600 million to the Al-Fayed brothers to help them buy Harrods make nasty telephone calls to their customers when they have run mildly over their overdraft limit, or they stop the overdraft completely. Surely when people have banked with them for year after year and have never gone bad on a debt they must have an interest in not bouncing cheques. My sons have had cheques bounced for ridiculous amounts. The explanation has been, "I am sorry, it was a new manager. He did not know that you had been with us for many years and did not know that you had 41 accounts". One one occasion, I said, "What the hell is the computer for if it does not know that? Surely you press the buttons and you get the information". On one occasion when the bank bounced a cheque—it was for £11.70 by the

205
way—I pointed out that if those concerned were rewriting their computer records they might add the fact that the chairman of the bank was godfather to the man whose cheque was bounced. I received an invitation to lunch very shortly afterwards.
In many cases the hardest task masters are the Inland Revenue and the VAT people. They have access and entry to people's houses. The sad fact is that for many small businessmen the collateral is their home, where their children and wives are. When the Inland Revenue or the VAT people put a company into bankruptcy, they are affecting the whole set-up. I hope that we can find some solution. I look occasionally at what happens in America. I wonder whether we could not pinch some of Chapter 11. I know we have the Insolvency Act but Chapter 11 seems to be quite widely used in the United States to keep people going while they are trying to get the matter right.
I like the idea of advice centres. When I saw the One-stop shops, I thought that they were hypermarkets, supermarkets or even ordinary markets. Such centres need to have a name which actually suggests that that is where you go for advice, help and training. As cash runs out, owners of businesses do not know where to go. That is one of the sad facts of the matter. What do you do when someone suddenly descends upon you and says, "We are going to pull the rug"? We want such centres; but they must be easily accessible so that people do not have to travel miles to reach them. I hope that Chapter 11 will be considered.
As regards accounting, there was a rather good article in yesterday's Independent newspaper. Surely we have allowed the matter of accounting to become too complicated. The idea that everything must be controlled right down to the tiniest detail may be necessary with ICI, Hanson, GEC and others, but it is not always necessary. Certainly, if some people had any drink in the house the constant efforts to keep up with the paperwork would drive them to drink, if not into insolvency. We all receive paperwork, though I suppose that most of it goes into the wastepaper basket. But if you are someone trying to run a small business, trying to keep the staff together and trying to obtain extra orders to cover the overheads, it is tiresome to be absolutely drained by the amount of paperwork. So, please, let us back up and support the idea that we must return to having less red tape.
As regards delaying payment, I know that we have been trying to do something about it. I was once so desperate that I had to ring up a big supplier and point out that the bank were going to pull the rug on me in respect of one of my companies if he did not pay £2 million which he had owed me for three months. But it is not always the big firms. Indeed, I recently met someone who was also put into bankruptcy. He employed three people. When he was asked why he used his VAT to pay his staff he said, "Because I am owed a vast amount for services that I provide to local government but they won't pay me". Incidentally, that is also true of government departments. Towards the end of the year when they are a bit short of money —that is, especially big spenders like the Ministry of
206
Defence—people may also find it very difficult to obtain payment. I hope that ideas to improve the situation will be stimulated.
Further, as regards small firms, ought we not to look at some special tax advantage—for example, to Aunt Joan, or whoever she may be, and Uncle So-and-So who is nearly falling off the perch anyhow —and try to get some help from friends, families and others? At present, there is no advantage in doing so. Of course, if you wanted the money back, you would probably never get it and there is no real small-firm stock exchange—it is very miniature—in this country.
Looking at all the facts in the matter, I gained the impression that the EC is more generous to its people. There is a very nice US slogan which says, "If you do not discriminate in favour of a small firm, you automatically discriminate against it". That is one slogan. The other, which I offer to my noble friend for use to the Treasury, is, "Not invented here". That is a terrible stopper. I urge her to take note of all ideas, wherever they may come from. Other people have the same problems. I hope that she will use those ideas to effect. If she does so, she will have every Member of this House, wherever he or she may sit, behind her to the maximum extent.
4.43 p.m.
Viscount Bridgeman: My Lords, I congratulate the noble Lord, Lord Weatherill, on a wise and moving maiden speech. I hope that he will not be true to his word and ration his contributions to your Lordships' House in future. I congratulate also the noble Lord, Lord Inchyra, on his maiden speech, to which I may refer later. In thanking my noble friend Lord Caldecote for initiating the debate, perhaps I may take up his point about late payment which many other speakers have mentioned. I wish to mention particularly payment by large customers.
Anyone who has had experience of technological industries will know that one large company in particular, itself sitting on a cash mountain, has a bad reputation for paying its bills late. That highlights a problem. Executives who have spent their working lives in large corporations are apt to have no idea of some of the problems facing the smaller company. There is often an insensitivity, not of course deliberate, of the dreadful cash flow difficulties which late payment of what the large company will regard as a comparatively trivial sum can create. These days it can make the difference between survival and the receiver. There is a responsibility on the larger company to realise that the owner of a company employing even, say, 15 people carries a responsibility in human terms which is, and I use the word advisedly, enormous. In that connection, I very much welcome the CBI's initiative for introducing a code of conduct for payment of accounts, to which my noble friend Lord Caldecote referred.
We are really talking about two business sub-cultures—the large and the small. My plea is that in any small business forum, initiated either by government or by the private sector, representatives

207
from larger listed companies should be included. In that way, the impact, in particular of late payment, can be brought home to larger customers.
We heard a sensitive, informed and, if I may say so, persuasive maiden speech from the noble Lord, Lord Inchyra, which could not have been bettered. He will understand that I have now changed some of the things that I had intended to say. However, there are three points to which I should like to draw his attention. The first is the absence of choice among the clearing banks. If a small businessman is minded to move, the first question he will be asked by the new bank is, "Where were you before and why are you moving?" The answer may well be no more than, "I liked your tele-ad on small businesses." In other words, we are not talking about serious banking alternatives. It is a fair generality to say that the smaller businessman is likely to have less experience of financial and banking institutions and therefore be very vulnerable.
Secondly, the effect of the banks' policy has been to exacerbate situations. In the late 1980s, banks were falling over themselves to lend. It is certainly the general perception that those same banks are calling in the loans, in many cases, some may say, precipitately. We all realise that banks have to look to their own balance sheets. But if there is one thing that will help a small business it is consistency on the part of the bank. If its attitude is tough as to lending, the business knows where it is. Similarly, if the bank is somewhat adventurous, then that bank should treat the consequences with sympathy. It is the predicability of his bank manager that can be so helpful to the small businessman.
I have three points that I should like to address to the Minister. First, I hope very much that the BES scheme will continue and that some way may be found to encourage the small entrepreneur to put money into his own business with tax relief. At present that is not possible. I hope that there is a possibility of some legislation on that score. Secondly, I believe that the very stringent requirements of the Financial Services Act should be relaxed in certain defined and small cases to enable friends, neighbours and relations of the entrepreneur to put their money into the business without constraints, especially those relating to invitations to subscribe. Thirdly, there is the ever present question which troubles all small businesses; namely, the raising of the ceiling of VAT.
Finally, I have been given to believe that under Mr. David Trippier a great start was made in the removal of red tape and paperwork. There is a feeling among the professional community that a further prod is needed in that direction.
4.49 p.m.
Lord Gisborough: My Lords, there is no doubt that small firms are in a particularly difficult trading position at the moment, even more so than medium or large concerns, and that the survivors are experiencing very considerable financial difficulties. As well as providing goods to the public, many small businesses provide services for larger organisations both in the public and the private sector. Both are taking credit
208
over a longer period on a unilateral basis which means that additional capital is needed by small firms to fund the debts. We have heard that said many times during the debate. The Government were supposed to have made some rules about the taking of excessive credit, but nothing seems to have happened.
Valuable advice for small businesses has become available through various agencies, many of which have done sterling work. In contrast, small firms do not have the muscle to obtain long credit from their suppliers themselves. It is often unwise for small firms to complain to the top of a large company that owes them money. If they do, the chairman is likely to order immediate payment of the debt with an apology. But the middle manager who is himself under pressure from his firm, and who caused the delay, and who is reprimanded by the chairman, is likely to ensure that that small firm is taken off the list and receives no more orders. The small firms knows that that will happen and so is wary of complaining too loudly.
The clearing banks are loth to fund additional credit which is why many small businesses go to the wall. Banks are often especially unsympathetic to small businesses, and even more so to those starting out. That seems to be due mainly to the rules laid down by head office. In the past, big international and property losses have been made. The smaller people are now being made to suffer as a result. Small firms and private customers are suffering from increased bank charges and less credit, as we have all discovered. That in turn obviously delays a general economic recovery.
So far as regulations are concerned, again, the small business seems to suffer the most and receive considerably more harassment. Local authorities can identify the person in charge of a small firm much more easily than with a larger company, and therefore find it easier to implement regulations. A larger employer is much more likely to receive good legal advice which makes the task of officials more difficult and time consuming.
Tax authorities find it easier to get to the bottom of small firms' accounts, whereas, again, larger companies can obtain good tax advice and launch into creative accounting. It is harder for the tax authorities to win. Also, of course, the large firm has a trained accountant to deal with queries, while the one-man business has to take time off from selling to talk out tax problems, as well as having to deal with all the regulations that pour in. There are too many regulations following one another.
It may not always be the case, but many a small proprietor feels that everyone is ganging up against him. Naturally, the recession hits everyone, large and small, but the small business, although more flexible, does not have the resources to weather the storm and many are driven out of business due to defaulting debtors. It always seems such a waste and a shame when a profitable firm, with an adequate order book, has the rug pulled out from beneath its feet merely because of a defaulting customer.
I come from Cleveland where in the 1970s the labour force was employed overwhelmingly by large business—British Steel and ICI. When those and other

209
firms rationalised, large numbers of people were made redundant, and our unemployment increased to about 25 per cent. Since then, many small firms have entered the county and have provided many jobs. I believe that our unemployment now stands at about 12 per cent. In view of the effect small firms have on employment, it comes as a surprise to me that there is a total lack of interest by the party opposite which has had no speakers in the debate apart from those on the Front Bench. Small firms are vital to us, but if one goes out of business, while it is sad and bad for those in it, it is not a catastrophe, as would be the going down of a big business. Collectively those firms are vital and not just for employment. The spending power generated by their employees is in turn crucial to the prosperity of banks and big businesses, some of which can behave thoughtlessly to those small firms.
The self-interest of banks and business should be enough to ensure that small firms are nurtured by them and given every assistance. All is not bad. Help is given, but they need even more: first, to start; and then so as not to be dragged down through no fault of their own.
4.55 p.m.
Lord Chilver: My Lords, as the debate draws towards its closing speeches it becomes increasingly challenging to shed yet further light upon the importance of small businesses. I have been involved at various times in my work with the development of small businesses. In his opening remarks, my noble friend Lord Caldecote made an indisputable case for small businesses. That case has been wholly endorsed by noble Lords on all sides of the House. We have been reminded by noble Lords that the number of small businesses grew substantially in Britain to record levels during the 1980s.
While that growth of small businesses has been encouraging, we should bear in mind that small firms in Britain still account for a lower proportion of economic activity in the UK than in our main competitor countries. In the recovery from the recession, small and medium businesses will probably make the earliest advances towards an improved economy. Apart from the recovery from the recession, a case can be made out for the intrinsic further growth of the small business sector in this country. My noble friend drew our attention to an important national issue.
If increasing numbers of small businesses are generated in Britain, further pressure will be placed on the many services offered to them through many different channels. That factor again must be considered seriously.
I should like to direct my remarks to specific problems suffered by small businesses. The first is the financial problem which is crucial and which has already been mentioned. The need here is for long-term funding, usually in loan terms rather than equity. That need is not met adequately by bank loans which are essentially short-term. Nor is it met by the extension of traditional forms of equity funding in large corporations. In Britain there is a real need for
210
longer term loans for small companies—probably at fixed interest rates. That would bring an element of stability into the future funding of those companies. At present our financial sector lacks the necessary range of mechanisms to provide us with an adequate range of long-term fixed interest rate loans for small companies.
My second point is that in more benign economic times innovation by small companies is important. It is challenging then, but it is even more challenging in today's economic climate. Innovation is likely to be developed more widely in businesses through a greater awareness of the potential of innovations. The introduction of new ideas into small businesses requires the identification and understanding of those ideas and their transfer into the production of goods and the provision of services. In that area, effective mechanisms for the transfer of ideas from the many sources of such ideas, in this country and abroad, are lacking in Britain. That is frustrating for small companies and for the many centres in Britain that generate new ideas which could be developed industrially in Britain. Transfer mechanisms must be strengthened considerably if large, small and medium-sized companies are to grow. They will make up the economy in the years ahead.
My final point relates to ways in which small businesses are disadvantaged, especially vis-à-vis large companies. Noble Lords have already emphasised the need for deregulation. One aspect of that is that the work of small businesses is hampered by out-dated licensing requirements.
Trading licences are still required in these days for employment agencies, public exhibitions, theatres, cinemas and public entertainments, as well as scrap metal dealers. Many of these licences are quite archaic and serve only to impair the setting up of small businesses to provide such services.
In conclusion, may I reinforce the pleas made by noble Lords that we move as rapidly as possible to sensible deregulation for small companies and equally sensible reduction of administrative demands, especially those made on companies by government departments.
5 p.m.
Lord Donoughue: My Lords, this has been a good debate and we all thank the noble Viscount, Lord Caldecote, for arranging it. There have been two notable maiden speeches: first, the noble Lord, Lord Weatherill—a familiar voice to us all, now becoming a familiar face. I must say that when he referred to the convention in this House that we speak only if we know a subject, I saw a tremor pass across the Benches on both sides and I nearly "scratched" this afternoon. Secondly, the noble Lord, Lord Inchyra, spoke as a banker; and we all listen with respect to bankers, especially on the subject of the problems of small businesses.
All noble Lords have stressed how important the small business sector is. Figures vary a little, but there seems to be agreement that something between 95 and 97 per cent. of all businesses in the UK employ fewer

211
than 20 people and have a turnover of less than £100,000. In total, that is around one-third of the British economy.
Since the war, these small businesses have contained on the whole the fastest growth, the fastest job creation—I believe that the noble Viscount said I million jobs—and the most dynamic technological innovation. That is a very potent combination. For the past 40 years, as many noble Lords will be aware, the small companies sector on the Stock Exchange has out-performed the average for the Stock Exchange and has certainly out-performed the large companies in terms of growth. So small has meant growth as well as beautiful.
That was until three years ago, but now small businesses are under-performing. That is very serious and worrying for the future of our economy. It means the most dynamic and creative section of our economy is now at best stagnant and at worst collapsing. We are left with the most mature and least innovative part surviving. That is not good for our future; it is like an aging society without sufficient children.
In this recession, since 1989, over 150,000 small businesses have collapsed. The latest survey figures show deterioration. They show that the decline in orders is accelerating; the decline in output is accelerating; job-shedding is accelerating. The unemployment implications are quite terrifying. We now have 3 million unemployed, on the Government's adjusted figures. That is over 3½ million unemployed on the traditional calculation. The forecasts are for a further quarter of a million unemployed from various industrial sectors: building, engineering, defence, the services. Small businesses will contribute negatively to a significant part of that. I saw that the Small Business Trust estimates that over 1 million jobs have been lost from small businesses in the recession.
What is particularly worrying is that in its latest survey, the CBI shows how small businesses are reacting to the recession. They are reacting by cutting spending on investment in plant and machinery, technological innovation and training. In other words, they are reducing their own future competitiveness. That process must be reversed.
So what should be done? I think the debate has been full of fruitful and positive suggestions from all sides. The first step must be in the area of interest rates which must be cut towards the rate of inflation. I believe that they should be cut by 4 per cent. by Christmas. They should be brought down to the level at which the real rate of inflation is minimal because, as I said in a debate on the economy last week, real interest rates have still not been cut. Real interest rates are still between 7 per cent. and 10 per cent., depending on the individual borrower.
A further fact on interest rates is that the banks must cut them in line with the decline in the Bank rate. Often recent reductions have not been fully passed on. We know that many mortgage holders wait three months in order to receive the benefits of the reduction. Many industrial borrowers do not benefit in full and find that the cut in their own rate is only half the reduction that has been made in the base rate. I understand why it happens and our bankers will
212
understand. Basically what is happening is that the banks are repairing their balance sheets at the expense of small businesses. It is natural, but collectively and socially it is disastrous and is very bad for the small business sector. When the Chancellor next announces significant cuts in interest rates, he should summon the banks and the building societies and say, "This reduction has to be implemented for your borrowers".
However, interest rate cuts are not enough. Confidence is low, so it is the debts that are repaid and economic activity is not stimulated to the extent we would expect. Therefore, monetary policy must be accompanied by industrial, fiscal and employment policies designed to assist the recovery of the whole industrial sector, but especially the small business sector.
The kind of measures that have been mentioned seem to me to be sensible. On capital allowances, I believe that they should be 100 per cent. for the next two years as a kick start and 40 per cent. after that. We have had discussion of investment grants. The noble Lord, Lord Ezra, mentioned what is done in Germany, and certainly there should be financial aid to small business at modest interest rates. We need more assistance for exporters. We are aware that the devaluation is helpful but the small firms find it most difficult to analyse and break into foreign markets. They do not have the resources for it, and I think that the DTI should provide more. I hope that the Minister will reassure us that full resources will be made available for small businesses to take the export opportunity.
In conclusion, the fact is that the Government have failed small businesses in recent years. The CBI has made that absolutely clear at its recent conference. There will be no improvement until the Government introduce sensible macro-economic policies to provide the proper climate for small businesses to succeed. At the more micro-level, they should introduce sensible industrial policies. Sadly, we do not yet have any signs of that, but I hope that the Minister will encourage us.
5.9 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield): My Lords, I too should like to thank the noble Viscount, Lord Caldecote, for moving this Motion. I thank him with personal gratitude because, as Minister with responsibility for small firms, I am exceedingly grateful to your Lordships for your input into the subject. It is greatly to my benefit.
I was very privileged to have two maiden speakers in the debate today. I am honoured that the noble Lord, Lord Weatherill, chose to make his maiden speech and welcome him into calmer waters. I agree with him; I have always personally felt there is so much knowledge in this House that it induces a certain sense of nervousness. I also thank him for leaving space in another place to be filled by a lady.
I was also pleased to hear the maiden speech of the noble Lord, Lord Inchyra. He is a worthy champion of the banks, and they should be grateful to him. As everyone has recognised, small firms are vitally important to the UK economy. As everyone has said,

213
they have done much to foster the development of an enterprise culture, extending consumer choice and making a valuable contribution to the quality of life. They stimulate competition and offer individuals the chance to realise personal ambitions. This debate gives the Government the opportunity to assure noble Lords that our commitment to their well-being remains undiminished, and to set out how we help small firms to start, survive and grow.
We have heard several variations of figures. As the noble Lord, Lord Donoughue, said, there are varying definitions of small firms which make direct one-to-one comparisons. However, all the figures show enormous growth in that field. I have a slightly different definition of small firms. The European Community defines a small firm as having 500 employees. I personally think 500 employees constitutes a pretty big firm. My definition of a small firm is one in which the end of the day arrives before the end of the work and no one will do that work tomorrow. I wish to consider the needs of small firms from their point of view and to consider the various watersheds that small firms hit in their growth.
We believe that business works best when it is given the maximum freedom to operate in a competitive market. The success of the economy as a whole depends on providing a context in which individual enterprise can flourish and is rewarded. While the Government have a role to play in setting a favourable economic climate for both large and small businesses, the crucial contribution is provided by the dedication, commitment and enthusiasm of individual small business people up and down the country. I meet those people and am impressed by them. I have great confidence in them. The success of these policies is reflected in the unprecedented growth that the UK small business community experienced during the 1980s. For example, between 1979 and 1989, the total number of businesses in the UK grew by two-thirds, representing a net increase of almost 500 businesses for every working day of that decade. All regions and most industrial sectors benefited from this growth. Even during the more difficult times of today, the number of new firms starting up is still impressive: bankers' surveys show 450,000 for 1991 and another 250,000 in the first half of this year. I hear that several noble Lords have been meeting undertakers, but there are still many more midwives around!
The number of businesses in the UK is around 3 million, of which, as has been said, 97 per cent. are small firms employing fewer than 20 people. Such firms provide 17 per cent. of UK turnover. My right honourable friend Mr. Sainsbury, the Minister of State for Industry, looks after large firms; but I should remind him that I have the big job in this respect in terms of where the great future for the economy lies. In this context, small is not simple. There is a tendency to underestimate the sophistication and the high-tech content of the small firms sector. That sophistication is vast and does not just occur among the mature industries.
As the noble Lord, Lord Donoughue, has said, the job creating role of small firms has been particularly
214
impressive. Small firms currently employ over one-third of Britain's private sector workforce. Since 1979 the Government have been working to create a more beneficial tax regime as a key factor in stimulating growth. The UK now has one of the most favourable corporation tax structures for small companies in the European Community.
As a Government, we also take a close look at the demands which we ourselves place on small businesses. Enterprises, as has so rightly been said, should not be distracted unnecessarily from their prime tasks. Governments must remember that the smaller an operation, the greater is the distraction in relative terms brought about by every single law to be complied with. The deregulation initiative has been instrumental in keeping the burden of bureaucracy to a minimum. Despite this, there is a widespread feeling that the needs of business have not been fully taken into account, and that something more must be done to create the right conditions for future growth. We are keeping up and increasing the pressure. The Prime Minister's recent announcement that my right honourable friend the President of the Board of Trade will lead a renewed initiative to cut burdens on business has been welcomed by small firms. I am delighted to confirm that we much appreciate the work that my successor, Mr. Trippier, did in this area. That work will be continued. I am delighted to reassure my noble friend Lord Chilver that licences will be one of the prime targets to be considered to enable companies to run efficiently.
As the Minister responsible for small firms, I am well aware that small firms suffer at the bottom of the late payment spiral, the compliance spiral and the regulation spiral. We are determined to look after them. I do not believe a person needs a Ph.D to take people on into employment. I do not know of a small firm other than an accountancy practice which set up in business because the employees were good at paperwork. Firms are good at the things they set up to do. We must let them carry on with what they are good at so they can grow. It would be my ideal wish that all small firms' paperwork could be pro forma and be reduced to an absolute minimum.
I believe that in the enormous growth of small firms in past years we have created a new generation of small firm owners. My noble friend Lord Bridgeman drew attention to that matter. Those small firm owners do not live in the same road as their bank managers. They do not play golf and they do not know accountants and solicitors. They need all the help they can get. It is indeed unfortunate if those firms should not succeed because they did not know how to reach the help that was available. Such a position is totally unacceptable. I have been pleased to hear the welcome given to my right honourable friend's One-stop shop initiative.
From time to time every small firm encounters hurdles in its growth process. Our task must be to help them overcome such hurdles as fast and as smoothly as possible. Apart from in the high technology field, there will be no hurdle they come up against which

215
someone has not already overcome. We feel it is important that firms should share their knowledge about such hurdles.
I was delighted to hear noble Lords agree today that small firms cannot be put into boxes and that each have individual needs. We must be there as those needs materialise. I am delighted to assure noble Lords that the One-stop shops will be visible and accessible both in terms of location and time. They will be branded for the benefit of the customer, not for the benefit of suppliers. However, suppliers are the key to success in this area and we shall harness the great strengths of the infrastructure from the chambers of commerce. the training and enterprise councils, the enterprise agencies, local authorities and those members of the private sector who are interested in the small firm economy.
It is important we ensure that small firms do not reinvent the wheel. That is expensive, and it is slow. I assure my noble friend Lord Orr-Ewing that the small firms Minister does not intend to re-invent the wheel either and will, as he puts it, pinch any idea which will work to the benefit of our small firm economy. I am delighted to tell the noble Lord, Lord Ezra, that I spent some time in Germany this summer trying to identify good practice which was relevant and which I could copy. Fixed rate loan money is an issue which is very high on my list of priorities.
I now turn to the question of funding, a major issue for small firms. However innovative we are in seeking to help small firms, the banks must and will remain the main funding agents of small business. It is therefore important that the relationship between small firms and banks is sound and happy and that they each understand the other's agenda.
I know that the noble Lord, Lord Ezra, thinks that sometimes my attacks on banks are a little too keen. Therefore, I should first like to thank the banks for giving me channels of communication so that we can check that there are two sides to every story. However, I am the Minister with responsibility for small firms and although I know of no bank manager who is frightened of his small firm visit, I know of many small firms which are frightened of their bank visit. We have to correct that balance. There is an issue of perception. There is a need for transparency of action, and there is a need for service. If we are considering having our one-stop shops open late at night because those involved in small firms have to be with their customers during the day, I hope that the banks will consider offering that service, too. I also hope that we shall not see a continuation of the backdating of charges. I am delighted to know that action is to be taken to correct the practice of the removal of funds from accounts without the holder of the account being informed in advance.
Of course, we have to worry about the fact that loans are based on property and the many revaluations which take place. We need a commitment from the banks in that area. I must agree with the noble Lord, Lord Donoughue, that falls in interest rates must be shared with small firms as well as with shareholders. The minimum lending rate is an issue which I hope the banks will address.
216
We have looked and are looking at other areas of support. We have seen much development in the area of venture capital. I find it particularly welcome that my noble friend Lord Caldecote introduced the debate because, through his leadership of 3i, he was instrumental in ensuring the starting up of many firms which are now significant players in our economy. We would welcome now an institution rather like 3i in its early days. I also pay tribute to the pilot scheme run by 3i in Birmingham, working with the community on appraisal costs under which loans of £50,000 could be considered rather than only of £250,000. That is helpful.
We have launched enterprise funds in Yorkshire and the East Midlands. They have a regional focus, as do the German banks. We hope that that will work. In Yorkshire we call it "Yorkshire brass for Yorkshire business". There is self benefit to the community.
I believe, and many Lords have said, that money with advice is most beneficial to small firms, enabling them to maximise the advantage from the funds available. We publish guides to sources of funding and the TECs direct businesses to sources of funding. The "local angel" schemes, with the Training and Enterprise Councils, direct companies to local sources which may be of help. I agree with my noble friend Lord Wade that partnerships in finance can also be crucial.
Both my noble friend Lord Caldecote and my noble friend Lord Bridgeman raised the question of BES. Unfortunately, only £15 million out of £420 million raised in 1989–90 went to small manufacturing firms. The Government's policy is for low overall taxation; but I note the points concerning the possibility of reinvesting one's own money, as company owner, into a business in a tax-efficient way. Noble Lords have also asked whether we could encourage pension funds to invest in small business, and to encourage committed persons to become involved.
My noble friend Lord Chilver rightly said that we must encourage firms to opt for fixed loans and long-term agreements.
I turn now to one of the other major issues facing small firms—late payment. That subject was raised by many noble Lords. The Government keep a constant eye on that subject. The noble Lord, Lord Ezra, was kind enough to say that we have tried to put our own house in order. In our contracts we insist that sub-contractors are paid on time. We have also audited all our departments and we support the CBI initiative. However, as my noble friend Lord Gisborough indicated, it is often the case that the chairman signs up to a principle while the credit controller is still rewarded for keeping money in the company. We have to make sure that the message goes all the way down. We have asked that payment terms be disclosed in annual reports.
We have not put aside the possibility of legislation, but I am conscious that it is difficult to bring the customer back to the order book once one has taken him to court. At present companies could apply interest charges for late payment, but if the supplier is strong they will not insist on that. I have a personal commitment to follow up the matter with large firms

217
and government departments. I must also pay tribute to the way in which the media have helped in drawing attention to the problem, not in order to create villains but to get the cash to flow.
In addition, I have initiated three pilot schemes in chambers of commerce and trade associations to see what help they can give on these matters because they have in their membership both small and large firms. If we can gain knowledge from that initiative, we shall certainly share it.
My noble friend Lord Caldecote drew attention to the fact that it is important that, when all other methods have failed, small firms should have easy and quick access to the court. My noble and learned friend is looking at that matter at the moment.
I must thank the noble Lord, Lord Clinton-Davis, for his kind words in relation to my commitment. However, I must say that I am proud to be part of a Government which has nourished so many small firms into life. This question of small businesses is not one on which I would wish to score political points. We must make sure that the economy is sound.
My right honourable friend's last Budget very much took into account the needs of small firms. I must also pay tribute to the way in which British Coal Enterprise has founded small businesses for miners. The growth in that area is tremendous.
The noble Lord, Lord Ezra, quite rightly pointed out that making this speech the day before the Autumn Statement is not easy; but I am sure that there will be other opportunities. I should like to thank my noble friend Lord Weatherill for his work on the Boulton Committee, which was a landmark in the way in which Government treats small firms. He knows that much of the work required is fiscal and that I need the support of the Treasury. However, I can assure him that I have large lungs and endless determination.
My noble friend, Lord Joseph, touched on many points. He mentioned intellect in small business as he found it in Germany. That is important and is something we continue to look at. He also drew attention to the fact that polytechnics had played a tremendous role in this area and it was very important that they did not become elitist and move away from the small firm market. We believe there is now an opportunity to encourage graduates into small business so that good. up-to-date practice can be shared, often in groups rather than individually, and to encourage large firms to do some of their training in small firms which gives their people much better project management.
I am pleased to reassure my noble friend that as far as self-employment is concerned, we have almost caught up with other Community countries (12 per cent. compared with 13 per cent.). We have a higher percentage of people working for themselves than in Canada or the United States. As my noble friend Lady Platt said, young enterprise flourishes and anyone who attends schools at speech days knows that to his or her personal expense. They are not only good producers but good sales people.
218
The Prince's Youth Business Trust does good work in small firm development, and I am hoping that it will publish a directory to which people will turn when looking for services. I believe many people will use it. My noble friend Lord Joseph mentioned women's magazines. We recognise that their awards in this area are of great value. I am delighted to tell my noble friend Lord Carr that we are supporting the chambers in their strategy to increase the strength of the movement throughout the country. Although obviously the TECs have hiccups, they are a very young organisation, the oldest being under three years and the youngest is one year only. I believe we shall see a watershed of good practice.
I am pleased to say to my noble friend Lord Wade that the DTI spends over £100 million a year on technology transfer, a large part of which is directed towards smaller firms. Schemes such as SMART do give funding of the venture capital kind as opposed to grants. Only small firms with fewer than 50 employees are eligible.
My noble friend Lord Orr-Ewing mentioned Chapter 11 as a possibility. The legal systems in the United States and Great Britain differ greatly and we need to hit the right balance between the time needed by firms to recover from temporary difficulties and preventing firms that are not going to recover from bringing others down with them. Nevertheless, we will continue to look at useful examples of legal actions here and abroad.
The United Kingdom's experience and approach to the small firms sector is highly regarded by our European Community colleagues and the Commission. We shall continue to press for and support steps in the Community to reduce administration, widen consultation with small firms organisations and secure a realistic appreciation of the cost of new measures to new firms before they are agreed. Our broad approach to the support of small firms remains the same as it has been over the past 12 years or so: to support and not to swamp them. We continue to aim to provide the right economic climate, pursue policies designed to keep inflation under control, minimise taxes and achieve low interest rates for both large and small companies. We must minimise bureaucratic burdens from Whitehall, the town hall or Brussels. I shall personally continue to ask my colleagues to be understanding of the needs of small business.
I believe that we can face the world positively from the point of view of our small firm sector. It is well; it continues to grow; and the Government have good reason to be proud of the support that is available to help it. I am pleased to have the privilege of being that sector's champion.
5.33 p.m.
Viscount Caldecote: My Lords, I should like to add my congratulations to the two maiden speakers, both of whom spoke from real experience. I hope we shall hear them on many occasions in future.
This has been a fruitful debate during which many valuable ideas have been put forward. I am grateful to my noble friend for her full reply. I was encouraged to

219
hear her reconfirm the Government's recognition of the importance of small companies and their determination to reduce red tape in every way. I much appreciated her kind comments about 3i and the need to help smaller firms to a greater extent as in the early days of the company. My noble friend referred to the problems of BES not having attracted a great deal of investment. The problem was that the scheme, admirable in conception, became much too complicated and restrictive with far too many rules that prevented its use. I reiterate my firm belief that the encouragement of equity investment in small firms is of the utmost importance, because if they are too reliant on bank or any other loans they get into real trouble when there is a downturn in the economy. My noble friend Lord Chilver said that the percentage of small companies in our economy was lower than in most of our competitors. That is a clear sign that there is no room for complacency in this field. We must do all we can not only to support the current small companies but to help new ones to form.
I was surprised and perhaps a little disappointed that noble Lords opposite showed so little interest in the debate and contributed only two speakers out of 16 or 17. The noble Lord, Lord Donoughue, was perhaps suggesting that there was not much experience or knowledge about small companies. That may be, but it is disappointing that there has not been a greater contribution from noble Lords opposite.
Motion for Papers, by leave, withdrawn.

Northern Ireland Political Talks
5.36 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (The Earl of Arran): My Lords, with the leave of the House I will now repeat a Statement made in another place by my right honourable friend the Secretary of State for Northern Ireland about the political talks concerning Northern Ireland. The Statement is as follows:
"These talks were built on those which were held last year. Like them, they took as ground rules my predecessor's statement to this House on 26th March 1991. The first strand of these new talks began in Belfast under my predecessor's chairmanship on 9th March this year and resumed on 29th April under my chairmanship to consider political arrangements within Northern Ireland itself.
"By the beginning of July I thought it appropriate to propose that the other two strands be launched. Accordingly, on 6th July, the second strand, involving both the Irish and British governments and concerning relationships in the whole island of Ireland was commenced. We met initially in London and subsequently in Belfast and Dublin. This strand has taken place under the distinguished chairmanship of Sir Ninian Stephen. To him, and to the Australian Government who permitted him to be available, we all owe an
220
enormous debt of gratitude, particularly since in the latter stages he readily accepted an invitation to help us in our proceedings across all three strands.
"On 28th July in Dublin the two governments held the opening meeting of the third strand, concerning future relationships between them.
"Throughout the talks I have received wise and indefatigable support from the Parliamentary Secretary, my honourable friend the Member for Richmond and Barnes. In particular he chaired a most fruitful series of Strand 1 Committee sessions and has often deputised for me in other strands.
"The present talks, like those last year, were stipulated to be held during a specified gap between meetings of. the Anglo-Irish intergovernmental conference. Before the talks resumed after our own general election, the two governments announced that the next meeting of the intergovernmental conference would not be before the end of July. Since then the gap has been extended twice. My right honourable friend the Prime Minister and the Taoiseach announced on 25th September, in a final extension, that the next meeting of the conference would be held on 16th November. More than six months have accordingly been available for these talks.
"We have not yet succeeded in the ambitious task of securing an overall settlement, that is to say, a new beginning for relationships within Northern Ireland, within the island of Ireland, and between the peoples of these islands. Since the talks were held on the basis that 'nothing will be finally agreed in any strand until everything is agreed in the talks as a whole and that confidentiality will he maintained', the question of a partial settlement did not arise. Nonetheless, the talks have seen substantive and detailed engagement on issues of the first importance.
"In Strand 1 the Northern Ireland parties, together with the British Government, identified common themes and principles which should underlie any new political institutions in Northern Ireland and examined possible structures which might reflect these.
"In Strand 2, in which of course the Irish Government have also been a participant, delegations discussed fundamental aspects of relationships within the island of Ireland, and of the realities underlying them, including constitutional issues and questions of identity and allegiance. We examined the scope for enhanced co-operation within the island of Ireland, in the social, economic, and security fields, among others. We considered the nature of the structures which might best serve such co-operation.
"In Strand 3 the two governments, as co-signatories of the Anglo-Irish Agreement, addressed, in liaison with the other participants, possible principles for a new and more broadly based agreement, and possible intergovernmental arrangements.
"Much has been done to identify and enlarge the common ground, and to increase understanding and respect for the participants' respective

221
positions. The process has involved hard work and commitment from all the participants. The talks participants have collectively reaffirmed their total abhorrence of, and unqualified opposition to, all forms of terrorism, from whatever source they may come. Nothing has taken place to alter my firm view that it was right to bring together the main constitutional parties in Northern Ireland, and the two governments, to address, in a single process, a comprehensive agenda. It remains my judgment that, with good will and application, a comprehensive settlement can yet be secured. Those qualities are not lacking.
"Yesterday the talks participants agreed and issued a statement, copies of which have been placed in the Library. In it they recognised that, `while at this time there is no basis to agree a settlement, they have identified and discussed most, if not all, of the elements which would compromise an eventual settlement; they have developed a clear understanding of each other's positions; and established constructive dialogues on ways in which an accommodation might be reached on some of the key issues which divide them'. All recognised the great value of that dialogue. The two governments expressed their view yesterday that further dialogue was both necessary and desirable. The four Northern Ireland parties agreed with that and accordingly undertook to 'enter into informal consultations with a view to seeking a way forward.'
"The whole House, although doubtless disappointed that fuller agreement has not been reached, will welcome that commitment. The objectives of the talks process remain valid and achievable in the expressed opinion of the independent chairman Sir Ninian Stephen and in my own opinion. The objectives are realistic. We have a duty therefore to build on what has been begun, however slow that process may have been, and not to give up.
"We have a duty not to lose patience; not to give way to exasperation; not to recriminate.
"Her Majesty's Government for their part, therefore, will steadily persevere. We shall maintain our line of approach to these objectives and we shall continue also our commitment to the resolute and just government of Northern Ireland. Not only the people of Northern Ireland but the people of the rest of these islands—let us not forget them—deserve this of us".
My Lords, that concludes the Statement.
5.44 p.m.
Lord Prys-Davies: My Lords, I thank the Minister for repeating the comprehensive Statement made by the Secretary of State earlier this afternoon. We very much welcome the progress that has been made, as referred to in the Statement, but the whole House will deeply regret that the talks were not more successful. The people of Northern Ireland desperately want peace and reconciliation in their day. I believe that many will be saddened by the failure to achieve more progress.
222
We have been fully aware at all times and throughout the talks of the huge differences between the parties and the grave difficulties facing Sir Ninian Stephen. Our expectations were not too high when the talks started six months ago but there were grounds for hoping that the talks would be concluded against a more positive background than the one revealed in the Statement. Indeed, as recently as last Saturday, it was reliably reported that Sir Ninian was trying to draw up what was described as a "heads of agreement" document to salvage something from the talks processes which started last April.
It was also hoped that the parties might agree some kind of suspension of the talks until a new Irish Government had been formed and had had time to settle into office, thus making it easier to restart another round of talks, when no doubt the pressure of public opinion in Northern Ireland would require their resumption. Indeed, that would also in effect have bridged the November meeting of the Anglo-Irish Conference.
The Statement refers approvingly to the undertaking that the parties will at a date in the unspecified future,
"enter into informal consultations with a view to seeking a way forward".
While those words are on the vague side, I note with some satisfaction that nevertheless it is an undertaking. Do the Government know when the process of informal consultation will begin? Do the Government propose to take any steps to encourage and facilitate those consultations? In any event, will the Government give consideration to publishing a document identifying the elements which would comprise an eventual settlement, as referred to in the Statement, and possibly identify the areas of agreement and those of continuing disagreement. Finally, I trust that the Minister is able to confirm that meanwhile the basic position of the Government continues to be that of support for the 1985 Anglo-Irish Conference.
Before I resume my seat, I join with the Government and all others in paying tribute to the role of the distinguished chairman, Sir Ninian Stephen, and his staff in helping to facilitate the talks. A tremendous amount of effort and very hard work went into the preparations for the talks and they deserved to succeed.
Lord Holme of Cheltenham: My Lords, I thank the noble Earl for reading the Statement so clearly. Perhaps I could correct him on an inadvertent mistake in reading it. I am sure he will be grateful for the correction since it changed the meaning of the Statement placed in the Library by the four constitutional parties. He spoke of the elements which would "compromise" an eventual settlement rather than those which would comprise it. As that changes the meaning, I thought he would appreciate and would not mind that minor correction to his delivery.
I am sure that the noble Lord, Lord Prys-Davies, is right when he says that everyone—the whole House and indeed the country, the people in the Republic of Ireland and, most of all, in Northern Ireland where they bear such heavy burdens with such stoic courage

223
—will be very sad that the talks have broken down. Perhaps I may ask the Minister whether he thinks that the talks have broken down or whether they have been suspended. As I listened to the Statement, I was slightly unclear as to what would happen next. Perhaps I may return to that point in a moment.
I agree with the noble Lord, Lord Prys-Davies, that we all owe a great debt of gratitude to the Secretary of State and to Sir Ninian Stephen. I should also like to pay tribute to the predecessor of the Secretary of State, Mr. Peter Brooke. The fathers of the talks, and those who have conducted them, have done so with great skill and patience.
We ought also to do something which does not often occur in your Lordships' House; that is, pay tribute to the Northern Ireland parties themselves. They have advanced quite a long way out of their trenches. They have now returned to them but have done so alive and perhaps that will encourage them to come out of their trenches again on a future occasion.
In an earlier debate in your Lordships' House, I expressed some doubts about whether the participants were sufficiently secure on Strand 1 before they proceeded to Strand 2; and whether they had consolidated their position on Strand 2 before they moved on to Strand 3. It was a thought which the noble Lord, Lord Fitt, shared with me. It is not a criticism. It is apparent that if nothing is agreed until everything is agreed, matters have to be kept fluid. Nevertheless, I suspect that one of the reasons that the talks have not ended in the success for which we all hoped is that the step by step process was a little too fluid.
Be that as it may, a great deal has been achieved. There has been an investment of good will on all sides. As the noble Earl repeated in the Statement, there is a wide measure of agreement. There is now something to build on. The question is: what happens next? I sincerely hope—perhaps the Minister will reassure me when he replies—that we shall not go back to talks about talks. I hope that we have moved beyond that process. When the Statement refers to dialogue, I hope that it does not mean that we shall begin to talk about how to talk. I hope that we may move to the substance of the talks which the parties had reached when the talks were suspended.
Within a short space of time, we shall have a new government in the Republic of Ireland. We shall know how that is composed. That may affect the Government's perceptions of how to proceed. Does the noble Earl believe that there is some scope for an initiative by the Secretary of State—I agree with the noble Lord, Lord Prys-Davies—and the British Government now to play a more positive role and to put forward their own proposals based on the terms of an eventual settlement? We are told there is a wide measure of mutual recognition. Like the noble Lord, I would value reassurance that the Anglo-Irish Agreement will remain intact until replaced by an agreement arrived at by negotiations between all the parties.
Finally, I have never detected among people in Northern Ireland in the time in which I have been involved in the subject such a willingness to urge the
224
parties on to continue talks. There is a great feeling on the part of the population of Northern Ireland, whichever community they are drawn from, that the process must continue. I hope that that pressure makes itself felt as the hot breath of public opinion blows down the necks of the Northern Ireland parties. I hope that the Secretary of State feels able to promote the resumption as soon as possible.
The Earl of Arran: My Lords, first, I am grateful that both noble Lords have spoken of their general agreement of how well the talks have gone so far. To the noble Lord, Lord Prys-Davies, who I think expressed, as he called it, disappointment, regret or perhaps both, that the talks have not actually progressed further, I would just make these points. When the talks resumed in April few thought that they would even last for one month. In fact they have continued for over six months. Historic watersheds have been passed. Unionists have sat down with the Irish Government. Dublin Ministers have been questioned in Belfast. Ulster Unionists have gone to Dublin for talks—the first talks in Dublin on the future of Northern Ireland involving Unionists for 70 years.
Those serious and substantive talks examined in detail the real issues at the heart of the problem. There has been discussion of both general principles and the detail of possible institutions. Views have been honestly and at times forcefully expressed. Everyone understands each other's position better than when we started. We have at times been surprised by the amount of common ground. Important disagreements, even fundamental ones, still remain, but the issues have been seriously addressed. Therefore, while the present talks have come to an end, all the participants have agreed to enter into informal consultations with a view to seeking a way forward.
Both the noble Lord, Lord Prys-Davies, and the noble Lord, Lord Holme of Cheltenham, asked when talks might continue. I have already said that it will be in the future on an informal basis, obviously after 25th November, following the general election in Ireland.
The noble Lord, Lord Prys-Davies, questioned the Anglo-Irish Agreement. Of course both governments have made it clear that they would be prepared to consider a new and more broadly based agreement or structure if such an agreement can be arrived at through direct discussion and negotiation between all the parties concerned.
The noble Lord, Lord Prys-Davies, also suggested that perhaps a paper should be published on what has been agreed or even disagreed so far. We all accepted, as I said in the Statement, that nothing will be finally agreed until everything is agreed and that confidentiality will be maintained. We shall hold to that because the process is not at an end.
The noble Lord, Lord Holme of Cheltenham, suggested that perhaps at this point we should impose our own solution. However, I remind him that we are committed to an agreed outcome. Everyone accepts that any new arrangements must command the widest possible support and allegiance in Northern Ireland.
Lord Holme of Cheltenham: My Lords, I thank the noble Earl for giving way. What I suggested was that in order to promote the process of the talks the British Government might wish to take some initiative and show more of their hand to prompt the parties back to the table rather than—I use the words he used—impose our solution. I believe that that would be wrong.
The Earl of Arran: My Lords, I apologise to the noble Lord, Lord Holme of Cheltenham, if I misread him on that. Of course it is up to all the participants on an informal basis to seek to start the talks again at an appropriate time.
Finally, I can tell the noble Lord, Lord Home of Cheltenham, that he was indeed right about "comprised" rather than "compromised".
5.57 p.m.
Lord Fitt: My Lords, not for the first time in your Lordships' House I feel myself unable to agree with what has been said by previous speakers. The outcome of the talks was entirely predictable. Indeed, I said so on numerous occasions. In 1985–86 when the Anglo-Irish Agreement was promulgated, I said in this House that the terms of that agreement made it impossible at any time in the future for the Unionist members in Northern Ireland, the Protestant community, to talk to the Nationalist community. For the very first time since the creation of the Northern Ireland state the Unionists saw the process as giving preference to opinions from the Government of the adjoining republic. Having been born and reared in Northern Ireland, I realised that no matter how extreme or moderate the Unionists may be, they would never accept what they regarded as intervention by the Government of the Republic.
I saw that also in the Sunningdale agreement in 1973–74. I thought that that was the best political development in Northern Ireland since the creation of the state. There was absolutely no doubt about the acceptance and the creation of a Northern Ireland Executive. That was Strand I of the talks. It was Strand 2, on the Council of Ireland, which brought that executive to an end. There is no doubt that agreement can be reached on Strand 1 but I say here and now and with no great enthusiasm that in my lifetime—and I hope to live a long time—there will never be any agreement on Strand 2 of the talks; namely, the intervention of the Government of the Republic into the affairs of Northern Ireland. Whether I would like such an agreement and whether it would be the best solution it will never come about in the affairs of Northern Ireland.
The talks are not new; they did not start six months ago. The first talks began under the noble Viscount, Lord Whitelaw. They were continued under the noble Lords, Lord Colnbrook and Lord Prior. My noble friend Lord Merlyn-Rees did what he could to start talks to try to find an agreement. So these talks have not been going on for six months or a year. There was the intervention of the Irish Government, which was legitimate under the terms of the Anglo-Irish Agreement. The latest series of talks began because
226
the Unionist community in Northern Ireland so detested and despised every word of every sentence in the Anglo-Irish Agreement that they were prepared to enter into talks to do away with it. The SDP and the Irish Government also entered into the talks with the intention of consolidating that agreement or, if that were not possible, of finding another agreement which would give exactly the same authority.
That was the irresistible force meeting the immovable object. No agreement could be found under those circumstances. There will be no agreement if it is insisted that the Irish Government continue to have a part to play in the affairs of Northern Ireland. We must face realities in this House and that is the reality of the situation in Northern Ireland.
The Earl of Arran: My Lords, perhaps I may say first that I hope the noble Lord, Lord Fitt, lives for a very long time. But I think that even he will agree that six months of Irish politics is but an evening gone. I hear very clearly what Lord Fitt says but I really do not believe that it would be in the interest of the resumption of the talks to recriminate and backtrack on what has already happened. There is a lot that yet has to be done. A lot of general very good will has come about. A lot of profound understanding has happened as a result of these talks, and we wish them well in the future as soon as they recur.
Lord Skelmersdale: My Lords, contrary to what the noble Lord, Lord Fitt, said is it not inevitable that a time of consolidation should come? It therefore comes as no surprise that there is what I would call a "temporary suspension" in spite of what my noble friend said in answer to the noble Lord, Lord Holme of Cheltenham. The most dangerous action which the British Government could possibly take would be forceful intervention because forceful interventions have bedevilled Anglo-Irish relations for many years. I hope that my noble friend will agree with that.
The Earl of Arran: My Lords, I agree that a forceful intervention at this particular point would be extremely unwise and extremely uncalled for. It was agreed by both my right honourable friend the Prime Minister and the Prime Minister of Ireland that the talks would come to an end before the next intergovernmental conference on 16th November.
Lord Hylton: My Lords, it is not necessary for me to ask the Minister whether the Government know about Initiative 92. Perhaps I should declare an interest as a person associated with the scheme. However, I wish to draw your Lordships' attention to the initiative and say briefly what it is. It is an investigation into what the citizens of Northern Ireland actually want. They are being asked what kind of accommodation, political and otherwise, they can foresee and in what ways they believe progress can be made. Views are being sought not only from individuals but from organisations of every kind.
The work of the investigation has been voluntarily funded and organised. It is, therefore nongovernmental, non-sectarian and completely across the board. It is important because while there are

227
many elections in Northern Ireland there has, alas, not been a great deal of practice of normal democracy. I believe that the initiative can pave the way to renewed formal talks between the official political parties and the governments concerned. No doubt your Lordships have many friends and contacts in Northern Ireland. I hope that it will be possible to publicise the initiative so that views can be submitted during the next two weeks.
The Earl of Arran: My Lords, I thank the noble Lord, Lord Hylton. Certainly we are aware of Initiative 92 and wish it very well. Indeed, we are ready to play a part if it is helpful but of course the noble Lord will understand that the main focus is the talks.
Lord Stewartby: My Lords, may I suggest that, although we listened to the noble Lord, Lord Fitt, with great respect, we should not be too pessimistic about the development which my noble friend has reported today. Each exercise of this kind helps gradually to further the reduction of mistrust which has bedevilled these discussions and relations for so many generations. I hope that formal processes will not be resumed too quickly because there must be a great deal that needs to be assessed and reconsidered as a result of the process which has ended. The best way of ensuring that the next time the tide comes in it comes a little further up the beach will be to look in detail at what has happened on this occasion and see whether we can build on that so that our next efforts will be more fruitful.
The Earl of Arran: My Lords, I assure my noble friend that the British Government are far from pessimistic. I am sure that it is the hope of us all that they find a way forward. Certainly we in Her Majesty's Government will continue to do all that we can to play our full part and we believe that present talks have made sound progress. We are determined to hold on to that foundation.

Voluntary Agencies
6.8 p.m.
Lord Elton Lord Elton rose to call attention to the increasing importance of the work of voluntary agencies; to the Home Office publication The Individual and the Community—The role of the Voluntary Sector; and the role of other government departments in this field; and to move for Papers.
The noble Lord said: My Lords, the day appointed for this debate is significant in four ways. It is the anniversary of the armistice that ended the First World War and thus a big day for one of our major voluntary organisations, the British Legion. It is also the anniversary of the birth of my noble friend Lord Carr of Hadley, whom I welcome to the debate. It is the eve of, and therefore sees the peak of speculation on, the Chancellor's Autumn Statement. It is also the day for the decision of the General Synod on the ordination of women. It is a day of deep importance to the Church of England. I regret that it is a day of sorrow, as it would have been whichever way the decision went, for many members of that flock to
228
which I belong. Your Lordships will recognise that for that reason the Archbishops' and Bishops' Benches are comparatively empty. On their behalf I extend to your Lordships apologies sent to me from Lambeth Palace. The most reverend Primates and the right reverend Prelates will not share with us the pleasure of hearing the maiden speech of the noble Lord, Lord Plant, whom I welcome to the Chamber.
Our subject today is a big one. The Charity Commissioners in their Trustee's Guide to the Charities Act 1992—an admirably lucid work on which they deserve congratulations —comment that the charity sector as a whole has an annual turnover of about £17,000 million. Its size was proved to me in a different way. Although I contacted only a tiny fraction of the voluntary and other organisations concerned, by Saturday lunchtime the replies I had received weighed three-quarters of a stone on the bathroom scales. Merely to make courteous mention of all those sources would take up half my time so I hope that your Lordships and all those who wrote will accept that I must rely on distillation rather than quotation. However, I record my warm thanks to all who wrote. In case it is necessary, I record my interest as president, chairman or trustee of half a dozen charitable voluntary organisations. I do so with great modesty as most of your Lordships will have taken on far more than I have.
One cannot cover everything from art to zoology or, indeed, from creche to hospice in a single speech so that my trawl for information is focused on those parts of the sector concerned with welfare issues. Other noble Lords will address other subjects.
Speaking to the Charities Aid Foundation—CAF —conference exactly a year ago, my right honourable friend the Prime Minister said:
"Voluntary action … improves the lives of those people that are helped, and in so doing I believe it also fulfils the lives of those people who do the helping".
As I shall have time for only a few words on volunteering, I hope that your Lordships will realise that that thought is fundamental to everything that follows, as is his recognition later in the speech that:
"Charities are not the sticking plaster of the welfare state. The activities of volunteers should be seen as part of the very cement that binds our society together".
Beside those two quotations I should like to place a third:
"Vigour and abundance of voluntary action … individually and in association with other citizens, for bettering one's own life and those of one's fellows, are the distinguishing marks of a free society".
That quotation, which I also heartily endorse, was from the third Beveridge report, Voluntary Action. Although it was written in 1948, I believe that the party opposite still accepts it. Therefore, it reveals the extent of the ground common to all Members of your Lordships' House. We can all welcome the finding by the Volunteer Centre in 1991 that the number of volunteers in the United Kingdom has risen to some 23 million. They turn in as many as 100 million man hours and woman hours every week.
That is the hallmark of a free society. We should help others in need of it. We are doing that. A government initiative which we can applaud today is the Charity Know-How Trust. The cash for it is found

229
from a group of charities and it receives a matching grant from the Foreign and Commonwealth Office. It is supported by CAF and is helping to found an independent voluntary sector in Central and Eastern Europe.
If Eastern Europe offers opportunities, Western Europe offers problems. One is the Community's draft legislation on data protection. Can my noble friend confirm that that would curtail a charity's ability to appeal by post and whether any other country has supported our objection to it?
As regards the United Kingdom, the Home Office paper named in the Motion reports the number of charities to be rising and that in 1990 it stood at about 171,000. It analyses the amount and sources of their income. The CAF survey, Individual Giving and Volunteering in Britain, elaborates on those figures and brings them up to date.
While a major consultant in the field—the Chapter One group—contests the CAF findings on the basis of experience with the larger charities, there is wide endorsement of its conclusions from those from whom I have heard in the voluntary sector.
Those findings are that 80 per cent. of the population gave something to charity in 1987. That dropped to 74 per cent. in 1989–90, the year in the Home Office paper, and recovered to 76 per cent. (still 4 per cent. below the 1987 figure) in 1990–91. Total individual giving is expressed, since the survey uses inferential statistics, in bands with a 95 per cent. probability of accuracy. The band for 1987 was £2.6 billion to £3.9 billion. It peaked in 1989–90 at £3.4 billion to £4.3 billion but fell in 1990–91 to £4.3 billion to £3.5 billion.
Comparing the mid-band points of the past two years, they show an overall fall in individual charitable giving of £300 million. That is a large figure, and an easy one to remember as it is precisely the sum said to be lost to the sector in irrecoverable VAT, to which I believe my noble friend Lord Limerick will refer.
The important matter is that in real terms the value of that income had fallen by over 16 per cent. As regards corporate giving, Charity Trends, another CAF publication, shows total support to have risen slightly in cash terms between 1989–90 and 1991–92, but in real terms it fell by 5.3 per cent.
We come to our subject against that background. There is a declining value of 5 per cent. in corporate and 16 per cent. in individual giving. That decline is from a level already strikingly lower than that achieved in the United States. There is an urgent need to raise public awareness of, and commitment to, charitable giving in this country. That requires the sort of campaign which the Windsor Group of charities was convened to manage. The members of the group have made a substantial cash commitment to it but the effective campaign which is urgently needed cannot be mounted without government backing. Will the Minister please tell the House what response the Government have given to the Windsor Group's request for help. Does not their response to the Know-How Trust provide a very apt precedent?
If we are to understand what is going on in the voluntary sector now, we need to see what has led up to it over a longish period. Throughout the 19th century private people, alone or with others, were identifying newly recognised needs and meeting them with newly devised services; for example, setting up schools, hospitals, asylums and so on. They were all designed, in the words of the Prime Minister, to improve the lives of the people they helped.
Throughout the first half of the 20th century, in the first great transfer, the state recognised those needs and either took on the services from private pioneers or reinforced them with massive provision of its own. In the last quarter of the current century we are witnessing, in the second great transfer, a passage of an increasing proportion of those services, not to the kind of private individuals who pioneered them but to their collateral heirs and successors in hospital trusts, on governing bodies of opted-out schools and in the voluntary sector more generally.
That nearly circular journey has been a long one. In it a good deal has been gained in the way of technology, savings of scale and standardisation and not least from the increase in volume which results in harnessing the resources of the state. Those gains are, generally speaking, quantifiable.
There have also been losses and they, though important, are not easily quantifiable: losses such as the immediacy, individuality and flexibility of response of smaller institutions; the simplicity and speed of their transactions; the institutional loyalty and clarity of purpose that spring from direct personal relationships and wither among the adversarial structures of large managements and enormous workforces; and the greater speed with which larger numbers of smaller organisations can identify and establish best practice, simply by reason of the greater diversity of their approaches, even when they do not compete.
The justification of the first transfer—to the state was the gains I have listed; the justification for the second—from the state—is the recovery of the losses caused by it. We must ensure that in recovering the greatest possible number of losses we lose the minimum number of gains. It is because I believe we are at risk of achieving less than this that I have tabled this Motion.
The transfer now in progress is being conducted under the influence of the conditions of the day, and of two in particular. The first is the recession, which puts pressure on a Government already committed to limiting public expenditure to restrict it still further. It is essential that we do not forget that the justification for this second transfer is to recover the losses suffered in the first. Most of those do not entail cost benefits and cannot deliver savings to the PSBR. If the process of transfer is captured by the intention to save tax payers' money and if the result is a reduction of volume, particularly if it is without the unquantifiable gains I have listed, we shall have kept most of the bath water and tipped the baby down the drain.
The second condition lies in the process by which the way we look at things changes and by which those changes alter the way in which we arrange our affairs.

231
That process has now, I hope, reached its furthest swing towards materialism, in which we describe everything as a market and organise everything as a business.
But the inheritance which the Government received in the first transfer was not from companies seeking profit. It was from individuals who forwent profit in order to improve the lives of the people they helped. It was right for my honourable friend Michael Jack to tell this year's CAF conference that,
"the Government want the taxpayers' money to work harder".
So do we all. We are taxpayers too. But if the systems and practices introduced by the transfer work in ways which limit the immediacy, individuality and flexibility of response of the voluntary organisations, they will destroy the justification for making the transfer in the first place.
A prominent feature of that transfer is the establishment of contracts between central and local authorities on the one hand, and voluntary organisations on the other. The term "the contract culture" is now freely used in the sector. Contracting does offer advantages. The process of negotiating terms involves the parties in discussions in which the sense of partnership that we are seeking can develop and flourish. Beyond that, the advantage of contracts for authorities is that they can provide clear statements of the service bought and the standards contracted for. Put at its strongest, this means that it gives them a degree of control over the organisation.
The attraction of contracts for the voluntary organisations is that they provide certainty of income over a period. The duration of that period is important. Voluntary organisations live too much from hand to mouth. They, as my right honourable friend the Prime Minister said in the same speech,
"like businesses, need stability to enable them to plan their activities and their future".
He thus endorsed the Efficiency Scrutiny's welcome recommendation of a contract period of up to five years.
But it is not only the duration of the period, it is how it ends that matters. I know of two cases—the ITS in 1990 and the Maternity Alliance in the current year—where the Department of Health, as a major funder, announced a substantial reduction of funding after the start of the financial year in which it took effect. There may be other cases, at local as well as national level. My third request to the Minister is an undertaking that this really deplorable practice will cease in central government and be severely discouraged by it in local authorities.
I am sure that the proper system for major contracts is to use rolling contracts of not less than three years, reviewable every year. Then, even if the review takes a year, which sadly does happen, there will still be time for 12 months' notice and proper preparation for change. Perhaps I may make it absolutely clear that in this context, and in all others, a major contract is one that is of major importance to the voluntary organisation. In the eyes of the authority that may be tiny—indeed, it often is—and hence the cavalier treatment which voluntary organisations sometimes receive.
That system will not only help voluntary organisations to deliver a good service to clients, it will help to offer a little more security of career to their salaried staff who, in my experience, work tirelessly and with enormous dedication for less that they could get in the rest of the market. I pay tribute to them —as should your Lordships —for without their dedication the work of literally millions of volunteers and all the benefits which they generate will be lost.
But there are other risks with contracts. First, a voluntary organisation that contracts as the sole provider of a service to an authority and delivers the whole of its output under that contract becomes, in effect, no more than an agent of the authority to which it is contracted. It is under its control and subject to its policies. That does not disseminate the authority's function to the sector; it extends the authority's power over the sector.
Secondly, where the whole of a voluntary organisation's output of a service is under contract to an authority, even where others do also provide the same service, unless the contract is carefully and liberally drawn, it surrenders the freedoms to vary the service, to innovate and to experiment. But those freedoms are central to the purpose of the transfer and for which it was undertaken.
In another part of his speech, my honourable friend Mr. Jack, the Minister, said:
"I recognise that some within the voluntary sector are uneasy about developments in the contract field".
He explained that by adding:
"They have not got used to the jargon".
My next request is that my noble friend will explain to Mr. Jack that it is not the jargon that worries us but the culture.
Good contracts used in moderation can benefit the sector, and therefore its clients. But careless, illiberal or excessive contracting can do great damage to both, and is dangerous.
I said a moment ago that one of the attractions of contracting for central and local government was that it gave them a measure of control over the activity of the sector. The instinctive wish to exercise control may be weak in Ministers and council leaders, but it is strong in officials at both levels. One can understand its attractions. But if this transfer is to be successful it must maintain independence and flexibility in the sector.
In days of boom one might hope that that independence could be guaranteed by private sector funding. In days of recession it cannot. If we accept that the objectives of much of the voluntary sector are not only compatible with, but largely the same as, those of Government—and it is very hard not to—it follows that the Government have a duty to see that the sector remains at least as effective as it now is and, for reasons I hope I have explained, that voluntary organisations retain their autonomy within it.
That cannot be achieved by a reduction of government support to the sector at exactly the time the recession is both reducing income from all other sources and increasing the demands put upon it. Neither can it be achieved by contracting alone. That is why the speedy withdrawal of core funding in favour of contracting, never admitted by government

233
but constantly attested to by practitioners in the field, must be reversed. My third request is that my noble friend the Minister will impress that on the voluntary service unit in his own department. That unit has a crucial part to play. The voluntary sector operates in almost all departmental areas of responsibility and the policy of each of those departments affects it closely.
If I detect from the Opposition Chief Whip that I am over time, then I say that I understood that I had 20 minutes in which to speak.
Lord Graham of Edmonton: My Lords, 15 minutes.
Lord Elton: My Lords, in that case I shall conclude with some regret and hope that I shall have time at the end. I request that the Minister informs the House of the composition of the ministerial group chaired by my honourable friend Mr. Jack; the terms of the mission statement of the voluntary service unit and the numbers and grades of the staff assigned to it in his department and attached to it from other departments.
As my noble friend Lady Macleod has sadly fallen and is unable to be present, I hope that your Lordships will be able—with much regret and good wishes to her —to use the time that she has vacated to make good my error of judgment. My Lords, I beg to move for Papers.
6.26 p.m.
Lord Plant of Highfield: My Lords, perhaps I may first thank the noble Lord, Lord Elton, for initiating the debate on this important and interesting topic, not least because it gives me the opportunity to speak about one of the few topics of which I know a little. I rise with some trepidation to make my first speech in your Lordships' House because, unlike most of your Lordships, my expertise, such as it is, is rather unspecific. I have spent my academic career teaching and writing about political philosophy and ideas. If my party had needed a spokesman on Plato, Aristotle, Kant or Hegel, I believe that I might have been of more immediate use to it than I currently am. I am sure that I have a great deal to learn from your Lordships about the practical aspects of public policy.
William Beveridge defined the sphere of voluntary action in the following way:
"To do things which the state should not do … to do the things that the state is most unlikely to do … to pioneer ahead of the state, to make experiments and to provide public services which could not be got by paying for them".
So the central issue is the relationship between the state and the community in many ways. During the past 15 years or so we have seen a gradual decline in the degree of consensus about what the state should and should not be doing and thus of the context within which voluntary work should be undertaken and the kinds of needs that it should meet.
The government of the noble Baroness Lady Thatcher, the underlying principles of which were given powerful expression in the writings of the noble Lord, Lord Joseph, in the 1970s have, I believe, led all parties, for good or ill, to a reconsideration of the nature of the state and in particular the role of the state in the provision of welfare.
234
I come to the present debate with a very strong conviction that welfare, including health care, education and social security, is a basic right of citizenship which should be provided as fairly and as equally as possible to all citizens in the same way so that we try to secure their welfare rights as well as their civil and political rights. In the light of that I welcome the Home Office document's assertion that the encouragement of the voluntary sector should not be at the expense of, or be seen as an alternative to, public provision.
I say that because in the 1980s there were many siren voices in the think-tanks, such as the Institute for Economic Affairs and the Adam Smith Institute, influenced by American social policy theorists such as Charles Murray, who were arguing for the wholesale privatisation of core areas of the welfare state. That would inevitably have meant that the voluntary sector would have had to play a much more central role in basic welfare provision than I believe could possibly be justified. The point about the voluntary sector is just that it is voluntary and thus it has to be discretionary and cannot be universal in aspiration and in scope in terms of the needs it seeks to satisfy. "From each as they choose to each as they are chosen" may be the central philosophical foundation of voluntary action, but it cannot be a legitimate principle in terms of which to distribute the basic goods, meeting the common needs of society.
Nevertheless it behoves those of us who take this view of welfare to formulate some kind of philosophy of the voluntary sector which sees a central place for it even within an entitlement-based view of welfare. In the time remaining to me I just want to mention a few features of voluntary organisations which it seems to me should provide an indispensable place for the voluntary sector. The first has to do with the idea of community. An entitlement approach to welfare has the strength of providing for people's needs in a universal and predictable way, but nevertheless it can be impersonal.
Perhaps here I may quote a short passage from an important book by Michael Ignatieff called The Needs of Strangers. This is a book which has also provided the title of a report on the future of the voluntary sector published recently by Gresham College. Ignatieff says this:
"People have needs and, because they live within a welfare state, these needs confer entitlements—rights to the resources of people like me. Their needs and their entitlements establish a silent relationship between us. As we stand together in line at the post office, while they cash their pension cheques, some tiny portion of my income is transferred into their pockets through the numberless capillaries of the state. The mediated quality of our relationship seems necessary to both of us. They are dependent on the state, not upon me, and we are both glad of it. Yet I am aware of how this mediation walls us off from each other. We are responsible for each other, but we are not responsible to each other"
in the welfare state.
The question though is, while this may be the absolutely necessary means by which basic needs are met in a complex society, it cannot be a basis for community even though it is a necessary condition for one since it is so abstract and mediated. The voluntary sector has a central role to play as a counterweight to

235
the impersonal function of the welfare state. The welfare state has its central virtues of equity, justice and fairness, but these are impersonal virtues which need to be complemented by the more discretionary virtues which voluntary action embodies. Each is necessary. One cannot replace the other.
Secondly, I think it is the case that people living in many of the most deprived areas in our society feel deeply alienated from the state, partly because of the deprivation which they experience, and as a result of that I think there are many of the agencies of the state where the social workers or social security officers may not be able to help them effectively to build up a sense of their own worth and self esteem. I suspect that the voluntary sector may have a central and crucial role to play in helping a sense of reintegration into a society which promises most people so much but can equally so effectively marginalise its less successful.
Thirdly, I believe that the voluntary sector can be more innovative than either state agencies or local authority bodies. It is in this context that I want to enter one caveat about the Home Office document, and in many ways I agree with the noble Lord, Lord Elton. First,—and I shall be brief about this—I strongly agree with the point that the noble Lord makes about the contractual culture. I think that the idea of target setting and monitoring may well destroy precisely the innovative capacity of the voluntary sector that is so important to it.
Further, there is the commitment to funding those agencies which accept prevailing ethical standards. I am a little worried about what interpretation is to be put on that. Given the Government's view about maintaining family values, would they fund, say, a refuge for battered wives? It is that kind of issue that needs addressing. Finally, there is a danger that the contractual method of the voluntary sector may become an agency of the state, which will precisely destroy all those virtues that I have tried to explain give the voluntary sector an indispensable role in a welfare society.
6.35 p.m.
Lord Gibson: My Lords, I am fortunate to follow the noble Lord, Lord Plant, and to be able therefore to be the first to congratulate him on his admirable maiden speech. I hope that we shall hear him on a number of other subjects. He said that he was not an expert on the things that affected this House but we know that he is, and I hope that we shall hear him often. We are grateful to the noble Lord, Lord Elton, for initiating the debate. I am somewhat embarrassed by the late start of the debate because I have to leave at a quarter past eight for an appointment for which I must not be late. If I miss some of the Minister's reply I shall read it with the greatest of care.
I should like to talk about voluntary work in the field of conservation because that is the field I know best having chaired the National Trust for nearly nine years. The trust is a major example of the contribution made by the voluntary sector to the public good. Of course there are other important players in the field both in the man-made and the natural environment, but the trust must be the largest conservation society
236
in the world both in terms of the size of its holdings —more than 200 houses open to the public and half a million acres of beautiful landscape held for public enjoyment in perpetuity—and in terms of support. There are over 2 million members providing some £50 million a year subscription income alone, quite apart from the donations that they make to specific projects.
A feature of the trust's work that is especially relevant to this debate is the involvement of volunteers. The chairman of the trust, Lord Chorley —who was not able to be here this afternoon but would no doubt have told you this himself if he had been—told the annual meeting of the trust the other day that there were 23,000 volunteers last year, young and old, who put in one and a quarter million hours of work, equivalent to the hours worked by just over a quarter of the trust's permanent paid staff. It is an impressive figure and an encouraging one. He gave some examples of the work. There were 7,000 room stewards signing up for the season; over 500 professional volunteers such as surveyors, safety experts, archaeologists, insurance experts and so on. Then there is all the money that groups raise for the trust, as well as the ACORN camps which work on footpaths, fencing and so on in the Lake District and elsewhere.
How amazed the founders of the trust 100 years ago would have been to see the support that their ideals have engendered 100 years later. They of course were typical of the type of people in the late Victorian age who had strong social consciences and got together to found what had developed into very large charitable organisations. In the last century most of education, hospitals, savings and many other basic needs were primarily and sometimes exclusively served by voluntary organisations. But as the 20th century progressed the state began to do more, and of course much private philanthropy of the 19th century has been replaced in this century by business philanthropy, so that there are now really three providers of many of our social needs: the state, commercial enterprise, and enterprise of a non-profit making kind, a voluntary kind. We have, as it were, a triangular partnership.
In the field of conservation the state is represented not only by the Department of the Environment but by the two bodies funded by the Government, English Heritage and the National Heritage Memorial Fund, brilliantly lead until his recent retirement by my noble friend Lord Charteris, to whom we all ought to feel, and do feel, a great debt of gratitude because as its first chairman he set it on its way 12 years ago. Both English Heritage and the National Heritage Memorial Fund were closely in partnership with the National Trust. It has been a pretty spectacular partnership over recent years, first, for historic houses that have come to the nation such as Kedleston, Canons Ashby, Calke, Belton, Castle Coole in Northern Ireland, Sheringham, Chastleton, to mention only a few, and some superb countryside such as Abergwesyn in South Wales, Kinder Scout in the East Midlands, Studley Royal in Yorkshire, the historic park at Dynevor in

237
Wales, Stowe landscape garden, and of course many coastal acquisitions under the Neptune scheme, acquisitions in the Lake District and so on.
Sometimes the partnership does not bring it off. The case I have in mind is Pitchford Hall in Shropshire, a house of great antiquity. It has no artistically very important contents but has all the historic interest and charm of a house with its accumulation of contents over many hundreds of years. The trust could not raise the money in the time available but English Heritage and the National Heritage Memorial Fund produced a scheme to rescue it within their resources. They were overruled by the Government. There is no point in having quangos if they cannot establish their own priorities within the resources allocated to them. They should determine their priorities. That case was a failure but on the whole over the past 20 or 30 years the system has much more often succeeded. The National Heritage Memorial Fund in particular has proved to be a priceless weapon in the fight to preserve our historic and natural heritage.
What of the future? The greatest contribution that the Government can make is to recognise that in the case of historic houses the private owner, whether his family has been in a house for generations or whether he has just bought it, is, if he can make a go of opening to the public, probably in this field the most valuable voluntary worker of all. Nobody recognises that more than the National Trust itself which has no ambitions ever to be more than a longstop.
I urge the Government to do more for the private owner who lets the public in on the grounds that it is the cheapest and, as many of us including the National Trust think, the best way of harnessing the voluntary sector to this goal. Fiscal help in the form of allowing maintenance funds, under the right conditions, not to pay tax and the removal of VAT on repairs to historic buildings to which there is adequate public access are the two steps for which this lobby is calling. I am entirely on their side. It is the only way that we shall achieve it. That would be the best form of partnership between the Government and the voluntary sector if we are to preserve this part of our heritage in the years ahead.
6.42 p.m.
Lord Joseph: My Lords, I want, though very briefly, to support the Motion of my noble friend Lord Elton and I apologise for the commitment that will prevent me from staying right through the debate. I am glad to pay tribute to the maiden speech of the noble Lord, Lord Plant. He and I have an overlap of interests: perhaps an overlap of points of view; but certainly plenty to debate. I look forward to reasoning with him and arguing with him in this House from time to time.
I hope that he will recognise in what he said about the universality of provision within the social services that that universal approach has to be very carefully shaped and reshaped from time to time to protect the spirit of self-reliance on the part of those who need the provision, and the motivation of those who provide
238
the service. He will remember that Beveridge emphasised the need not to destroy the self-reliance of the population and to preserve both the work ethic and the voluntary spirit.
I am glad to follow the noble Lord, Lord Gibson, who speaks with passion and with experience of the needs of conservation, conservation which serves the interests, the sense of wonder, the education and the culture of the people of the country. I turn from the buildings that are part of conservation to the people for whom conservation is important, though I marvel, as I think we all do, at the scale, the variety and the dedication of the voluntary services. There will always be new needs and new enthusiasms on top of all the existing needs, but who can doubt that some of the human miseries with which voluntary services try to deal flow from one particular cause. It is a cause on which I have spoken to your Lordships before. The cause is inadequate parenting at all levels of income and education.
The House flinches from this subject because of its inherent delicacy and difficulty, yet I urge again that the subject be taken seriously. Of course inadequate parenting cannot be eliminated, but it can be reduced. The way to reduce it which lies open to our own efforts is through voluntary services. I should like to tell your Lordships that following a debate in this House only a few months ago the National Society for the Prevention of Cruelty to Children and the Council for Education Development have been in touch with me. We are very diffidently exploring the prospects for a few pilot projects in preparation for parenthood. Of course there are efforts going on all over the country —fragmented efforts—to provide something in the field of preparation for parenthood. We all know that it is a particularly difficult area in which to help which is made much more difficult by all kinds of current trends and all kinds of cultural influences. But if even marginally the extent of inadequate parenting could be reduced then all kinds of other fields of voluntary work would become less formidably large and hard.
I should like to speak briefly on the role of those voluntary bodies which on a large or small scale try to befriend families who want and need help in their own homes. Some of your Lordships know of my own enthusiasm for the work of Homestart which deploys nearly 4,000 volunteers. They provide about four hours of work a week in the home supporting families for an average of about 14 months. In that way they rescue nearly 20,000 children a year—fresh children each year—from what would otherwise be the prospect of family break-up and a life in care leading probably to criminality, addiction and all the other miseries.
I am talking therefore of truly radical voluntary work, work that gets at the root of later problems. If we can be less timid about trying to improve inadequate parenting where the help of voluntary services is welcome—I do not mean to impose it in any way—perhaps we can have some effect in reducing some of the other troubles that plague our society. I support my noble friend's Motion.
6.47 p.m.
Baroness Fisher of Rednal: My Lords, I shall not directly follow the line of the noble Lord, Lord Joseph, except to say that the constituency I represented in Birmingham—Ladywood—was an inner city constituency. The Ladywood Inner City Partnership does work identical to that mentioned by the noble Lord. There are certain education problems which we all know have to be tackled but that part of Birmingham is benefiting from inner city partnership money and urban aid. However, one of the problems in trying to help the group of people to whom the noble Lord referred is that Government cutbacks on inner city aid programmes and inner city partnership money will lead to fewer resources for the voluntary organisations that are working so hard with some of the most difficult families.
I should like to concentrate upon the importance of recognising the fact that thousands and thousands of people get themselves involved in money-raising schemes in the country. They are not attached to any organisation; they are just there when the need arises. One of the most successful are those, like the one we have in Birmingham, in a children's hospital. When one has a famous operation on a child, everyone knows about it. The parents want to raise money to buy some fantastic machinery for the hospital in order to cure other young children. The snowballing continues with all such activities. Thousands of people are involved, either shaking collection boxes on a Saturday for worthy causes, organising fun runs or doing all kinds of things. In many cases, those people are the backbone of local charities.
Therefore, when I looked at the Home Office publication, I was somewhat disturbed to see that such people are called,
"ordinary men, women and children".
I do not call them ordinary men, women and children; I call some of them extraordinary. I took grave exception to the word "ordinary" being used to describe those people. Looking through the pages of the document, one can become a little worried when reading under "Awards for volunteering" that the
"Honours system, of course, reflects outstanding contributions by individuals in the voluntary sector".
I do not know whether the words "outstanding contributions" mean the number of man hours that people have given or whether it means substantial donations being given in order to get one's name on the Honours list.
I should point out that the title of the publication is The Individual and the Community and not The Individual and Society which is the subject of the debate as set out on the Order Paper. In it, we can see that training for employment is mentioned. When various departments are working together and we see the TECs taking up most of the resources, we must look at those organisations—such as the Rathbone Society, which is known to me, and others—which are losing out on TECs. They are training young people whom we now call "educationally backward". But they are experiencing extreme difficulties because they are losing out on that form of finance.
240
I thought that the report was a little dismissive about what young people do. I only know what young people in Birmingham do. If we are to have the sleep-out—of which I am part—for the young homeless in the city, we shall have literally scores of university students sleeping out all night on 4th December, as will Boys' Brigade lads and other young people.
We are very fortunate in the West Midlands to have another group of people. However, I am not sure whether this is general throughout the country. I refer to the West Midlands' fire service young firefighters. They do a tremendous amount of voluntary work. Part of their training is based on being good firefighters in the future; but the specific efforts that they make are helping in many ways. That has to be praised.
I turn now to trends in charitable giving. We must recognise the fact that one of the big charitable trends that have changed are the TV marathons. When they are taking a score of the money raised they say things like, "We have now reached half a million; let us have someone else!" There is much fun and enjoyment. Such marathons give out large sums of money to some of the smaller charities that are well known in particular areas.
If we are looking at trends in charitable giving, I should point out that "payroll giving" is enunciated in the document. As unemployment, and the large number of people on the dole has increased, can the Minister say whether the number of schemes has decreased? We see specific numbers. But, in view of the number of people who are not working now, has the practice of money being stopped out of one's wages-in other words payroll giving—diminished?
My next point follows on from the latter. I see that the Windsor Group is mentioned in the document. I have never heard of the group. However, as I come from Birmingham, that is perhaps not unusual. I do not know what it is. But if those involved can give any guidance to people outside of Windsor, London or anywhere else, we would be most grateful. One of the real problems faced by the three charities with which I am involved is that of establishing the practice of payroll giving.
Inner-city partnership will be very important in the future if it is to carry out government policy of working together. We cannot afford for charities not to know from year to year how to develop if they find that government funding is perhaps only done on a weekly, monthly or whatever basis.
I should like to conclude by referring to some words from the document, The Individual and the Community. It says that the Government cannot instruct people to give to charity but it can create the right climate to encourage them to give more. Would the right climate be that the Government should make increased efforts towards putting the unemployed back into jobs so that they could be giving more generously than they can at present?
6.56 p.m.
Lord Henderson of Brompton: My Lords, the Motion tabled in the name of the noble Lord, Lord Elton, rightly calls attention,
"to the increasing importance of the work of voluntary agencies",
at a time when they are experiencing great difficulties. Those difficulties are mostly caused by under-funding, or at least lower funding than that to which they have been accustomed. Of course, the funding comes from the Government, from local authorities as well as from private sources. That lower funding comes at a time when there is increasing demand for voluntary services. I am speaking about all kinds of voluntary services, but I am especially interested in social and advisory services. The fact that they are being starved of funds is very largely due to the recession; it is not merely because less money is being given by the three main sources of funds, but also because there is very much more for the social and advisory services to do as a result of the recession.
One normally thinks of the poorer parts of the United Kingdom in regard to the need for social and advisory services. But now that is not necessarily so. Indeed, I am told that there is a steeper deterioration in some of the more affluent areas where unemployment has risen disproportionately and comparatively fast—quite apart from disaster areas such as the mining communities. Therefore, there is a double reason to be grateful to the noble Lord, Lord Elton, for raising the matter this evening.
I should like to say a brief word about local authorities. I am slightly worried about indications that one or two local authorities are not funding social and advisory services as they have in the past and are tempted to reduce their rates thereby. If that practice were to spread, it would give rise to an horrific state of affairs. It is most important that local authority funding should be kept high.
As my time is limited, I should like to concentrate on one area only of voluntary service; namely, that concerned with youth crime where the Government have expressly welcomed co-operation between the statutory and voluntary services. In particular, I should like to draw attention to intermediate treatment. The Intermediate Treatment Fund is struggling for existence after its funding has been tapered off, and is soon to be extinguished by the Department of Health which founded it, I believe, in 1978. It is sad that that should be so just as the Criminal Justice Act 1991 is being implemented. The success of its policy of keeping young people out of custody depends largely upon the provision of intermediate treatment centres which magistrates can use as part of their non-custodial sentences. Magistrates will find it much harder to work with the grain of the 1991 Act if facilities for non-custodial treatment are unavailable.
The Intermediate Treatment Fund also plays an important role in discovering, promoting and supporting IT schemes which successfully divert young people at risk and at their most vulnerable. There are other agencies that also do that. There are IT schemes funded by local authorities, but the most
242
active and innovative agency for the promotion of IT schemes is the Intermediate Treatment Fund which was a most important initiative introduced by the noble Lord, Lord Ennals, when he was Minister for Health. It has been continued until now by successive Ministers for Health.
The motive, apart from its intrinsic worth, is to reduce the number of young people who might otherwise drift into criminality. In its work, it is spot on in fulfilling the aims contained in the Prime Minister's speech at the Charities Aid Foundation conference in November 1991 which is incorporated in the publication which is the subject of today's debate. He said:
"We want more recognition of the needs of smaller, lower-profile organisations, the vital little battalions of the voluntary world; and we want more recognition of the contribution of volunteers".
The Intermediate Treatment Fund's staff with its accumulated experience, and the John Hunt Award Trust, have together performed just those functions. All over the country, intermediate treatment initiatives of the most imaginative and constructive kind have been actively sought out, promoted and developed. The funding has been put to exceptionally productive use, not just because of its intrinsic worth but because for every £1 in funding which the Department of Health has contributed, the Intermediate Treatment Fund has been able to raise no less than £5 from other sources. Such good value as regards such work is rare indeed. I hope that the savings generated by diverting young people from the huge cost of custody is money well spent. I hope that it will continue to receive official and private support.
I hope that the Government recognise good value when they see it and will be generous when the Intermediate Treatment Fund is relaunched next year under the dynamic new title of Divert under the dynamic leadership of the noble Lord, Lord Elton.
7.4 p.m.
Lord Carr of Hadley: My Lords, I hope that I may have your Lordships' indulgence if I have to leave before the end of the debate. I must leave not later than 8.30 p.m. When I put my name down to speak, I thought that that would be comfortably beyond the latest time at which the debate was likely to end. Like others, I say to my noble friend Lord Elton how much we appreciate his choice of this subject for debate. It is a most important subject. I join others in congratulating the noble Lord, Lord Plant of Highfield, on his maiden speech. As my noble friend Lord Joseph said, it was an interesting and thought-provoking speech. I hope that we shall have a mutual exchange of thoughts on these subjects on a number of occasions over the next months and years.
The strength and quality of voluntary organisations and work in this country is great. It is a precious asset and its scale and variety is something at which to wonder. It must be preserved. We must work constantly to ensure that it is increased and not allowed to diminish in quality or scale. We must put it to the best possible use. For a few moments that is what I want to make my theme. When one studies the booklet published by the Home Office, one can say

243
that over the past decade governments have done a great deal to strengthen the voluntary movement in what otherwise might have been difficult times. They have made it easier to give. They have encouraged giving and the use of voluntary bodies in a greater variety of ways. Over the past decade, governments on the whole can take credit for their stewardship of the voluntary movement. But I should like to see government becoming more pro-active and less reactive to ensure that we put the enormous voluntary effort to even better use.
I wish to illustrate my point by taking one example. I have the great honour and privilege of being the president of the Rainer Foundation. It is a post I took over from the noble Lord, Lord Hunt, who cannot be with us this evening. It was a great honour to take over from him. The Rainer Foundation has a number of particular points. First, it is probably unique in that it works for young people between the ages of 13 and 25. There is no break in the middle. The spectrum of children growing into full adulthood is continuous. Some of the troubles the services in this country have are caused by the artificial break when a child becomes a juvenile, a young adult and so forth. The Rainer Foundation works over the whole range. That is one of the reasons why it has been able to do such valuable work for so many years. It has been going for well over 100 years under one name or another.
The Rainer Foundation has three main purposes: the first is to reduce the severity and frequency of re-offending among those with which it works; secondly, to reduce the use of custody and remand into prison for juveniles and young adult offenders; and, thirdly, in doing that, to innovate and successfully to develop and constantly improve methods of treatment and to pass on its successfully developed techniques to other organisations, whether in the public or voluntary sector. Where it is successful, what it does can be done on a much larger scale than it is possible for one body to do itself, and nor should it. That is where I hope to see the Government becoming pro-active.
I talk about the Rainer Foundation as an innovator. To ensure that no one thinks that I am exaggerating, perhaps I might mention the fact that its most famous innovation was, of course, the probation service. It was a pre-war effort, but that is the spirit which continues to inspire it. I should like to give a brief summary of its record. We have managed a good many projects, often in partnership with the probation service. What has been most striking is the impact these projects have had on sentencing and apparently also, I am glad to say, in reducing the rate of recidivism among those whom we treat. For example, at the Juvenile Justice Centre in Southend custody was reduced by 70 per cent. in the first year of its operation. In Aylesbury, the Kingsbury Project, in partnership with the Buckinghamshire probation service, had a marked impact on Crown Court sentencing. Between 1987 and 1988, 37 17-to-20 year-olds were sentenced to custody. By 1990 this had dropped to 17, and last year it was only five.
However, it is not only the reduction in custody that has been achieved. Figures on recidivism have
244
also been encouraging. There is less than the normal amount of re-offending, and where re-offending occurs it is often much less serious than the original offences.
I could give your Lordships a number of examples, but I will only mention one more. At the Stone House Probation Hostel in Northampton, a study of 100 persons over a year demonstrated that only 46 became recidivists, compared with the normal 70 per cent. or 80 per cent.
I wish to say to the Minister that I hope the Home Office will look at those results and test the figures, if necessary. If that testing proves that the claims are substantial, perhaps the Minister will realise the precious gift he has in his hands to benefit young people, to reduce the amount of crime and to do both at much less public cost. That is where proactive investment will produce great social and economic benefits to our society. That is why I cry out for greater proactiveness.
7.12 p.m.
The Earl of Longford: My Lords, as one would expect, the noble Lord, Lord Elton, initiated the debate in a highly expert fashion, basing his remarks on much dedicated service. His example has been followed by all other speakers, including my colleague Lady Fisher and the noble Lord, Lord Carr. I join in the warm congratulations to the noble Lord, Lord Plant. I am glad that we heard the voice of political philosophy raised in this House; we do not hear enough of it. I gather that we shall hear more about Plato, Hegel, Kant and even Karl Marx. It was always a question when I was at Oxford as to whether Marx was a philosopher. No doubt we shall have enlightenment on such matters in time to come but today we were much impressed.
It was interesting to find so many references to Beveridge, as he is now called—William, later Lord Beveridge. I worked with him for three years as his personal assistant, I had joined the Labour Government in a humble capacity when work on voluntary action started. I did my bit, I made a speech in 1949 on behalf of the Labour Government. I was assisted with much of it by Mr. Herbert Morrison and in it I declared that voluntary action was the life blood of democracy, without it democracy loses its soul. I do not know whether people think that there are more eloquent things to be said about it today or subsequently; I reserve my opinion. At any rate, today we are concerned not with the past, not with words, but with deeds.
Like all other noble Lords who have spoken, I have been concerned in many forms of voluntary action. I have often mentioned the Matthew Trust, the New Horizon Centre for the Young Homeless which I founded with others; the New Bridge for ex-prisoners which again with others I founded and over which the noble Lord, Lord Henderson, now presides. He has been a good deal more successful in getting money from the Home Office than I was in the early days. When we started, the Home Office put it about that we were a homosexual set up. When it was pointed out that I had eight children, they said, "Oh, we know all

245
about that. It's just cover"! At any rate, in these latter days they are much more helpful, although perhaps not helpful enough.
I wish to concentrate in these few minutes on a smaller organisation. I have been much impressed by the talk of thousands of people being helped by this or that movement, and of course all credit goes to the people who run those immense establishments. However, I am thinking today of the Effra Trust which may or may not be known to your Lordships. There is no organisation that I personally admire more in the field of social work than the Effra Trust, and no individual that I admire more in that connection than the lady who presides over it, Mrs. Jane Branston. There are several units; but the one that I know best, has 26 of the most difficult people to cope with that one could find anywhere. They are ex-offenders who have committed serious offences and who are so mentally disturbed that it is considered that they qualify for residence in an Effra home.
The Effra Trust tries to persuade them all—successfully, in my experience—that these are their homes. Some of them have been there as long as eight years, some people have died in one establishment that I have visited. There is no doubt at all that the trust is giving a wonderful service, if only because these unfortunate people would otherwise be let loose on the public and who knows what would happen.
I find it immensely inspiring and recommend noble Lords to pay them a visit. I hope they will do so in the near future because under the Government's financial rearrangements, there is a serious danger that in 18 months the Effra Trust will be compelled to fold up. I cannot go into the financial arrangements which may produce that, but it is a real threat. At any rate, that is how it seems to the devoted people running the trust.
I do not expect the noble Earl, when he replies, to say anything positive on the matter—I gave him a few minutes' notice before the debate started—but I hope he will promise to look carefully at the situation of the Effra Trust. These people are the most difficult in the country, they have found a home there and it would be an absolute outrage if the Effra Trust were wound up. It would only be because the finance which had previously been forthcoming was no longer available. I hope that the noble Earl will make sure that that outrage does not occur.
7.17 p.m.
The Earl of Limerick: My Lords, we are all obliged to my noble friend Lord Elton for initiating this timely debate. He has been my friend for more years than either of us would care to be reminded of, starting in the distinctly non-noble years. We are currently associated in various endeavours in the voluntary sector. I now have to do what I hate. Six months ago I accepted an evening engagement which could not be altered and I shall therefore be obliged to leave before the end of the debate, for which I apologise to the House.
My noble friend Lord Elton and the noble Baroness, Lady Fisher, among others, have drawn
246
attention to evidence that the voluntary sector is alive and well. Recently I was engaged as treasurer of the Royal Marsden Hospital Cancer Appeal in helping to raise £25 million in a rather unfavourable climate. The individual efforts which contributed a good part of that amount were beyond praise.
I wish to start with a general point. The Government's acknowledgement of the role and importance of the voluntary sector is to be welcomed as exemplified in the many constructive interfaces and specifically in the fresh look taken in their paper: The Individual and the Community.
Inevitably, in a short intervention I shall speak to issues where the situation is, at least to my perception, less than perfect. But I would not like that to detract from the recognition of so much which is good and supportive, both of the voluntary sector in general —to the annual tune, we are told, of £2.4 billion—and also specific causes within the sector.
I turn to a specific but major area and that is the poor of London. Some 101 years ago the City Parochial Foundation was created by Act of Parliament to address the needs of those people, initially with a few thousand pounds. Today it has annual donations of around £10 million. For the past 20 years I have been a trustee of that body, as a Crown nominee, and earlier this year I became chairman. Naturally our centenary history, an eminently readable account by Victor Belcher—I commend that history—was required study. Comparing that history with the thrust of the Government paper, one is struck by an evident paradox. In the late 19th century and the first half of the 20th century, as my noble friend Lord Elton has remarked, the voluntary sector reacted to crying perceived needs not then regarded as the concern of central or local government, and addressed itself directly to meeting them. As the provision of social security and basic health came to be assumed by government, the role of the voluntary sector remained to identify new needs and often to get those needs adopted for public funding.
Now we have an apparent contradiction—in part at least. The question I ventilate here is whether the cart may now be put before the horse. The Government paper proclaims that dedicated individuals and groups can act flexibly and that they can spot and fill gaps in provision quickly. That is a good observation as that is the traditional role of those groups and they have performed it well. However, one detects some role reversal here. If voluntary organisations are to be service deliverers, their funding base has to be secure. However, it is becoming less and less secure.
A climate of uncertainty and even confusion exists. The Department of Health, for example, has announced it will now limit its Section 64 grants for core costs to five years. Traditionally trusts have started new work, so what do voluntary organisations now do? They are encouraged to look to "other sources". What are those other sources? Other sources can only mean local authorities, companies, individual donations or charitable trusts. In the case of the nearly 2,000 organisations funded by the City Parochial Foundation and the Trust for London in the past five years, the money raised from companies and

247
donations was negligible. Local authorities increasingly were unable to pick up trust funding. Indeed some authorities warned us not to encourage voluntary endeavour because they could not take it on. Therefore we are forced increasingly to become core funders ourselves. It is this role reversal that I question.
On the one hand, it is hardly likely that government, local or central, will go out looking for problems, the amelioration of which is bound to cost a substantial sum of money, in the way that the voluntary sector does. On the other hand, when the voluntary sector in its traditional role identifies such urgent needs, or indeed if these needs emerge from projects which may be core funded by government departments, there are realistically no other sources than government to pick up substantial costs. In the present climate for fund-raising, charities are less rather than more able to respond in real terms. I believe that that question needs to be thought through more than it appears to have been thought through so far.
That brings me to the matter of the Trust for London, a sister body to the City Parochial Foundation. Again I declare an interest as chairman of the trustees. The Trust for London made its first grants in 1988. On the initiative of my honourable friend Sir George Young, its £10 million endowment came from the proceeds of asset disposal on winding up the GLC. Wonders have been performed—we have a report to support this—using the annual income of around £700,000 for the whole of London in responding to needs and inspiring action at the micro-level in the very poorest districts and communities in London, often with ethnic minorities. The benefit is out of all proportion to the cost, as illustrated in the report.
How can that good work be extended? It can only be done by an increase in the endowment. I am in touch with my honourable friend Sir George Young, who is now happily back at the Department of the Environment, to see how this might be achieved. Clearly it makes sense to apply the proceeds of surplus asset disposals in London to the lasting benefit of poor Londoners by adding to a capital fund rather than distributing to boroughs in very temporary relief of revenue constraints.
I conclude with a brief reference to a subject that was flagged by my noble friend Lord Elton and that is the burden of VAT. I cannot quantify that burden as no cost can be put on the use or misuse of the time of volunteers. I draw my information in part from the Institute of Export. I start from the position that the institute has to charge VAT on all its subscriptions. After years of argument with Customs and Excise, we have now established that 80 per cent. of subscriptions can be related to the cost of providing a journal and handbook to members and thus can be zero-rated. We do not ask to be exempt, thus losing offset on VAT inputs, but our present partially exempt status is an administrative nightmare. Every quarter we must undertake some two days' work on detailed analysis. Our director general has to sign a daunting declaration, any error in which could lead to a heavy
248
penalty. The end result is the repayment of a few hundred pounds. That sum is probably much less than the cost of calculation. One can multiply that cost across the country and contrast that attitude with the helpful attitude of the Inland Revenue towards charities.
I appreciate that VAT is a matter not entirely within our national control. I suspect that there may be some definitional overlap between this matter and the draft directive on freedom of information, to which my noble friend Lord Elton referred, as to whether the definition of companies in Article 58 of the European Community treaty extends to non-profit organisations and thence whether UK charities fall within its scope. Some relief from this VAT burden not only in cash terms but in terms of relieving those who administer charities, and who are seldom accountants, would be of incalculable help to the voluntary sector.
7.27 p.m.
Baroness Masham of Ilton: My Lords, in his foreword to the document, the Prime Minister says:
"I believe that we in Britain can he proud that voluntary action is such a distinctive feature of our country".
I agree that we have many excellent voluntary organisations carrying out valuable work throughout the country. However, I read in some of the literature pertaining to this debate that the UK is the only country in Western Europe that asks no service from its young people. In Germany over 100,000 young people are engaged in service in hospitals, children's homes and old people's homes. In France, 16,000 serve in schools, medical centres and in economic development. A further 7,000 work in civilian defence, that is the fire and ambulance services, at home and on standby, to help tackle natural disasters in the rest of the world. Some 4,000 more work in disadvantaged neighbourhoods tutoring, providing after-school care and beautifying blighted environments.
Last Thursday I spent the day at Deerbolt Young Offenders' Institution in County Durham. The Catholic chaplain had organised a seminar with youth workers and some of the inmates so that the young people who had got into trouble could explore ways, with the youth workers, of how best they could be helped when they returned to their communities on being discharged. Many of the youth workers had never been inside a penal institution. Some were overawed when they visited the Legs—the units where the boys are accommodated—and the block.
Many of the offenders said when they left the institution that they became bored, were hassled by the police and then re-offended. They felt if they had a telephone number and a place where they could contact the youth workers, those youth workers could perhaps keep them on the right road and help them obtain an interesting occupation even if there was no employment to be found. They put employment at the top of their list of things to help them keep out of trouble. Co-operation between the statutory services and the voluntary sector, as the report rightly says, is

249
so vital. The youth workers felt co-operation from the probation service was vital if they were to be able to help these young offenders on the latters' discharge.
At Deerbolt the boys do voluntary work in the community, and that is excellent. The same is true of many other establishments. But there are thousands of young people getting into trouble. It would be far better for society if they did not offend in the first place. Should we not be looking at France and Germany, which seem to have an organised youth service? With the reorganisation of care in the community, does the Minister think that there is any hope of organising a scheme to give the multitude of young people something useful and productive to do? Would it not help care in the community if we had an organised community youth service, lasting for say a year or 18 months.
It is good to hear of voluntary work being done in prisons. Much talent is being locked up, and it is good to hear of Braille transcription being undertaken in prison to help the blind, and of other projects. I hope that the Minister will encourage such projects throughout the prison service. Helping less fortunate people is one of the best ways of rehabilitating prisoners.
I should like to give your Lordships an example from one of the voluntary organisations—and its funding—with which I am involved, the Spinal Injuries Association. This is a self-help group of people with spinal injuries who work to support the members, who have back and neck injuries, due to injury or illness, which have resulted in paralysis. We give information, provide holiday facilities, a counselling service, a legal advice service, and an emergency care service under which trained carers may go into a member's home for up to two weeks. We campaign for the correct treatment. We have produced a book called So You're Paralysed which has been translated into many languages and several other booklets on many different aspects of paraplegia.
Two of our specially adapted narrow boats were funded by Coral Racing and the other by the Young Farmers. Fund raising is an essential part of survival and is necessary in order for us to pay our excellent staff. We are supported by the racing industry, Heinz, British Coal, Bass and many others, including our members. The Bingo Association of Great Britain has raised £300,000 for the Spinal Injuries Association.
We have run an awareness campaign to try to prevent neck injuries being caused by diving. That has been sponsored by Barclays Bank. We are involved with an independent living project so that people who have become paralysed can be helped to plan their lives. That project is an example of the National Health Service—Stoke Mandeville Hospital—working with a voluntary organisation—the Spinal Injuries Association. It is sponsored by Rowntree, and it is run by an independent living adviser.
Voluntary organisations cannot sit back. They have to go out and find sponsors. In these difficult times of economic distress, voluntary organisations are very concerned when companies have to withdraw their support.
250
There are many people working in so many different ways to provide help. Many organisations have found that it is not easy having paid and unpaid staff working together, but one only has to look at the London Lighthouse, an AIDS project, to see how well that can work. The important factor is that volunteers should be given enough support and organisation so that they feel confident.
If care in the community is to be successful, the community needs training and encouragement to accept some of the people coming out of institutional care. If government departments do not monitor what is happening and give support when needed there will be a monumental muddle; but voluntary organisations must not lose their freedom.
I now have one minute in which to thank the noble Lord, Lord Elton, for this very important and interesting debate and to congratulate the maiden speaker. I should also like to point out that next week is European Drug Awareness Week and that there are many things which need to be done in the voluntary sector. I hope that the Home Office and other government departments will look very carefully at the continuation of voluntary organisations. Otherwise, some of them will have to close down.
7.34 p.m.
Lord Alexander of Weedon: My Lords, this debate is surely timely, for the demands on the voluntary sector have never been greater. I should like to refer in a moment or two to Crisis, a leading charity for the homeless with which I have a personal involvement. But there is no doubt as to the general picture. Demands on the voluntary sector are continuing to rise. Social needs are bound to grow during a long and deep recession, but the ability of our society to respond by contributing money is diminishing. We all know how contribution levels grew during the 1980s but we now have a situation, according to the publication Charity Trends 1992, in which the level of corporate giving is diminishing in real terms, the level of individual giving is static, and the level of statutory contributions is also reducing. That means that there is bound to be a demand for money which cannot at present be met.
My own employer, NatWest, contributed close to £12 million to charitable causes in 1991. That record compares well enough with other large businesses, but we receive an enormous number of requests, no fewer than 10,000 so far this year. So we have to focus most of our support on financial education and financial literacy. In that way we can use money, skills and people in areas to which we can bring our own special strengths. However, the sad fact is that neither we nor other companies can anything like match the demands that people seek to make on us.
All of that highlights the importance of a number of points made in the publication The Individual and the Community. It is very reassuring that the Government do not see the voluntary sector as a cheap alternative to statutory bodies. Inevitably the voluntary sector sometimes feels that its actions may be regarded by the Government as a substitute for the discharge of those responsibilities which should properly fall upon the

251
state. It is important that the voluntary sector should be seen quite firmly as supplementing, not replacing, the responsibilities of the Government.
It is also timely that the report stresses the importance of partnership. With increasing demands and considerable restraints, it is vital that the voluntary sector and the statutory authorities should work together and harness their resources efficiently. Voluntary agencies and companies working in close partnership with statutory authorities can also help those authorities to monitor the effectiveness with which they use their own resources. I see that, too, as important.
Perhaps I may now mention briefly the work of Crisis, which was established some 25 years ago as Crisis at Christmas to help meet the needs of homeless people over the Christmas period. Since 1972 it has run the Open Christmas shelter, which last year provided accommodation and food for some 2,000 people in London over the Christmas period. But the homeless are with us all the year round, not just at Christmas. I am sorry that we shall not hear from my noble friend Lady Macleod who, with her late husband, was an inspiration for the creation of Crisis and remains closely involved with our work.
The work of Crisis has grown so that now it acts as a major agency for attracting funds which help to contribute to the financing of some 260 projects across the United Kingdom. Crisis distributed about £2 million last year, in some cases supplementing grants given by statutory authorities. That is one example of funding in partnership. Our responsibility to those projects is all the more sobering and important because of the move away from local authority core funding. That undoubtedly has the effect, as my noble friend Lord Elton said, of lessening stability and the ability of projects to plan on a sound basis.
Another example of partnership with statutory authorities was the cold weather shelter which Crisis ran with funding from the Department of the Environment. An unkempt building in Tooley Street, just south of the river from here, was transformed by 30 volunteers, working round the clock, into a short-stay shelter for the homeless. Crisis ran the hostel, largely through volunteers. It accommodated 300 people, 100 of whom were subsequently rehoused. That is most important. Short-stay shelter is no substitute for permanent housing, and co-ordination between the various agencies in this area is vital.
I should like to pay tribute to the Minister for Housing, Sir George Young, who in spite of the constraints on the funds available to him seeks to understand and ameliorate the problems of homelessness. His constructive and sympathetic approach is a great asset. We hope that he will support the cold weather initiatives again this year. It will undoubtedly be much needed.
Crisis has diverse sources of funding: from the widow who gives £5, to schoolchildren who do a sponsored pilgrimage from Canterbury to London over an autumn weekend, and large companies that help with donations. But Crisis is still able to fund only about half the projects which apply for assistance. I quote Crisis as an example of a voluntary
252
organisation that seeks to use its talents flexibly. Those talents are largely the immense goodwill of many dedicated individuals whom we are able to bring together to help supplement what the Government do. I am bound to say that in some cases it substitutes its work for work which arguably in a perfect society the Government should be able to do.
Finally, perhaps I may stress how important it is that at a time of increased demand and diminishing resources the work of the voluntary sector should be well focused and cost effective. That drive for efficiency also means that charities need an effective management team backed by trustees who take their responsibilities as seriously as if they were directors of companies. That need is reinforced by the new Charities Act. I strongly believe that the voluntary sector has to be truly accountable if it is to command the commitment of individuals and volunteers and continue to make an enhanced contribution to improving social provision. I welcome the publication that we are debating and the opportunity given to us by my noble friend to talk upon this important topic.
7.42 p.m.
Lord Judd: My Lords, I join those who have thanked the noble Lord, Lord Elton, for giving us this opportunity for today's debate. It has gone to the heart of the quality of our society. I join also in congratulating the noble Lord, Lord Plant, on a distinguished, reflective and informed maiden speech in which he brought to bear his considerable learning and experience. It augurs well for what he will bring to the House in the years ahead.
In his introduction the noble Lord, Lord Elton, paid tribute both to the volunteers and to the staff of voluntary agencies. I am glad because I believe it is that unique combination that is very much the key to the genius of the voluntary sector. As noble Lords on all sides of the House will know, I have had the good fortune to spend a good deal of my working life in the charitable and voluntary sphere. One of the things I have come to admire is the professionalism of volunteers who are unwilling to put up with second best. The number of hours they spend on training and preparation to do their work effectively indicates how seriously they take the task in hand. We congratulate them on their professionalism, but what is very often overlooked is the voluntary effort of so many of the professionals. Not only do they take small remuneration; often they work hours way beyond what would normally be regarded as the call of duty. Having worked in that sphere I have come to recognise that a very special asset is the collective calibre and talent in the voluntary sector in the United Kingdom.
If we are to talk of the staff and volunteers and their relationship with government I hope we will not overlook the compassion, concern and generosity of the millions of spontaneous donors who make possible so much of the charitable work in this country. They donate not only money but frequently goods. If we are taking this issue seriously tonight I hope that one of the messages we send to those in government with responsibility for financial and tax affairs is that we must come to grips with the current

253
threat from Brussels to introduce VAT on voluntary effort. The prospect of VAT being imposed on donated goods is a nightmare. The value added to donated goods is the voluntary effort that goes into raising resources for charitable work. To see charitable activity of that kind taxed is totally unacceptable.
Both the noble Lord, Lord Elton, and the noble Lord, Lord Plant, spoke of the interface between the official and voluntary services. One point we have been making in various ways in the debate is that if we will the end we must will the means. If there is a significant place for voluntary organisations in our society the state must ensure that they are provided with the resources to take on those responsibilities. As the noble Lord, Lord Elton, said, it is important in that context to watch what is said tomorrow with some care and attention.
Sometimes people have commented to me on the potentially close relationship between voluntary organisations, charities and the public sector. I am always worried when I hear that. I believe deeply in the role played by public administration. I want good public services and public administration in the society in which I live, but my view is that the role of voluntary agencies is in some ways much closer to the role of the private sector. The voluntary agencies are entrepreneurs but entrepreneurs of ideas, experimentation and initiatives in the interests of the disadvantaged in our society. It is that originality that we have to preserve.
One issue that I feel I must deal with is the prospect of a state lottery. I have never been quite sure where a banana republic begins, but I am fearful about a society that becomes unduly dependent on a state lottery for its cultural, voluntary and similar aspects of national life. It is a matter of balance. One of the things that worries people in the voluntary sector is the indication that a state lottery will attract money that would otherwise go to the voluntary sector and so penalise the voluntary sector. We need to think very hard about that.
Beyond that general point lies the more specific anxiety that at a time when we are talking about the importance of voluntary effort, and the initiative, spontaneity and decentralisation which should be a characteristic of voluntary activities, we will see a move towards centralisation as we set up cumbersome state apparatus to decide how the money raised in the lottery is allocated and where. I say to those making these plans that if we take seriously the spirit of voluntarism the potential contrast is quite sick. It is very important that those responsible take seriously the creative and original dimension of voluntary activities and, in working out how money is allocated, preserve the essence of voluntary effort and not just make it an adjunct of public administration.
7.49 p.m.
Lord Westbury: My Lords, I should like to thank my noble friend Lord Elton for introducing the debate and illustrate one or two points made by him. St. John Ambulance, with whom I am connected, has some
254
30,000 adult members and a further 25,000 cadets. Together they give about 4 million hours a year doing voluntary work on public duties. Eighty per cent. of public events are covered by the voluntary services of St. John Ambulance and many of them, like football, could not legally take place without first-aid cover.
Since we are now in the football and rugby season, it is appropriate to illustrate the voluntary sector's contribution to those major spectator sports. St. John Ambulance asks London clubs for a minimum donation of £11.60 per 1,000 spectators plus £75 for an ambulance and £120 if a mobile first aid unit is required. The figure is slightly lower for other clubs, and obviously some organisations for which we provide cover are able to be more generous than others. Donations from event organisers, therefore, do no more than cover running costs.
St. John Ambulance relies on its many loyal supporters to raise the balance of funds required. It costs £350 to train each volunteer. A modern ambulance costs £40,000 and a mobile unit is £60,000. Even basic first aid equipment, such as dressings, stretchers, etc., are provided by fund raising. A relatively small crowd can require about four St. John personnel. However the organisation will be providing four ambulances and 60 personnel for Saturday's match at Twickenham. A similar level of service provided by the NHS would be vastly more expensive; for example, whereas St. John Ambulance asks for a donation of £75 for the use of an ambulance, the charge for the use of an NHS ambulance on similar duties is at least £200. It is interesting to note too that each policeman on duty will cost the organiser of the event £85. Similar comparisons are easily provided for other sports such as cricket, tennis, racing, and for public events such as major agricultural shows, festivals, concerts, and so on.
Community care is an important field for co-operation between voluntary organisations and the statutory authorities. A study in 1985 by the Office of Population Censuses and Surveys identified around 6 million carers in Britain. The Family Policy Studies Centre has estimated that the cost of the service currently provided by those carers, even using a very conservative figure of £4 an hour, would be between £15 billion and £24 billion a year. The Department of Health has even run an experimental scheme to look at new ways in which the voluntary sector could provide support for carers. That is ample acknowledgement of the tremendous need.
Voluntary care covers many fields. I take one for my example: the care of older people. We live in an aging society and the number of people aged 85 years and over is rising dramatically. Fifty-one per cent. of carers are aged 45 to 64 years and 28 per cent. are over 64 years of age. The majority devote at least 50 hours a week to care. Many suffer considerable strain under the burden and many themselves are not fit. It is important that adequate provision is made to identify and support those often isolated members of the community.
For demographic and social reasons there is a decreasing number of able people available to meet the needs of the increasing number of carers, and I do

255
not refer only to those engaged with the elderly. It is a problem that needs further study. Increasing numbers of women now work either full or part-time. Families move to different parts of the country either because of, or in search of, employment. Thus the network of families in communities breaks down, often leaving isolated those in need of care.
An illustration of co-operation between the voluntary and statutory sector can be found in a charity called Counsel and Care, which provides nationwide an advice and information service for all older people and their carers. Over the years it has built up a comprehensive database of information, to the extent that one-third of the inquiries it receives comes from the social services department itself.
It is imperative that the tradition of offering service to others is nourished and maintained. There are many voluntary bodies which seek to encourage people, particularly the young, to offer their services to others. It is vital work to help ensure that there are willing, volunteer carers for the future. St. John Ambulance has chosen to rise to that challenge and will be launching a major Care in the Community initiative in April next year. However, there is a point at which such generosity of spirit and willingness to serve is not enough of itself, and I call upon Her Majesty's Government to consider carefully setting aside resources and funding to enable the voluntary agencies to provide their services in the efficient and cost effective way that those agencies and Her Majesty's Government would wish.
7.55 p.m.
Viscount Brentford: My Lords, I should like to thank my noble friend Lord Elton for so eloquently introducing this subject and leading us into what has been a most interesting and helpful debate. I should also like warmly to congratulate the noble Lord, Lord Plant of Highfield, on his admirable address. We look forward to hearing much more from such an extremely able addition to your Lordships' House.
The voluntary sector is very wide indeed. I wondered, when thinking about this debate earlier, whether it included your Lordships' House, bearing in mind the remuneration that noble Lords receive. I wondered also whether it spreads across the road to the Synod of the Church of England which met in Church House this afternoon and very narrowly gave approval to the ordination of women. I am not quite sure whether that is also part of the voluntary sector.
The theme that I should like to adopt from the Home Office report, which has been mentioned by my noble friend Lord Elton and other noble Lords, is that of partnership. I read a sentence from page 7 of the report:
"The Government … seeks a free, vigorous and creative partnership with the voluntary sector, in which both parties can make their distinctive and valuable contributions".
I shall speak in particular on the theme of partnership between the voluntary sector and local authorities.
I first pick up on what my noble friend Lord Elton said about the risk of contracting, about which I am also slightly anxious. It can favour larger organisations to the detriment of some of the smaller ones
256
working in the field. I have the privilege to be president of an organisation called the Field Lane Foundation which, among other things, provides residential homes for the elderly. Currently there is tension between commercial efficiency and the low costs that the local authority (with which in every case we have very good relationships) quite rightly look for when they purchase a service. There is a tension between efficiency and the desire of the organisation to maintain its own purpose and aims. Following what other noble Lords have said, an example might be the amount of time that a carer is able to spend with a client.
Another aspect of contracting is the competitive spirit that is encouraged by offering contracts rather than grants. I am told that experience in the USA, in documents published by the NCVO, suggests that that can be very damaging to the nature of voluntary work and may reduce the incentive and opportunity for people to become involved. It is right that voluntary organisations should be both professional and efficient. Contracting needs to be watched.
The second need of the voluntary sector is stability at the present time. Again, the point about length of term of contracts was validly made by my noble friend Lord Elton. Voluntary organisations need stability and certainty to plan the services that they offer. They may want to expand, and develop and offer services to the local authority. They need to have stability. Voluntary organisations do not have large built-in reserves to tide them over changes. Therefore the whole matter needs to be thought through and planned carefully so that the voluntary sector knows its position.
I touch on the question of research, which is needed by many voluntary organisations to ascertain the demand for their services. It can be expensive and time-consuming for them. I suggest that local authorities should provide a comprehensive and freely available research service within their areas detailing the amount and location of need. That would save much time, energy and expense and it would enhance the partnership between voluntary organisations and the local authorities.
Finally, I refer to the partnership between different voluntary groups. I have encouraged Field Lane Foundation and other voluntary organisations with which I work to meet with other voluntary organisations to see how they can work together in particular in the community field. Can they help each other? Can they provide services together? That is another aspect of partnership which local authorities can encourage in their area. If local authorities can assist and support voluntary groups to work together it will benefit the outworking that everyone wants to see. It will be valuable in the community care field after next April. The theme of partnership which runs through the report needs to be expanded and strengthened at every level of voluntary work.
8.1 p.m.
Baroness Seear: My Lords, it is no criticism of the speech by the noble Viscount, Lord Brentford, but it is almost a cliche to say that what we see is partnership

257
between the statutory, voluntary and private sectors. If there is to be real partnership, there has to be trust and understanding on both sides as to what is needed. I wish to underline as heavily as I can what the noble Lord, Lord Elton, and the noble Viscount, Lord Brentford, said, about the need for reliability and stability in the arrangements for funding.
The noble Lord, Lord Elton, said that contracting is not always a satisfactory substitute for core funding. Every voluntary organisation that I know of always has difficulty in raising the money for core funding. Of course no one supports excessive administrative overheads. But one cannot mount any organisation without some office at the centre; and for that core funding is required.
In order to raise money from public authorities for core funding, the practice is to negotiate for a year ahead. I ask noble Lords to consider in more detail what that entails. The voluntary body has to make its plans. It takes time, and time is money. It has to have a date to see the public authority, the government department. That can involve a considerable wait. It has to negotiate with the government department. It has then to wait—sometimes for weeks—to hear where it stands. That body is then told that it has or has not been given a grant. Let us assume that it has been given a grant. By the time that money is in the bank, it has to start the business all over again. That is time consuming and extremely wasteful. The people who undertake such negotiations ought to be engaged on the professional work of running the organisation, and they are not. They are being deflected into unnecessary activities. I ask the noble Earl to take this question seriously.
Is it possible to have three-year contracts which will roll over? Yes, there will have to be reports at the end of each year, but it is stability that one needs. How can one run any business, large or small, from a sweet shop to ICI, unless one can rely on some stability on funding: what the money will be and how the funding will come in. Of course there will be variations. I implore the noble Earl, Lord Ferrers, to take the point seriously. Stability and longer-term funding are necessary so that the voluntary bodies do not have to waste so much time redoing the claims that they make and in the planning, talking, preparations, discussions and arguments.
Other factors arise in the negotiations. It would be nice if we could occasionally have the same people to deal with. I refer to the speed with which officials change. One meets with new officials whose knowledge of the subject is not always as great as it might be. An education process has to be gone through before the official understands what one is talking about. Unless one is lucky, by the next meeting, he or she has moved off. It would be nice to have some specialisation within the department so that the people with whom we deal are familiar with the subject and we could rely on them. We attain that relationship at times, but there is so much change that one has to keep starting the process all over again.
Of course we would all like to deal with only one government department. Government departments
258
are always telling us to get our act together. Would it not be possible for government departments to get their act together, so that we could deal with several departments at one go and not have to troop around from one office to another achieving a little support here and there, and then realising that, on occasions, one department is playing another one off. We are always told at the end of the day, "That will be all right but there is always the Treasury". Of course we never get anywhere near the Treasury, but departments will always use that reason as the excuse why one cannot receive what one thinks has been promised.
So much for relationships with government departments. That would help life a great deal. However, there is a bigger problem. We have to be careful that we do not destroy the very heart of voluntary organisations. Why are they valuable? They are valuable for their independence, their ability to initiate, and to stand up to governments and to tell governments where to get off. Not infrequently that is a very necessary job. If a voluntary body is 90 per cent. dependent on public money, how voluntary will it remain over the years? The important issues will never be raised because they will make it too difficult when it comes to negotiations on funding.
We need to look urgently at the future of voluntary bodies in this country. I believe that we need to have, as they have in the United States, a few powerful, well financed funds, trusts or foundations which are completely independent of government so that there are other sources to which to go. At present a number of private funds and trusts are listed in a thick book which costs £50. If we could have countervailing financing—I know that this is a long way off—away from government departments, then the independence of the voluntary sector could he maintained. If we do not have such financing, bit by bit the voluntary sector will become little more than a limb of Government administration and that would be a great loss.
I believe that a committee of your Lordships' House could with great advantage examine what ought to be done about the long-term development of the voluntary sector in this country. It is the kind of subject that we are good at dealing with. We have a great deal of experience in this Chamber. We know the value of government departments and the need for collaboration. But we also know the risks. Will the noble Earl give thought as to whether a committee of noble Lords might consider where the voluntary sector is going. Is it going in the right direction? If not, how can it be saved?
8.8 p.m.
Lord Richard: My Lords, it has been a fascinating and useful debate. I congratulate the noble Lord, Lord Elton, on bringing the subject before the House. It is one of those subjects which this House is well qualified to discuss. Everyone in the Chamber has been involved with the voluntary sector in some shape or form. The amount of experience and expertise displayed from all Benches within the past few hours has been remarkable.

259
The debate has also been remarkable for the maiden speech of my noble friend Lord Plant of Highfield. It was a speech of high quality, if I may respectfully and humbly say so. It was clearly well thought out. It had considerable intellectual content. I look forward to a little Hegelian dialectic between my noble friend Lord Plant and the noble Lord, Lord Joseph, as to precisely where one draws the line between the activities of the state and of the voluntary sector. It is a prospect which I relish. I sincerely congratulate my noble friend upon the power of his speech. All who heard it will look forward to the opportunity of hearing him again.
The debate has provided us with an opportunity of drawing attention yet again to the valuable work of Britain's voluntary agencies. We also welcome the Home Office report which shows that the Government's attitude towards the voluntary sector is now more positive. This country has a proud tradition of providing help to those in need but lately the voluntary agencies have assumed an even greater role.
As a number of noble Lords have said, the other side of the coin is that many charities are beginning to believe that the Government are asking them to step into the role of providing as charities services which should be available to citizens as of right. For example, in the implementation of the Children Act the Department of Health has provided no less than £250,000 for training for the whole of the voluntary sector. I am told that Barnardo's alone spent £1.6 million in 1991–92 retraining its staff for that purpose. It is that type of relationship which I find disturbing. It exists not only in the example which I have given but in many other sectors.
We in this country have one of the largest voluntary sectors in the world. The noble Lord, Lord Carr of Hadley, used the word "awesome". I note that it is the noble Lord's birthday today; perhaps he will allow me to express our congratulations. The noble Lord used the word "awesome" in looking at the whole of the voluntary sector. The word is extraordinary and not inappropriate because the sight is awesome. The Charities Aid Foundation states that in 1990 171,434 charities were registered with the Charity Commission. Their total income is between £16 billion and £18 billion. In terms of employment the sector is 80 per cent. larger than the motor industry and the same size as the energy and water supply industries. The voluntary sector plays a most important part in our national life and we must safeguard its future.
There is evidence, however, that as the recession has deepened so the total income of all charities has fallen in real terms. That view was expressed by many speakers. The Charities Aid Foundation has found that during the past three years donations from large companies have declined and legacies to the top 400 charities have fallen. At the same time it is estimated that government grants fell by an average 5.5 per cent. per year between 1985 and 1990. While the amount the Government are willing to spend on fees may have increased, grants, and especially core funding grants, seem to be increasingly threatened. I strongly agree with what was said tonight about the importance of core funding. However good the objectives of the
260
organisation may be, however desirable and effective it may be, it cannot achieve them unless its core funding is guaranteed somehow or another.
I am concerned also that one result of the present economic background is that more charities are having to draw on their reserves in order to meet spending commitments. Barnardo's and the Spastics Society are in that position. Both have warned, rightly and inevitably, that that is only an interim position. They cannot continue to eat into their reserves merely to preserve the level of their present activities. Barnardo's is also faced with the position that the value of its assets is decreasing due to property devaluations. The effect of the recession is therefore proving to be extremely disquieting.
We on these Benches welcome the work of the Home Office voluntary service unit. It has made great strides in its liaison with, and its support for, the voluntary sector. I hope that tonight the Minister will comment on its future and the expansion of the unit's work.
As the noble Baroness, Lady Seear, said, there is a need for more co-ordination between government departments as regards voluntary agencies. On the one hand the Department of Health urges local authorities to support voluntary organisations in order to ensure the success of community care and child protection. On the other hand the Treasury and the Department of the Environment are squeezing local authority budgets and local authority expenditure. The left hand and the right hand need to work more closely together and move more in the same general direction.
I do not oppose a contract culture per se. That is a somewhat inelegant phrase but it appears to be part of the vocabulary used in this area of our national life. It can derive more certainty as contracts are usually for longer than a year but I wish to echo what I have heard from many speakers tonight. We do not want contracts to replace a commitment to core funding and we do not want voluntary organisations risking their independence to experiment and to be radical, as the noble Lord, Lord Joseph, wanted. They should be independent from government and from local authorities. Will a ruling be made soon on the question of VAT being chargeable on contracts when it is not chargeable on grants?
While we welcome the fine words of the Government on the high value of the voluntary sector —indeed, we echo them —we are concerned lest that commitment remains verbal only. The voluntary sector needs a number of things: it needs funding; it needs recognition of its valuable role in providing services which otherwise would not be provided; it needs VAT exemptions for local authority contracts; and, most of all, the Government must make it clear that they respect the independence of the voluntary sector. Contracts should not be awarded only to those charities which the Government find acceptable and perhaps acquiescent. Contracts should be awarded also, and perhaps in particular, to those which are more critical of government policies. Core funding must be safeguarded as it is not at present.
8.17 p.m.
Earl Ferrers: My Lords, the House is grateful to my noble friend Lord Elton for introducing the subject for debate. His knowledge of, and interest in, so many parts of the charitable and voluntary sphere are well known. Although the debate is described as a "short" debate it has enlisted a formidable array of knowledgeable speakers. It has also enlisted an equally formidable array of noble Lords who, for one reason or another, said that they would not be able to stay until the end of the debate. We understand those reasons. It only remains for me to commiserate with those noble Lords who do not have a pressing engagement at eight o'clock tonight. I am grateful to those who have resisted the temptation to leave and who have remained.
The debate has been notable for the maiden speech of the noble Lord, Lord Plant of Highfield. His speech was bound to be brief according to the rules but that did not make it any the less attractive. It was an interesting and knowledgeable speech. The noble Lord said that he did not believe that he had any great qualifications for taking part in the debate because his qualities lie in another field. All I can say is that the proof of the pudding was in the eating and it was very tasty.
The debate was also notable because one of the participants has a birthday today—I refer to my noble friend Lord Carr of Hadley. I am surprised that he has resisted the temptation to have another engagement but I hope that after the end of the debate he will enjoy an engagement in full measure.
The voluntary sector does not, as your Lordships well know, have quite the uniformity which its name suggests. It has always struck me what a remarkably diverse collection of organisations it is. No one knows, oddly enough, exactly what is its size. It probably consists of something like half a million voluntary organisations of all shapes and sizes. Not all of them are well-established charities with household names. Not all of them are run along strict business lines. Some of them are tiny organisations with little money, whose success depends upon a few local enthusiasts working hard for no reward at all. The noble Lord, Lord Henderson, referred to them as the vital little battalions of the voluntary world. When that kaleidoscope of varied organisations is lumped together—if one can do such a thing with a kaleidoscope—they represent a rich seam of British national life. Those voluntary bodies contribute enormously to the totality of life, and of caring, in the country as a whole. Our lives would all be considerably the poorer without them.
One merely has to take one example of many—and I would take the work of that remarkable man, the late Lord Cheshire. The Cheshire Foundation, which looks after the incurably sick, took over my old home at Staunton Harold in Leicestershire, nearly 40 years ago now, and I had the privilege of being a trustee of his foundation for some 15 or so years. I shall never forget the first trustees' meeting which I attended in 1955. It was decided that there would be no more Cheshire Homes because there were enough and the organisation would become too large. There were six.
262
There are now 83 in the United Kingdom and 180 abroad in 48 countries. No one can know how many people's lives have been affected, alleviated or transformed by the work of the late Lord Cheshire and his foundation—and one need not have been a patient to be so affected. I take this organisation as only one example of one particular field of voluntary work. However, it is certain that people's lives have been helped by voluntary effort in a way which would have been impossible had they been left solely to the care of the state. That is not a reflection on the state, it is merely a fact.
I am also glad that our voluntary bodies are playing an important role in spreading the idea of voluntary activity beyond our shores, to the new democracies in Eastern and Central Europe.
My noble friend Lord Elton referred in that connection to the draft EC data protection legislation. The Government share charities' anxieties about the Commission's first draft of the data protection directive. That would have severely hampered fund raising by charities. The Commission issued a redraft on 15th October. There have been a number of consultations. The preliminary indications are that the redraft goes a long way towards meeting the anxieties of charities. The Government will continue to work towards seeking a directive which is as close as possible to United Kingdom law.
The Government are, and will remain, committed to supporting and to promoting volunteering in the community. That support is not limited to words of encouragement. Between 1979–80 and 1990–91, the level of direct support to voluntary organisations rose by 150 per cent. in real terms. It now stands at £472 million a year.
Tax reliefs to charities, and charitable giving, are now worth the quite considerable sum of over £900 million a year. Excluding that tax relief, in all the Government are supporting the sector annually to the tune of £2,600 million. That is a substantial amount by all, or any, standards.
In today's debate there have been understandable cries for more money or for better distribution of funds. My noble friend Lord Joseph referred to inadequate families and the fact that, for whatever reason, they need help. He said that the problems of such families often contributed towards encouraging criminality, and he was quite right about that. On a similar subject, my noble friend Lord Carr said that we should look at the work of the voluntary sector to see whether or not that keeps people away from crime. He said that we should look at the figures and, if that is the case, we should back the voluntary agencies. He made an extremely persuasive speech. We do look at the figures. There are endlessly good arguments for spending more money but we must set some parameters on expenditure. We spend a great deal. It is important to see that what we spend is spent wisely and properly.
The noble Lord, Lord Judd, referred to a national lottery. I realise the fears which the voluntary sector has on that. Of course, charitable bodies will be an important category of recipient of lottery proceeds. Money from the lottery will not replace conventional

263
public expenditure. Consideration is being given to amending existing legislation to protect the small lotteries from which many organisations derive their income.
Some voluntary agencies which are involved in providing aid and relief, such as Oxfam or Save the Children, are household names in almost every country. They provide swift and effective assistance when disasters strike, but they also make a unique contribution to improving the conditions of the poorest communities. Their contribution is so valuable that the Overseas Development Administration provides those organisations, and others, with substantial amounts of money. In 1990–91 over £88 million was given to non-governmental agencies. The final figure for 1991–92 is likely to be well over £100 million.
Volunteer agencies, the largest of which is Voluntary Service Overseas, now account for about half of all the personnel who are working overseas and assisted by the Overseas Development Administration. The work of the voluntary agencies is essential in the developing world. Their courage and fortitude, working in places like Sudan and Somalia, are outstanding and these non-governmental bodies are often the best local ambassadors for Britain that we could wish to have.
It is important, too, to have the involvement of the business sector. Many businesses give very generous support to voluntary organisations, by cash donations and in more practical ways. There is also much that they can do to promote volunteering. We have, therefore, been supporting the Employee Volunteering Initiative. That is designed to promote the practice of companies encouraging their employees to become involved in local projects.
Our leading national charities and voluntary organisations are increasingly prepared and equipped to provide services throughout the country. They are also prepared to take advantage of the growth of what is often termed—and we have heard it so often this evening—the "contract culture". Developments in the contract field are sometimes viewed with a certain amount of unease in case the drive for efficiency, and compliance with contracts, might undermine the traditionally independent voice of the sector. I understand that anxiety, and that is one reason why we have emphasised the need for voluntary organisations not to become totally dependent upon public funds.
My noble friend Lord Elton said that he objected to the jargon on contract culture and asked me to pass on his objections and his other strictures on the subject to my honourable friend Mr. Jack. I shall do that. I hate jargon in any form and I shall be content to pass on the remarks of my noble friend.
My noble friend referred also to the withdrawal or change from core funding. The noble Baroness, Lady Fisher, said that funding needs to be constant in order that people know where they stand. We recognise that core funding is essential to some aspects of the work of many voluntary bodies. We remain committed to that concept. However, we cannot merely write out a cheque and leave it at that. We must satisfy ourselves
264
that the funding is used cost effectively. That has been, and will remain, the concern of the voluntary services unit of the Home Office.
On a similar tack, my noble friend Lord Alexander of Weedon said that core funding lessened the ability of organisations to know where they stand. That is true. However, there are advantages in contract culture. There is room for both. It is important to decide how best to apportion the available resources, however limited they may be.
The noble Baroness, Lady Seear, made a penetrating and devastating speech, as she always does, about the insecurity attendant upon annual funding. Again, that is a similar point. She asked for three-year contracts and said quite sharply that no one, not even a sweet shop or ICI, would run on an annual basis. That may well be true except in the case of the government. She will be aware of the dramas that have been going on recently as regards public expenditure. I know that the noble Baroness will accept that it is difficult for a department always to agree something on a long-term basis when it does not know itself how much money it will have at its disposal. I shall certainly look at that point because it is a very real one.
Several noble Lords, including the noble Lord, Lord Richard, referred to VAT. That is a subject all on its own and of great complexity. Time will not allow me to do so this evening, but I shall look at the points made and get in touch with those noble Lords who expressed concern.
Partnership is another means of harnessing government and voluntary effort. We want to see statutory, private and voluntary organisations working together. The noble Baroness, Lady Fisher, referred to payroll giving. She asked whether that had decreased because of the recession. There are 6,000 schemes and 300,000 participants. Oddly enough, far from going down the contributions have increased, though not as much as we would have liked.
The noble Baroness, Lady Masham, was concerned that formal arrangements should be made about young people taking part in voluntary service. I was interested to hear what she said. The idea has been canvassed before but it has not received substantial support from the voluntary sector, the business sector or from the statutory services. There are many opportunities for young people to volunteer. A campaign is to be launched next year by the Volunteer Centre and Radio 1 to attract young people and to match them to the available opportunities.
My noble friend Lord Elton referred to the membership of the Ministerial group on the voluntary sector. It includes Ministers from 14 departments. I shall contact my noble friend on that matter later because it might take up an unnecessary length of your Lordships' time if I were to outline them now. Similarly, I shall let him know the content of the voluntary service unit mission and the staffing.
The partnership approach is now engaged in all walks of public life and activity. The Royal National Institutes for the blind and the deaf, for example, are making an invaluable contribution to an employment programme which is designed to help people with

265
disabilities. The noble Earl, Lord Longford, referred to the Effra Trust. He said that he did not expect an answer and that was very kind of him. However, I shall give him one. The Home Office is aware of the concerns of that trust about its ability to continue to provide offender beds under the new community care arrangements. Officials of both the Home Office and the Department of Health are jointly working to try to ensure that voluntary organisations such as the trust can continue to operate under the new arrangements.
My noble friend Lord Carr referred to the Rainer Foundation. The Home Office is aware of its expertise in the field work with juveniles and young adult offenders. As my noble friend recognises, the Home Office has already provided funding for a number of the foundation's projects dealing with offenders. I hope that the foundation will be able to continue to make contributions to criminal justice work under the new partnership arrangements.
Many points have been raised by your Lordships, but in the time available I have been able only to address my replies to a mere sample. The desire to give, and to give freely, is an integral part of the make up of every person and nothing should be done to numb that virtuous quality. I hope that everything will be done in future to encourage volunteer work and giving.
8.33 p.m.
Lord Elton: My Lords, it remains for me to thank all Members of this House for their contributions to a debate which has been not only impressive but nostalgic for me. The first occasion on which I heard the noble Earl, Lord Longford, speak on the subject of Mr. Beveridge was long before his third report and when I was in short trousers at my private school. I do not believe that the noble Earl's views have changed, but he has matured wonderfully.
I too congratulate the noble Lord, Lord Plant, on his successful embarkation on the waters of this House. I apologise to your Lordships for transgression of the time allowance which was drawn to my attention by the grimaces of my noble friend Lord Long. I also apologise to the noble Baroness, Lady Fisher of Rednal, who drew attention to the error in the Motion. Together they made me determined, when I get home, to look in my shoes in order to scrape out the clay.
I conclude with just three questions of which I have not give my noble friend notice because I have the answers for him. They centre on funding and the burning issue of core funding. Do Ministers doubt the cost effectiveness of at least maintaining historic levels of cash support to the voluntary sector? In that case let them consider the survey referred to by the noble Lord, Lord Henderson, which showed that for every pound of government money expended through the ITF (in which I declare an interest) the recipients were able to raise £5. That is good value for taxpayers' money.
Do Ministers doubt that a stimulus to the sector will contribute to the stimulation of the economy generally which is now so urgently needed? Let them
266
reflect on the figures given by the noble Lord, Lord Richard. He told noble Lords that it accounts for 3.4 per cent. of the GDP; it gives paid employment to over 450,000 people, which is up to 80 per cent. more than that of the motor industry.
Finally, do Ministers doubt the political wisdom of supporting voluntary organisations with cash? They should consider the 450,000 employees and the 23 million voluntary workers who are all adults and have votes. I congratulate the Government on making the progress which they have. Under the stimulation of that statistic, I hope that they will progress even further and faster. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Damages (Scotland) Bill [H.L.]
8.36 p.m.
Lord Macaulay of Bragar: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Macaulay of Bragar.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ELLIOTT OF MORPETH in the Chair.]
Clause 1 [Rights of relatives of a deceased person]:
The Earl of Selkirk The Earl of Selkirk had given notice of his intention to move Amendment No. 1:
Page 1, line 12, leave out ("from the deceased's society and guidance").
The noble Earl said: I am not going to talk about this amendment at all. We are at a late hour and there are very few Members present for a Bill of outstanding importance. I question whether further discussion at this stage is really worthwhile. I suggest that we take a further look at the report which we have in front of us. I have regard for the report for a special reason. I remember very well when Lord Gardiner was Lord Chancellor 25 years ago. He suggested that an examination should be made of the problems which arise through statutory work.
When Lord Gardiner made his statement I was sceptical. I was not sure what he was going to do. I now say that he was right. He has added something to the structure of the way in which Scottish law can be developed. We are extremely indebted to him.
What we are doing is a little difficult. We are saying that the former law was wrong. The noble Lord will tell me whether it has to be abolished and whether we have to put a complete new law in its place. It is an extremely important matter. It deals with all damage or death to individuals of this country whether they be in industry, in motor cars or for any other reason whatever. It affects everybody and no matter who they are.
It is very important that the structure and shape of this Bill should be properly dealt with. I do not want to move the amendments tonight because the occasion is too thinly attended. It is an important one. The noble Lord probably wishes to say a number of things about his amendments. I suggest that postponement

267
should be accepted. The noble Lord, Lord Macaulay, will deal with the amendments put down by him. My amendments have been put down by the Law Society of Scotland. We should examine them and see whether they are fit. The noble Lord can take his own amendments and have them examined by his colleagues to find out how far they will be effective for the purpose.
This Bill is important and it has to be good. It is no good pretending that we can provide a half-hearted Bill. It is an important Bill and we would be criticised by all kinds of people if we do not get it right. We must get it right. Even if it is a matter of convenience for anyone who is here tonight to rush it (which it probably is not) it is much more important that we should thoroughly satisfy ourselves that the way this Bill is shaped is suitable.
We have put in some observations. We have cut out certain words that are believed to have an unsatisfactory significance. We have made it a little more open to the courts. They are not compelled to follow a certain course but they can follow a course according to their view. These are small points but they are in the clauses. I do not want to press this further tonight. I shall leave it to the noble Lord to develop the point. I should like these observations read by what I might call the members of both societies, and for them to examine carefully what has been said to see whether it meets their requirements and that we can satisfy ourselves that we have put forward the best Bill that we can. In these circumstances, I do not propose to say any more. I shall not move Amendment No. 1.
[Amendment No. 1 not moved.]
[Amendment No. 2 not moved.]
[Amendment No. 3 not moved.]
Lord Macaulay of Bragar Lord Macaulay of Bragar moved Amendment No. 4
Page 1, line 16, at end insert:
("(2) At the beginning of subsection (5) of that section there shall be added the words "Subject to subsection (5A) below,".
(3) After subsection (5) of that section there shall be inserted the following subsection—
"(5A) Where a deceased has been awarded a provisional award of damages under section 12(2) of the Administration of Justice Act 1982, the making of that award does not prevent liability from arising under this section but in assessing for the purposes of this section the amount of any loss of support suffered by a relative of the deceased the court shall take into account such part of the provisional award relating to future patrimonial loss as was intended to compensate the deceased for a period beyond the date on which he died.".").
The noble Lord said: Amendment No. 4 in my name seeks to insert a new subsection in Section 1 of the Damages (Scotland) Act 1976 which relates to the rights of relatives of a deceased person. The amendment is somewhat technical and caters for a situation which is likely to arise fairly infrequently. I can perhaps best illustrate the need for the amendment by means of a simple example. Take the case of a shipyard worker of 40 years of age who has contracted asbestosis as a result of working with that substance. His doctor tells him that he has scars on his lungs and
268
that he is unfit for any gainful employment. The doctor also reveals that there is a risk of mesothelioma developing at an unspecified future date.
Faced with a complete loss of future earnings, the claimant seeks advice from his lawyer who decides that the best course for the claimant is to raise an action for provisional damages in terms of Section 12 of the Administration of Justice Act 1982. The action is raised and the pursuer recovers solatium in respect of the injury to his lungs and he is awarded a sum representing loss of earnings for a period of future time. The court awards these damages as provisional damages under, and in terms of, Section 12 of the 1982 Act. In a year or two after the provisional award has been made mesothelioma develops and causes the claimant's death before he has an opportunity to return to court to finalise his award.
Two questions arise. The first is: do the provisions of Section 1(2) of the 1976 Act prevent a claim being made by the relatives? Section 1(2) should not preclude the raising of an action by the relatives on his death. In part, this amendment is intended to remove any doubt as to that. The second question is whether there is a possibility that there could be an overlap of the loss of earnings awarded as a provisional award under the 1982 Act to the claimant and the loss of support which may be claimed by the relatives under Section 1(4) of the 1976 Act. It would appear that this might well arise as there could be a potential overlap of patrimonial damages where the deceased has obtained in his provisional award of damages a sum representing his entire loss of earnings throughout his life. In such a case it would be inequitable that the defender should also be liable to pay the relatives damages for loss of support resulting from the deceased's death. If this had not been a provisional award of damages, the payment of such an amount for patrimonial loss would have discharged the defender's liability and thus prevented the relatives claim from arising.
To obviate the possibility of double damages being paid, the amendment enables the court to take into account in considering the relatives' claim such part of the provisional award relating to future patrimonial loss as was intended to compensate the deceased for any period beyond the date on which he died. I hope you will agree that this amendment clarifies the existing law and provides a solution which is fair both to the relatives and to the defender. I beg to move.
8.45 p.m.
Baroness Carnegy of Lour: I am sure that it was a very full description of the amendment that the noble Lord gave. It is not easy for a lay person to follow that kind of description. Can he tell the Committee whether this amendment comes from any particular body? Is this a Law Commission second thought about the Bill, or does it come from any particular direction? It would help the Committee to understand what is happening. I do not think it was mentioned at Second Reading. I was not able to be here but I have read the Hansard report and I do not remember that aspect being mentioned.
Lord Macaulay of Bragar: To be honest at this stage, I cannot be precise; but I think it arises out of the report of the Scottish Law Commission on the effect of death on damages.
The Lord Advocate (Lord Rodger of Earlsferry): Perhaps I could help my noble friend Lady Carnegy. This particular amendment derives from I shall not say a second thought but a further thought by the Scottish Law Commission and a letter from Lord Davidson on this matter. It was realised that if this particular amendment was not brought in, a difficulty would arise where someone died after a part of the procedure had been gone through, and that while alive that person had recovered a sum of money which would include a sum for future loss of earnings for a period beyond that period when he actually died.
Therefore, when he had died and his relatives then came to bring their claim, and that claim being for a loss of dependency during the period after his death, it was seen that there would be a possibility of double counting, so to speak. In order to take account of that matter, the chairman of the Scottish Law Commission wrote, and this is an amendment deriving from the Scottish Law Commission.
On Question, amendment agreed to.
Clause 1, as amended, agreed to.
Clause 2 agreed to.
Clause 3 [Transmissibility to executor of deceased's right to solatium for his injuries]:
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 5:
Page 2, line 9, leave out ("not").
The noble Earl said: This is an important point. The Bill would delete that on the death of a certain person the executors will be fully informed. The executors should be fully informed. In a way it is a small point but they may be interested in a variety of matters and all sorts of things may be concerned relating to the property of the man who died. His relatives and friends should be acquainted as to how they stand. For that reason this should remain and the word "not" should be taken out. It seems to me to be fair to the persons concerned and that that is the best way to handle it.
Lord Rodger of Earlsferry: I am not sure that I understood the noble Earl, Lord Selkirk, when he said that he thought that the relatives should be informed of a certain matter, and he thought that if the amendment was not carried, the effect would somehow or other be to deprive the relatives or the executor of some information. I think that what the noble Earl said perhaps rested on a misunderstanding of the purpose of Clause 3(2). I shall explain what the effect of Amendments Nos. 5 and 6 would be.
The idea of the amendment of the Law Society was that not only claims for solatium but also claims for patrimonial loss in the period after the deceased's death should transmit to an executor on the death of the deceased injured person. The existing Section 2(3) (b) of the Act, which is re-enacted by what will become Section 2(2), is intended to prevent the duplication of damages. But Section 2(3) (b) does much more than that because it actually expresses one of the
270
fundamental purposes behind the Act and rests on a principle which has been part of Scots law for—I put it at the very lowest—at least 100 years. The principle is that compensation is directly related to the loss suffered.
When a claimant dies the situation is radically changed, and in the new situation the claims of the deceased's executor and the claims of the surviving relatives are quite distinct. The claim of the executor is one for compensation for losses which have been suffered by the deceased up until the date of his death. Thereafter, the deceased having died, he can suffer no more and it is a matter of compensating relatives for their losses after the deceased's death. That is the basic structure of the legislation. This amendment would completely undermine it.
I should add that with the introduction of the new rules on transmissibility, which is the whole point of the Bill, the family should be substantially better off than it was formerly. In addition to solatium, which would come via the executor, the relatives enjoy the right of loss of support suffered since death or likely to be suffered as well as the reformulated loss of society award relating to non-patrimonial benefits.
The effect of the amendment would be particularly unacceptable if the deceased died leaving no dependants who can make a claim for loss of support. It could then happen that some beneficiary who might be a very remote relative would receive a windfall sum of damages which would apparently be designed to compensate the deceased for earnings which he could not make because he was dead. Such a concept verges on the grotesque.
There may indeed be a case for a further and wider review of the current law on damages, as the noble Earl suggested, but this amendment would represent a fundamental departure from the present law and would raise much wider issues such as the possible use of structured settlements or actuarial methods for calculating damages. No change such as is envisaged by Amendments Nos. 5 or 6 could possibly be contemplated without wide-ranging consultation and without seeking the advice of the Scottish Law Commission. I underline the fact that the Bill has been prepared by the Scottish Law Commission. Bearing those matters in mind, I ask the noble Earl to withdraw the amendment.
The Earl of Selkirk: I hate to say this but I could not understand the noble and learned Lord the Lord Advocate. I did not follow his argument. He said that the relatives should get other things, which is exactly what I am trying to do. If a man is killed, one would expect his wife and children to get something. Who would give it to them? The executors would receive it and it would be up to them to hand it on.
I listened as carefully as I could to what the noble and learned Lord said. If he can tell me that that is what will happen, I shall not press the point further. I realise that the Bill is not finished and is still in a somewhat immature state. But if that is not what it does, I think it is wrong. The relatives must get those things. It may be a house, a handkerchief, tables or chairs, but that is what they should have. There is no

271
protection if the word "not" is left in. The noble and learned Lord may show that I am wrong but that is my reading of the Bill as it stands.
Lord Rodger of Earlsferry: I am sure that it is my fault if the noble Earl did not follow my explanation. if can assure him that the Bill as it stands does not take away anything from the relatives. On the contrary, the effect of the Bill will be to increase what is claimable by the executor. As the noble Earl rightly said, the executors would pass it on to the people entitled to it.
Under the present law the executor can claim only for damages suffered by way of patrimonial loss by the estate up until the date of the man's death. The executor cannot recover damages for the pain and suffering which the man has suffered up until the present date. The effect of the Bill will be that from now on the executor will have a claim which will relate not only to the loss suffered but also to the pain and suffering which the man experienced before his death. The effect of the noble Earl's amendment would be to go much further than that—this is where I take issue with it—and to undermine the principle underlying the whole of our law of damages and say that, in addition to that, a sum will be awarded for earnings which he would have had after his death. What happens under law is that the estate does not get earnings after the man's death but the relatives get a sum which represents what they would have been expected to get if he had lived. That is a just and fair way of proceeding. It is certainly the way the law has been up until now.
It may be that I have not made the matter sufficiently clear. I should he more than happy to discuss it with the noble Earl between now and Report stage. If he has any doubts or hesitations at that stage I have no doubt that he will raise the matter again. I ask him to withdraw the amendment at this stage.
The Earl of Selkirk: I do not have doubts on the laying down of the law by the Lord Advocate on any account. I would not for a moment press this point. But what I am saying is that I do not understand how the damages of a man who has been killed can possibly transfer to his relatives. That seems to be one of the things the noble and learned Lord said, but I may not be right. I am sure that the noble and learned Lord has taken the point; he has asserted that without the "not" he gets the point. If he says that, I am prepared to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 6 not moved.]
Clause 3 agreed to.
Clause 4 [Enforcement by executor of rights transmitted to him]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 7:
Page 2, leave out lines 28 to 33 and insert:
(" "Enforcement by executor of rights transmitted to him.
2A.—(1) For the purpose of enforcing any right transmitted to an executor under section 1A or 2 of this Act the executor shall be entitled—

(a) to bring an action; or

(b) to he sisted as pursuer if an action for that purpose has been brought by the deceased but has not been concluded before his death.").

The noble Lord said: After the discussion between the Lord Advocate and the noble Earl, Lord Selkirk, I approach this fairly simple amendment with a certain temerity. The amendment is proposed by the Law Society of Scotland. Its purpose is to restructure Clause 4 and is for clarification purposes only. The Law Society of Scotland considers that Clause 4 as presently worded is unclear. It has therefore asked me to put forward this amendment which is certainly simpler in terms of words. As to whether it is as clear legally, I await the Lord Advocate's comments. I beg to move.
9 p.m.
Lord Macaulay of Bragar: I am grateful to my noble friend Lord Carmichael of Kelvingrove for bringing the matter before the Committee. In dealing with the amendment, I should put on record the fact that we are grateful to the Law Society for the careful and constructive approach that it has taken to what is a most important Bill and one which is demanded by the people of Scotland. In this case, I am prepared to give my noble friend an assurance that the principle behind the amendment is acceptable. It will require a little redrafting but that will not change the spirit of the amendment; indeed, I think that it will make it much clearer. With that assurance, I hope that my noble friend will see fit to withdraw the amendment.
Lord Carmichael of Kelvingrove: I know that my noble friend Lord Macaulay of Bragar has spent much time on the Bill and had many discussions with the Law Society. Therefore, until we reach Report stage, I am certainly happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 agreed to.
Clause 6 [Transitional provisions]:
[Amendments Nos. 8 to 10 not moved.]
Lord Macaulay of Bragar Lord Macaulay of Bragar moved Amendment No. 11:
Leave out Clause 6 and insert the following new clause:
Transitional and retrospective provisions
(" .—(1) Section IA of the 1976 Act (as substituted by section 2 of this Act) shall have effect as if it expressly provided that the reference to a right to damages under section 1 of the 1976 Act included a reference to a right under that section as it existed at the time when the right vested and section 2A shall have effect accordingly.
(2) Section 1A of the 1976 Act shall also have effect as if it provided that the reference to a right to damages under section 1 of the 1976 Act included a reference to a right to damages by way of solatium in respect of the death of a person under the law in force before 13th May 1976 and section 2A shall have effect accordingly.
(3) Section 9A of the 1976 Act shall not affect any proceedings commenced before this Act comes into operation.
(4) Subject to the following provisions of this section, this Act shall have effect only in relation to deaths occurring on or after its commencement.
(5) Notwithstanding section 3 of the 1976 Act, section 1A of that Act shall have effect, subject to subsection (8) below, in the case of the death on or after 16 July 1992 of the relative concerned.
(6) Notwithstanding section 2 of the 1976 Act as it existed prior to the commencement of this Act, that section as

273
substituted by section 3 of this Act shall have effect, subject to subsections (7) and (8) below, in the case of the death on or after 16 July 1992 of a person in whom was vested immediately before his death a right to damages in respect of personal injuries.
(7) Subsection (6) above shall not apply in the case of a death before the commencement of this Act in so far as it would enable an executor to recover damages (other than for patrimonial loss) in respect of injury resulting from defamation or any other verbal injury or other injury to reputation sustained by the deceased.
(8) Neither subsection (5) nor (6) above shall apply where the rights to damages which transmitted to the deceased's executor under section 1 or 2 of the 1976 Act prior to the commencement of this Act have been subject to—

(a) a full and final settlement; or

(b) determination by a court in a final judgment within the meaning of section 19A(3) of the Prescription and Limitation (Scotland) Act 1973,

before the commencement of this Act.
(9) In calculating whether a claim made by an executor by virtue of subsection (5) or (6) above is unenforceable by virtue of the provisions of Part II of the Prescription and Limitation (Scotland) Act 1973, the period starting with the date of death and ending with the commencement of this Act shall not be taken into account.").
The noble Lord said: In my remarks during the Second Reading debate I informed noble Lords that it was my intention to bring forward an amendment to Clause 6 of the Bill which would enable the new rights of transmissibility to executors to apply in cases where the death of the injured person occurred on or after the date of introduction of the Bill in this Chamber —namely, 16th July 1992—subject to certain provisions and, in particular, provided that those rights could not be exercised if the claim was time-barred (obviously, by the passage of time as set out in law) or had been settled, or judicially determined in a court. The amendment seeks to give effect to that undertaking. The clause is necessarily somewhat complex in its structure. It may assist Members of the Committee if I explain its principal provisions.
Subsections (1) and (2) clarify the effect of Section 1 of the 1976 Act and also the pre-1976 Act rights of any people still affected by the law as it was then. They make it clear that in those cases Section 2A, as inserted by Clause 4, shall have effect. Subsection (3) provides that Section 9A of the 1973 Act, inserted by Clause 5, does not affect any proceedings commenced before the Act comes into operation. Subsection (4) makes clear that, subject to the provisions of Clause 6, the Act shall have effect only in relation to deaths occurring on or after its commencement.
Subsections (5) and (6) make provision for the retrospective effects of Sections 1A and the new Section 2 of the 1976 Act in any case where a death occurs on or after 16th July 1992. Sections lA and new Section 2 make provision for any right to damages, whether patrimonial or non-patrimonial, which is vested in a relative under Section 1 of the 1976 Act or in an injured person, immediately before his death, to transmit to an executor. In the case of such a person who dies on or after 16th July 1992 and before the date of commencement of the Bill, the effect of those
274
subsections is to provide, subject to the following provisions, that the right to damages will transmit to the executor on the date of commencement of the Bill.
Subsection (7) provides that subsection (6) does not apply in the case of a death before the commencement of the Act in so far as it would enable an executor to recover damages (other than patrimonial loss) for injury resulting from defamation or other verbal injury to reputation sustained by the deceased.
Subsection (8) provides that neither subsections (5) nor (6) shall apply where the rights to damages which transmitted to the deceased's executor under Sections 1 or 2 of the 1976 Act, prior to the commencement of the Bill, have been subject to a full final settlement or a determination by a court in final judgment before the commencement of the Act.
Subsection (9) provides that in calculating whether a claim made by an executor by virtue of subsections (5) or (6) is unenforceable due to the passage of time —that is, by virtue of the provisions of Part II of the Prescription and Limitation (Scotland) Act 1973—the periods starting with the date of death (if death occurred on or after 16th July 1992) and ending with the commencement of the Act shall not be taken into account.
No doubt that explanation sounds very technical —indeed, it is very technical—but it was correct to put it on record so that people, especially lawyers, who read the report of the debate will understand the purpose of the amendment. I trust that Members of the Committee will agree that, in effect, the solution of suspending the running of the prescription period in the last section that I mentioned represents a reasonably fair means of dealing with what we all hope will be a small number of claims arising in that interim period.
As the noble and learned Lord the Lord Advocate remarked on Second Reading, whether there is retrospection or not, there will always be a degree of unfairness to someone when one case is viewed against another. It is not possible to reopen cases where settlement has been made; nor, for the reasons explained by the noble and learned Lord, is it possible to change the rules for ongoing cases, irrespective of when death occurred. However, if the amendment is accepted by the Committee, it should provide some degree of comfort to those currently suffering from a terminal industrial disease. Should such people die before the Bill is enacted, it will ensure that their families will, nevertheless, be able to benefit from the improved provisions. That is the main objective behind the Bill. I beg to move.
Baroness Carnegy of Lour: As the noble Lord has explained to me the reason behind the amendment, I understand it very well. I have also read his Second Reading speech and that of my noble and learned friend the Lord Advocate. I understand that the amendment has been put forward for reasons of compassion and sympathy for certain people who will be on the wrong side of the cut-off line when the Bill becomes enacted.
As I understand it, the intention is to backdate part of the clause to the date of the Bill's First Reading. On Second Reading, I believe that both the noble Lord

275
and my noble and learned friend said that there were precedents for the provision. As a lay person, it seems to me to be extremely strange that one can arbitrarily fix the date when the Bill received its First Reading as the date after which people are able to take advantage of the Bill's provisions. I wonder whether the noble Lord, Lord Macaulay, or my noble and learned friend can tell me what kind of precedents there are in this respect? Are they numerous? It seems very strange. I wonder whether it is good law.
Lord Macaulay of Bragar: I thank the noble Baroness for raising the point which, of course, interests us all. The reason for taking the provision back to First Reading is that the House sets its face against retrospective legislation in principle, and we had to strike a balance. There has to be a cut-off point at some stage, and we believed that we were doing the best that we could and being as fair as we could by making the First Reading what the noble Baroness has called the arbitrary date. I describe it as the most reasonable date that we could think of in all the circumstances.
Baroness Carnegy of Lour: Does the noble Lord know what precedents there are?
Lord Macaulay of Bragar: I cannot quote a precedent. Each Bill has to be considered on its own merits. Perhaps the noble and learned Lord the Lord Advocate can give some precedents.
Lord Rodger of Earlsferry: I do not believe that I can put my hand on a precedent at the moment, but I am aware in general terms that there are Bills which have been given effect from the date of First Reading. That is done on the broad principle that from that stage onwards the people who have an interest in the possible effects of the Bill are, so to speak, put on notice as to the effect that it will have. That is the reasoning underlying the choice of the date. It might be helpful if I were to write to my noble friend and give her details of some examples. I can assure her that this has been done in the past.
I am grateful to the noble Lord, Lord Macaulay, for the care that he has given to this provision and others and also, of course, to the Law Society of Scotland which has taken an interest in the Bill and has discussed various aspects of it with him and the noble Lord, Lord Carmichael. I am grateful to everyone involved.
On Question, amendment agreed to.
New Clause 6 agreed to.
Remaining clauses and schedule agreed to.
House resumed: Bill reported with amendments.

Overseas Aid Programme
9.10 p.m.
Lord Judd Lord Judd rose to ask Her Majesty's Government what level of resources they consider necessary to meet the growing global demands on Britain's overseas aid programme.
The noble Lord said: My Lords, for many millions the world remains a wretched place. Somewhere, every
276
2.4 seconds of every day, a small child dies of poverty. Across the world, one in five people lives on less than £175 a year; 1.5 billion people are without health care; 1.75 million people have no access to safe water; a woman giving birth in the third world is 12 times more likely to die than a woman in a country like ours; her children, even if they do survive, can expect to live 12 years less than we do here in Europe. More than 1 billion people live in absolute poverty.
The last decade was, by most standards, an unmitigated disaster for the majority of third world countries: a time when poverty levels reached unprecedented and almost unimaginable depths. All that has been compounded by the tragedies of Somalia, Yugoslavia, Albania, Liberia, Sudan, Ethiopia, Mozambique, Angola and the rest. It was nearly 20 years ago that the United Nations, with British support, proposed an official aid target of 0.7 per cent. of GNP. Twelve years ago the Brandt Commission of which Sir Edward Heath was a prominent member called for,
"a massive transfer of resources",
from North to South.
Barely five months ago, at the Rio summit, John Major, the Prime Minister, publicly pledged British support for Agenda 21, the new global programme to meet the inextricably interwoven challenges of environment and development. He said, I believe—the Minister will no doubt correct me if I am wrong—
"All of us will have to meet the cost of commitments undertaken to tackle our common global problems".
He went on:
"The British Government is ready to commit new"—
I emphasise the next word—
"additional resources".
Indeed, in Chapter 33 to Agenda 21 the signatories, including the United Kingdom, agreed to augment their aid programmes in order to reach the UN 0.7 per cent. target as soon as possible. In that respect, we were heartened by the reports from Rio that the noble Baroness, Lady Chalker, had herself made clear that she would do everything within her power to persuade the Government to honour their commitments.
The Agenda 21 master plan reckoned the total cost of preserving the world's environment—lest a terminal crisis develops—together with the cost of effective action to eradicate world poverty, to be more than 600 billion US dollars per year. Maurice Strong, the indefatigable organiser of Rio, calculated that this would require the transfer of 125 billion US dollars per year from North to South, leaving a staggering 475 billion US dollars to be found by the impoverished South itself. At present, the OECD countries of the North are transferring little more than 55 billion US dollars per year to the South.
Of course, the response of some developed countries to the challenge of global poverty has been more shameful than that of others. Since 1979, British development assistance has fallen dramatically in real terms, some calculate by as much as 24 per cent. It is down from the 0.51 per cent. of GNP at which it stood when the Conservative Government came into office 131 years ago to 0.32 per cent. in 1991, having fallen as low as 0.27 per cent. in 1990.
At first in the 1980s we were repeatedly told by the Government that Britain would reach the 0.7 per cent. of GNP UN target when economic circumstances permitted. However, when the economy did grow, we were then told that the aid ratio was declining because our gross national product was growing so fast. Subsequently, when the economy declined, predictably we were told that there were other spending priorities and commitments.
The truth is, I fear, that the sincerity of purpose and the very genuine commitment of the noble Baroness which all of us who have had dealings with her have come deeply to respect, indeed with some affection, has never been reflected in the firm resolve of the Government as a whole. Despite her firm resolve, they have dragged their feet or, worse, disastrously undermined what she herself wanted to achieve.
Now surely is the time for this House to send an unequivocal message to the Prime Minister and to the noble Baroness's other colleagues, demanding that they support her and stand by the solemn undertaking given less than six months ago in Rio by the Prime Minister. It was an undertaking reflected as recently as the end of last month in the words of David Maclean, Minister of State for the Environment, at the General Assembly of the UN. On behalf of the European Community he spoke of member states reaffirming their commitment to reach the accepted UN target of 0.7 per cent. of GNP for overseas development assistance as soon as possible and of their determination to ensure prompt and effective implementation of Agenda 21.
Such a message from this House becomes all the more urgent because of the warning signals. First, with the United Kingdom holding the European Community presidency, there has been a disgraceful proposal by the Council of Ministers that there should be a cut of more than £190 million in the European Community's aid and development budget for 1993. That is a cut more than seven times the size of the United Kingdom's relief programme to Somalia alone. To its great credit, the European Parliament has voted against the proposal and instead voted for a modest increase of £15 million. I hope that the noble Baroness will tell us that that will stand firm.
Secondly, there have been rumours of a possible 10 to 15 per cent. cut to be announced tomorrow in our own UK aid and development budget. Cuts of that magnitude could be equivalent to cutting out the entire aid programme to 10 of Africa's poorest countries; to cutting twice as much as the UK spends within the overall aid budget on emergency aid; to cutting two-and-a-half times more than the total aid to India; to cutting several times more than the United Kingdom Government grant to the overseas voluntary agencies. That is a sad betrayal of the immense generosity spontaneously and repeatedly demonstrated by the British public when, by their voluntary giving, they have tried to close the gap between what the Government provide and what is needed. We ask the noble Baroness, even on the eve of
278
the Autumn Statement, to leave her colleagues in no doubt that she will not accept any reversal whatever in the United Kingdom's battle against world poverty.
Were the rumours and leaks to prove well founded, and were the Government to trim aid expenditure at all, this would represent a savage blow not only to those in extreme poverty but to the fledgling democracies emerging at last in different parts of the world. Most of them have been urged by the United Kingdom to take the road of reform. Reducing development assistance would be in sad contrast to last year's spending commitment of a 15 per cent. increase in cash terms, 3 per cent. in real terms, in development assistance. That is a commitment which at all costs must surely be protected. Aid cuts would re-establish the downward trend in overseas development expenditure witnessed since 1979. It would mean that the Government were once again moving further from the UN target they continue to accept but always fail to honour. When she answers my Question tonight, it is conceivable that the noble Baroness may argue that the concept of a UN target is out of date. If so, with what would she replace it?
Of course, any target is something of an arbitrary figure. Of course, no target can accurately reflect the real needs of third world countries for development assistance. Of course, quality of aid matters at least as much as quantity of aid. But the noble Baroness knows, as all of us who have held her office know, that in crude Whitehall battles for resources all would be lost with no such measurable yardstick.
I believe there are eight good reasons why aid should not be cut. First, it would be disastrous both for the millions on the knife edge of poverty—the desperate people we see on our television screens in Somalia—and also, potentially, for the cause of democracy where many are for the first time able to cast their votes in free and democratic elections. Secondly, the United Kingdom of the Falklands and the Gulf remains a powerful nation with strong influence in the UN, in the EC, in the international finance institutions and throughout the Commonwealth. This is a position in which firm and consistent leadership in the fight against world poverty is demanded, rather than a retreat from the challenge when times are hard.
Thirdly, aid cuts would be particularly damaging because almost certainly it would be the longer term bilateral assistance that would bear the brunt. That is precisely the type of aid, as I know from my own experience at VSO and Oxfam, and as is the experience of other non-governmental organisations, that is most effective in alleviating poverty and which helps to prevent the kind of crisis we are still encountering throughout much of Africa. Investing in long-term assistance now will mean that there is less demand for emergency help from donors in the future.
Fourthly, aid to poor countries is in the UK's own direct interests. It can boost our own employment and industry and do so in a less inflationary way than directly stimulating demand at home. It has been calculated that our bilateral aid programme generates £750 million of orders here at home and that—

279
according to the Public Accounts Committee—for every £1 contributed to multilateral programmes £1.70 comes back to the UK in orders.
Fifthly, it is obviously in the UK's own long-term interests to enable poor countries to develop in a secure and sustainable way both for the sake of the global environment and to help mitigate global security problems.
Sixthly, the public have overwhelmingly demonstrated that they would not favour any cuts in the aid budget. The generous voluntary giving speaks for itself. However, three-quarters of those questioned in a national opinion poll for ACTION AID as recently as 7th October said they would not like to see any reductions in this budget. The public response to the prospect of cuts, in terms of the volume of letters to Members of Parliament and the press, has overwhelmingly rejected aid cuts. Over 200 Members of the other place, through an open letter to the Chancellor and two Early Day Motions, have called on the Government not to reduce development expenditure.
Seventhly, cutting development aid will be a serious setback for the Overseas Development Administration, rendering any claims about its targeting aid effectively depressingly hollow. Eighthly, overwhelmingly, there is the moral imperative. In the name of civilisation we cannot turn our backs on the poor of the world without undermining the moral fabric of our own nation.
We know that the battle against world poverty is not just a question of increased aid. Priority must also be given to the issues of armed conflict, neglect of the environment, lack of democracy and accountability in government, unpayable debt, restrictive international terms of trade, extravagant consumption by the industrialised world of finite resources and, indeed, effectiveness in the use of aid itself. The challenge to GATT is huge while 80 per cent. of the world's population still has only 18 per cent. of the world's trade. As for conflict, it is no coincidence that every major famine in recent years has taken place in a war zone. It is frequently no exaggeration to argue that if we could stop the fighting and ensure distribution, for example in Somalia and Bosnia, we could end the famine.
As I have argued before in this House, success in the fight for humanity necessitates massive debt relief based on the ability to pay principle; a new and fairer world trading system centred on basic needs, food security, employment for the poor, fair and stable prices, and concern for the environment; fairer investment patterns which bring training, appropriate modern technology, good employment practice, and engagement with sustainable development; and aid which empowers the poor rather than the rich. It also necessitates urgent control of the sinister and destabilising international arms trade and greatly enhanced resources for early warning and conflict resolution. The lack of priority and sustained drive by the United Kingdom on all those issues during the God-given opportunity of our presidency of the European Community has been lamentable.
Meanwhile, a certain amount can be achieved by the re-direction of aid. Above all there must be a
280
sufficient flow of aid. The noble Baroness will gain nothing but respect if she refuses to yield to the blinkered heavy brigade in the Treasury. Let the axe men ponder. There is no country in the world more dependent than our own on a peaceful, stable and prosperous world economy. To invest in global human progress is to invest in our children's future. It is not a matter of poverty overseas versus poverty at home. Poverty is poverty wherever it occurs. At a time when the rich have been getting richer and the poor have been getting relatively, and too often absolutely, poorer it would be obscene to penalise the poor still further.
In and immediately after the Second World War, times of acute crisis, solidarity was the order of the day. Victory was rooted in a nation in which a priority was social justice and the protection of the vulnerable. We pulled together. It is precisely because of the gravity of the economic challenge which confronts us that we should now draw a line and determine that whatever the stringencies demanded they will not aggravate existing injustices.
I have quoted the Prime Minister at Rio. He also said during the election that his Government would never forget those with their foot on the first rung of the ladder of opportunity or those who have been knocked off by misfortune. The Government he led, he assured us, would always protect their interests. Words, my Lords, or genuine commitment'?
That is the crisis of credibility which this Government repeatedly face. In the past decade there has been too much pandering to short-term myopic greed and selfishness. A healthy, dynamic United Kingdom, as in the 1940s, would be one in which we take second place to nobody in our fight for justice and humanity throughout the world, in Merseyside as much as in Mozambique, in Somalia as much as in Clydeside. I hope that the noble Baroness will convincingly put our minds at rest tonight.
9.26 p.m.
Lord Prentice: My Lords, I congratulate the noble Lord, Lord Judd, on instigating the debate tonight with a speech of great conviction. That is always a feature of his speeches, and of his whole life's work —in VSO, in Oxfam, in another place, and throughout all his activities on behalf of the developing world.
I agree with nearly everything that the noble Lord said, but I should like to add a cautious addendum just in case at one point he was a little partisan, in the party sense. He said that the commitment of my noble friend Lady Chalker was not matched by that of her colleagues. Perhaps I may say that, in a Labour Government, nor was his. Nor was mine when I worked in this field in a Labour Government. He and I are two of the five former Ministers for Overseas Development sitting in this House. It is true that our commitment, and that of some of our colleagues who agreed with us, has never been matched by the practical commitment of British governments as a whole.
The target of 0.7 per cent. of GDP has been accepted in principle by Labour and Conservative governments, none of which have ever got anywhere

281
near it. Indeed, the first of my two resignations from a Labour Government in 1969 was on that issue and due to the fact that during the 1960s the proportion of our gross domestic product spent in this direction had steadily, year by year, fallen below the figure which the then Labour Government had inherited from the Conservative Government in 1964. I am not making a party point; I merely say that a point can be made at any time about the failure of British governments of both parties and of most governments in the Western world to live up to their pledges in this field.
If there is one thing wrong with the debate it is that in a sense we are playing Hamlet without the prince. The Chancellor will make a vital statement tomorrow on this matter, as on so many other matters. The noble Lord reminded us that the programme announced last year provided for a modest increase, over the three-year period then in question, in the value of the aid programme in real as well as in cash terms. Tomorrow we will see whether that continues, improves as we would both like to happen, or some of the rumours about reductions turn out to be right. All of us will have vigorous comments to make afterwards. None of us knows except perhaps the Minister and she cannot tell us, but we all know that in recent months she will have fought her corner with great clarity and vigour.
I put the problem in the context of the public spending round as a whole. I support a tough spending round and believe that the Government should stick to their overall strategy. But within that I suggest that this year and in the years immediately ahead we need a radical rethink of priorities in public spending, which will mean some painful reductions in some programmes and improvements in others. I should like to think that in your Lordships' House and in the other place there will be debates in depth about priorities. That is a new parliamentary habit that we ought to develop. It is too easy to have debates on specific programmes such as we are having now when their supporters say that more resources are needed.
The Earl of Longford: My Lords, for clarification perhaps I may ask the noble Lord whether he is saying that he favours a reduction in overseas aid.
Lord Prentice: My Lords, I favour an increase. I believe that in some spending programmes (using that expression in the broad sense of departments) there is scope for reductions. I should not develop that at this hour in a debate of this kind, but I merely suggest in passing that there ought to be more debate in depth in both Houses of Parliament and throughout the country about the priorities we would like to see in different forms of expenditure.
I ventured to add to the volume of paper going across Ministers' desks a few weeks ago by writing a personal memorandum on this subject to the Prime Minister and every member of the Cabinet. I wrote as an ex-Minister for Overseas Development and as a supporter of the aid programme as to why the aid programme should be treated as a greater priority than might happen in the current situation.
282
I will not weary the House with all of the reasons I put forward, but some were stronger in the context of the recession and the fiscal problems facing the Government than they normally were. It seemed to me that some of the familiar reasons were given added strength. I give three examples. The first is the moral imperative as the noble Lord described it. To me it is and always has been a moral imperative. The basic reasons for that do not need restating tonight. In a situation where Ministers will have to make difficult choices there may be a temptation to trot out old cliches such as "charity begins at home", that the recipients of our aid programme have no vote in our elections and the first duty of the Government is to the people who elect them and so on. I say that the very existence of those sentiments—that some of the general public would share—places upon us and colleagues in Government a duty not to yield to those temptations. It would be mean and unworthy to break our commitments to people in sub-Saharan Africa or Bangladesh. We have made medium and long-term commitments to them. They may be more modest than some of us would like but nevertheless they are real commitments. To break them now would be a betrayal of what this country should stand for.
Another familiar argument is the "mutual benefit" argument based on the fact that development in poorer countries creates trade opportunities from which the world economy will benefit, including the aid donors. I see nothing wrong in saying that our self-interest marches in step with our moral duty. Surely, that is all the more the case at a time when the world is in recession and we want to stimulate development in as many parts of it as possible, particularly the poorest. In continuing to stimulate that development, we shall be creating opportunities for ourselves and other developed nations also. Incidentally, I agree very much with what the noble Lord said about GATT. But in addition to the trading opportunities that they should have, they should receive help with their development projects, thereby stimulating the growth that the whole world economy needs.
My third and last point is that it seems to be in the national interest, particularly in difficult times, to identify things that this country does well and to continue to do them, perpetuate them and, if possible, expand them. From my own experience in this field —I believe others share this view, including the noble Lord—I know that the effectiveness of our aid programme has improved steadily over the years. Many people have contributed to that, but in particular there has been a degree of improvement during the stewardship of my noble friend Lady Chalker.
I understand that the Development Assistance Committee of the OECD, having had a study made of the efficiency and effectiveness of all the main aid programmes in the world, has identified our programme as the most effective of them all. We should take pride in that. It reflects credit upon the Minister and her department. It also reflects credit upon the hundreds of British people working in the field, men and women of many talents, skills and types

283
of experience who are working alongside people in developing countries, helping them to help themselves. Some of them work directly under the umbrella of the official aid programme or work for developing countries under arrangements made under the aid programme. I understand from something said in the earlier debate (I did not know it before) that a large number, almost half the total, are people recruited through the non-governmental organisations.
Those people deserve the encouragement of the Government and Parliament. Their work should be better known. It is not only good for the people among whom they work; it is good for this country. They are supported by the voluntary bodies and in that sense this debate overlaps with the previous debate today. Up and down the country there are many thousands of people working in this field, fund raising and organising—voluntary workers and the staff of those bodies.
In the past—I have seen it happen under both Labour and Conservative governments—a stroke of the Treasury pen has wiped out a year's fund raising by such people. I profoundly hope that that will not happen. I profoundly hope that our programme will continue to expand further in quality and quantity in the years ahead.
9.37 p.m.
The Lord Bishop of Worcester: My Lords, I too am grateful to the noble Lord, Lord Judd, for asking this Question tonight. It will enable us to put down a very firm marker for Her Majesty's Government; namely, that it will not do for overseas aid to be cut. It is too easy to do, but in the last resort it is against the will of the people of this nation.
I understand that when he uses the word "global", the noble Lord is also thinking of the needs of Eastern Europe. Six weeks ago I was privileged to visit the headquarters of the allied powers in Europe and to spend some time at NATO headquarters. Two things were borne in on me. They must have been obvious to noble Lords in this House, who must have realised them long ago and must forgive my lack of sophistication.
The first was the realisation that a large factor in bringing the Cold War to an end was an economic one. We succeeded in beggaring the economy of the Soviet empire by the continual stockpiling of massively expensive weapons. The effect was not one-sided. We may not have had a nuclear exchange but our own economies were strangulated. We refused through fear to invest in the future in long-term aid to countries overseas. We were too preoccupied with our own defence. As a result, we have no productive relationship between the industrialised countries of the northern hemisphere and the developing countries of the South. Furthermore, among the developing or, perhaps more accurately, the poorer countries, we must now include the countries of Eastern Europe. Europe is now probably one of the most unstable continents of the world. As has been implied by the noble Lord, Lord Judd, with poverty comes political
284
instability. That has occurred not only in the countries of the southern hemisphere but now in the countries of Eastern Europe.
My second insight from my visit was that Eastern Europe is also in need of massive aid. As we were told in your Lordships' House about six weeks ago, at present only one-fifth of 1 per cent. of the gross national product of the seven most wealthy nations goes in aid to the countries of Eastern Europe. After the Second World War, when in a far less advantageous position than it is now, America gave six times as much as that to us in Marshall Aid to reactivate our economy. I say that to indicate, as noble Lords know well, that we are not concerned only with charity: we are concerned with the reactivation of the economies of the poorer nations. As has already been pointed out, there is not only a moral imperative for the rich to help the poor and the strong to help the weak, but it is also in our own interests to improve their economies.
However, let me stress that I do not equate the plight of the former Yugoslavia to that of sub-Saharan Africa. In the Horn of Africa it is not a matter of tightening belts but of survival. As has already been said, every two seconds a child dies of hunger or disease. No statistic can express what it feels to see even one child die—to see an uncomprehending panic in eyes that were made to see the living world as the natural habitat for those born into it.
It is a time not for retrenching but for generous, far-seeing statesmanship. It is no time to diminish our programme of official aid, and certainly not to cut our grants to the International Development Association. The private investment in developing countries is drying up. In 1990 it was no more than 0.36 per cent. and it is decreasing. It is well known that, as a nation, we have never reached more than 0.32 per cent. in official aid, yet the Pearson Commission long ago set the target of 0.7 per cent. Furthermore, the United Nations' target for both official aid and private investment is 1 per cent. of gross national product; and we give nowhere near that.
We have consistently fallen below those targets. I was told only this evening by one who has researched into these matters that 20 years ago we were giving twice as much as we give today in official aid. In 1990 we were one of three countries to register a decline. I am told that, in real terms, between 1979 and 1990 our aid to sub-Saharan Africa fell by 22 per cent. Other donors from the northern hemisphere managed to increase their aid by 65 per cent. during that time. The extraordinary paradox is, as I am sure noble Lords are aware, that in repaying debt the seven poorest countries in drought-stricken sub-Saharan Africa pay £225 million back to the United Kingdom, which is far above the aid that we give. In summing up, will the Minister reassure us that the hopeful terms which the Prime Minister put forward in Trinidad can be implemented to the full so that repayment of debt does not outstrip the aid that is given?
I know that statistics are notoriously difficult to handle and are open to misquotation. However, it is plain for all to see that this is no time to reduce our aid to a world in need; rather it is a time to increase it. I

285
do not want to give percentages but a cut of, say, 15 per cent. would mean a reduction of £285 million per year in aid. That equals all the United Kingdom's bilateral aid to Asia in 1990. The average man and woman in the street knows that that is wrong. MPs tell me that daily they have a large postbag of letters begging them to stand against parsimony and letters asking them to stand for generosity. Twenty-four Anglican bishops have written to record their opposition to any diminishment in aid. Other Church leaders, Roman Catholic bishops and Christian councils from all over the country, have expressed a similar opposition.
I would like the Minister to address the question of whether there is a peace dividend from which aid can go to the poorest nations. In other words, in a period when defence budgets must be smaller would it not be far-sighted to take a new and hopeful initiative for the very poor whose development budgets grow less by the year?
Secondly, I wish to make the point that the noble Baroness, Lady Chalker, is held in high regard by the aid agencies. She is known by governments of developing nations as one who travels unceasingly to espouse their causes and see the unprecedented human
286
tragedies for herself. Should we not beg Her Majesty's Government not to take the ground from under her feet? She should be strengthened and not disabled in her work.
Finally, although the Unstarred Question is about aid, we cannot avoid at this time reference to the Uruguay Round of GATT. We all know that if no solution is found the poorest nations will go deeper into recession and we shall follow them. In the last resort, it is trade and not aid which the world needs. We must look to the further horizons; short-term solutions are not enough. We must resist all short-sightedness and narrow-minded caution. The times are ripe for generous, courageous statesmanship. We have the presidency of the European Community. If we cut our aid other countries will follow. We need to give a lead and to set an example. If we do not we shall live to regret it.
I repeat a saying which I have used in this House before—self-interest so often dictates that which justice demands. It is not just a matter of charity; it is a matter of realpolitik. Therefore, on behalf of many workers in the field, in Christian Aid and in the parishes of our land, I express the hope that official aid is not cut when the time comes to make the Autumn Statement.
9.50 p.m.
The Earl of Longford: My Lords, the marvellous speeches of the right reverend Prelate and the noble Lord, Lord Judd, were so full of passion and knowledge that my mind goes back to a story which I have ventured to tell before in this House. After Edmund Burke made a great oration, the next speaker could not think of anything to say except to say, "I say ditto". In a sense, I cannot improve on the contributions of previous speakers.
This debate is vested with a great deal of unreality. We are begging the Minister of State, who is admired by all, to increase the aid budget. Everybody assumes that the aid budget will be cut tomorrow. That is a general assumption made by the newspapers. We are expecting the noble Baroness, who is not in the Cabinet, to alter the whole situation at the last minute. That is ludicrous. I remember the situation well when I was Minister with responsibility for Germany 45 years ago. I was pro-German and told the children of Dusseldorf that they were right to be proud of being German. The Germans expected me to do all sorts of wonderful things; of course, I did not achieve them. Therefore, we understand that the noble Baroness cannot achieve an increase although we go on record as begging her to make that tremendous last minute change, and no doubt she would wish to do that.
I hope that I can still call the noble Lord, Lord Prentice, an old friend. I have some things in common with him. We both changed our parties in the course of our lives. I changed my party when I was young and callow. Whether or not that is more or less credible than changing it with the wisdom of later years, I do not know. The noble Lord has been a Minister in two totally opposing governments. Only Sir Winston Churchill has achieved that in this century. Of course, I respect the noble Lord for his total integrity.
Unfortunately, I could not make head nor tail of his speech. I ventured to interrupt because I could not follow his line. I thought that he was going to say that there was some justification for reducing aid but he said that he is in favour of increasing it. Let us suppose that it is announced tomorrow that it is to be reduced. Will the noble Lord denounce the Government? He is a free agent and he is under no obligation to the Government so I hope that he will speak out boldly. The noble Baroness must defend whatever is decided if she wishes to remain in the Government; and we all wish her well. I was kicked upstairs all those years ago and perhaps that is what happened to her, to remove her from the firing line. It is a peculiar situation. We are attacking the Government's record and it seems to be defended by two people who do not believe in it.
I turn now to the figures. The noble Lord, Lord Prentice, may correct me on these, as he is more expert than I am, as is the noble Baroness. However, the figures that I have are not inconsistent with those given by the right Reverend Prelate. In 1979 overseas development assistance, as a percentage of the GNP, was 0.51 per cent. That is a poor figure, compared with 0.7 per cent. In 1991 the figure was 0.32 per cent. That being so, there was a steady reduction throughout the Thatcher years in the percentage of our national income going to overseas aid.
288
The noble Lord, Lord Prentice, cannot be proud of that record. I thought he might feel ashamed of it. It is fairly lamentable in an area which he has made his own. Therefore, the starting point is that there has been a lamentable reduction in the percentage of our overseas aid during the Thatcher period.
What is the justification for that? I have heard none other than it has been said that it means sacrifice. With enormous diffidence, I venture to say that I was rather unhappy to hear the right reverend Prelate talk about realpolitik. I know he mentioned justice, but he said it is not a question of charity. I believe that this is a question of charity in the Christian sense: faith, hope and charity. One hears the figures read out by the noble Lord, Lord Prentice. This country is still a rich country. In The Times today I see that the basic income requirement of the average family is £21,000 per year. If anyone doubts my figures, they should look at The Times today. This is a rich country and we are talking about starving people. I do not believe that we need to go into realpolitik to say that Christian duty, whether one calls it charity or love is very different from the one pursued down the ages.
The Lord Bishop of Worcester: My Lords, if one is a Church leader, one has to offer the teachings of Christ in such a way that people in the marketplace can pick them up and not just regard them as something which is said from the pulpit by those with Christian ideals. The quotation with which I ended my contribution came from Archbishop William Temple who was very keen on what he called little axioms. That is if we are going to offer to the secular world of everyday the wisdom of the teaching of Christ, we must do so in such a way that the world can pick it up. Self-interest so often dictates what justice demands. That means, by interpretation, that Christian love is not just a stratospheric idealism; it is a very practical way of living.
The Earl of Longford: My Lords, I disagree totally with the right reverend Prelate. The idea that Christianity is involved, above all things, in adjustment of principles to suit presentation is a very unhappy one. I shall not put it as crudely as I could. I do not believe that the founder of the Christian religion pursued that policy at all. I am very sorry to say, as a lapsed Anglican of 50 years' standing, that I am shocked by the utterances of the right reverend Prelate.
9.57 p.m.
Lord Taylor of Gryfe: My Lords, like other noble Lords tonight I would like first to express my thanks and appreciation to the noble Lord, Lord Judd, for introducing this subject with such eloquence and conviction. It is a great pity that there is not a larger attendance because the noble Lord's contribution was certainly moving and effective.
While most of the speakers are on this side of the House, I do not pretend for one moment that these Benches have a monopoly of compassion. I would like the noble Baroness to understand that the issues which we are discussing are not party issues at all. There is

289
a response in our nation to this moral challenge, which has been presented in the Unstarred Question before the House.
Perhaps I may also say that I am sure that the noble Baroness will appreciate that we understand her difficulties at this moment when public expenditure cuts are the order of the day. It may be of some encouragement to her to feel that she has unanimous backing in the obvious defence of her particular concerns.
The Earl of Longford: My Lords, perhaps I may interrupt the noble Lord. I do not believe that it is at least likely that the message that the noble Baroness will deliver will have unanimous backing. I believe that most of us will object.
Lord Taylor of Gryfe: My Lords, I am talking about the House tonight. I believe that her concerns have the backing of the majority of the people of this nation. I hope that she will feel that she speaks for the moral majority when she defends her corner. I echo what was said by the noble Lord, Lord Prentice, about the vast improvement in the quality of our overseas aid provision. I have worked for overseas aid for some years. I know that after the war, in the first flush of aid, it was more abundant and people were more responsive. A great number of mistakes were made in the supply of aid.
I like to feel that in the last few years this nation has got value for money from our overseas aid programme. I like to feel that some of the more sophisticated arrangements we are making for relief in the third world—for example, in reducing debt through debt-equity switches and that kind of thing —have contributed to improving the situation in largely administrative arrangements.
I wish to mention two aspects. One has already been mentioned: the aid-trade provisions. I have worked for a number of years with a leading merchant bank in the City of London. It was involved in project finance. When Britain was trying to secure large contracts overseas for turbines, boilers, sugar machinery and so on, we were competing with other countries. The Germans, the French and others were putting in their bids. It was not only the price of the actual plant that we were selling but the financial package that had to be produced in order to get the order.
Most of these countries had substantially larger aid programmes than we had. Last year British exporters had no money for 11 months of the year because our entire aid assistance had been taken up in the month of April, the first month of the new year of contributions. As a result we were frequently disadvantaged when competing with France, Germany and other countries because we could not add an element of aid into the bids that we were making for the sale of British plant and machinery. The so-called credit mix, which involves an element not only of credit but an element of aid, is always built into international bids. To the extent that you might be tempted to cut the aid budget, then consequently you would diminish the capacity of our heavy
290
engineering industry to compete in overseas markets. As the right reverend Prelate said, we are frequently talking about matters of self-interest when we talk about aid.
Aid programmes have often been used as a device, as a tool, to secure greater respect for human rights in many countries. Not so long ago I visited Sri Lanka where there was massive abuse of human rights. What happened? The aid agencies—not only the British, although the British took the initiative—got together and said to the Government of Sri Lanka, "We will cut off aid if you continue to suppress human rights." In so far as you reduce your aid budget you are diminishing your capacity to influence these kinds of things which are important in the developing world.
The Earl of Onslow: My Lords, may I interrupt the noble Lord? In fact we gave to Sri Lanka in 1990–91 £10,289,000 in development aid and £3,611,000 in other aid programmes.
Lord Taylor of Gryfe: My Lords, I did not say that we cut off aid. I said that the aid agencies—the British, Canadian, Dutch and other agencies—got together and said that we would withdraw aid. A good deal of the figures the noble Earl has just quoted are military figures, but it does not matter. The point is that assistance of this kind is frequently used, and can be used, in securing greater respect for human rights. If we diminish our aid programmes, we shall diminish our influence.
The right reverend Prelate raised the important question of how we might pay for increased aid. I share his concern that some of the peace dividend might be directed to these peaceful purposes. I do not know whether all noble Lords listened yesterday to the very moving speech of President Yeltsin, in which he talked about reducing his arms budget by 38 per cent. in order to meet domestic commitments. We should get our priorities right. The Germans recently cancelled their interest in the European fighter aircraft. It may be revived; I do not know. The Germans indicated that they could not afford the European fighter aircraft. Their priorities were directed towards improving the situation in Eastern Germany and therefore they could not afford this sophisticated aircraft.
We have to look at our programmes and at the amount of money we are spending on armaments. On Trident alone we are spending £33 billion, and that is before devaluation of the pound is taken into account. The cost may rise still further. Our total overseas aid budget is £1.8 billion. I do not regard those as the priorities of a civilised community. We have to look at what is important in our lives and what is important in our community. I regard that kind of expenditure on armaments compared with our expenditure on aid as not being a reflection of a moral society. The people who wish to spend large sums of money on armaments of this kind say, "We have to do it in order to maintain security in the world." However, the insecurity frequently arises from the conflict between rich and poor. That is what basically causes insecurity.

291
Consequently, I believe that it would be a wise investment to transfer some of the resources we are spending on military equipment into aid.
After the war I worked in the field for the United Nations in relief and reconstruction. At that time we in this country spent 1 per cent. of our GDP on aid to countries that were less fortunate than we were. I ask noble Lords to consider the position of Britain at the end of the war. Factories and houses had been destroyed, communities were devastated and we had all the problems of soldiers returning to Britain to look for better lives. At that time this nation gave 1 per cent. of its GDP to the relief of suffering of other nations less fortunate than we were. I sincerely believe that we were better people at that time. We felt that we were making a moral judgment. The noble Lord, Lord Judd, said that it would be a blow to the recipient countries if we were to reduce our overseas aid. But it would also be a blow to ourselves if we were to reduce the amount of money we give to overseas aid. Therefore, I hope that this country and the Government will be convinced that a moral judgment has to be made and that the Government will respond by increasing rather than decreasing the amount of the aid budget.
10.10 p.m.
Lord Bridges: My Lords, I must begin by declaring an interest in the subject as I am chairman of the United Nations children's fund in this country. As we receive substantial contributions from the Government, I have a personal interest in the Question tabled by the noble Lord, Lord Judd, in the level of the overseas aid programme. At the same time, I should also record my gratitude for the fact that in the past decade between 1981 and 1991 government funding of UNICEF has increased by 67 per cent. We are very grateful for that. I just note that some of our neighbours in Europe have managed to be even more generous. That should be an encouragement for us keep up the good work.
Before turning to the substantive questions raised by the noble Lord's Question, I should like to say something on a personal note. I very much miss the presence from the House this evening of the late Lady Ewart-Biggs. She was the president of UNICEF's National Committee for eight years. She spoke in this Chamber on the subject with great dedication. Although I have no doubt that she will be succeeded by others who can speak as eloquently and as authoritatively as she did, she had special qualities of commitment, human sympathy and clarity of vision which will, I believe, be much missed from our future debates on development subjects.
The noble Lord, Lord Judd, phrased his Question in his own very special tones of conviction and dedication. The question is a difficult one at the best of times. But tonight, on the eve of the Government's announcement of their Autumn Statement, it must be almost unanswerable. The noble Baroness cannot be expected to disclose to us the nature of the decisions which have already been taken. But, of course, they will determine the answer to the noble Lord's Question for, perhaps, some years to come. Therefore,
292
the approach that I suggest it is most useful to adopt is to look at some of the general considerations which bear on the issue. I shall attempt to do so.
First, there is the problem of how we define the level of aid expenditure. For the purposes of our Government, that must be done in our own currency and included in the annual Budget. But, of course, most of the money which is voted will, by definition, be spent abroad in other currencies. That is a matter of particular relevance this year, given the recent devaluation of sterling. To maintain the value of the ODA vote next year—that is, just maintaining the budget for another year—even if there is a modest increase to take account of domestic inflation in this country, will in fact decrease its spending power abroad by, I suppose, 10 per cent. or more. So there is some difficulty about defining the level of expenditure in our currency, although we have to do so.
The international method of comparing different nations' expenditure on development aid, to which many speakers referred, is by the percentage of GNP. That is a worthy target. I am sure that all of us present tonight regret the fact that our progress towards it has been slow and indeed, in recent years, in the wrong direction. However, I believe that one should add a word of caution before reaching too many conclusions about the GNP base. From living in various countries around the world, my own impression is that GNP calculations are by no means infallible, even in the developed world where they are more reliable than elsewhere. In the case of our own statistical series, we have only to look at the embarrassingly large balancing item which appears in our external payments account to realise that we should not expect accuracy to one or two decimal points of GNP when we are calculating our aid budget.
There is one other problem when dealing with those broad comparisons as percentages of GNP. There are, understandably, different priorities in different societies, some of which find it necessary to spend rather more on defence and social programmes than others. Others may decide that an overall reduction in government expenditure (and taxation) is a necessary stimulus or medicine for the national economy. While we should not be mesmerised by the figure, we should regard the GNP target of 0.7 per cent. as a reasonable, approximate guide.
Looking at our recent performance over past decades, it seems to me to be an inescapable conclusion that every effort should be made to raise the level in sterling and foreign currency terms, as soon as possible. If that is not done, the constraints on the aid programme will be severe, given the devaluation of sterling this year and that the large proportion of our aid budget which is already absorbed by contribution to international bodies such as the European Community Development Fund and the United Nations agencies will grow further. Also, and perhaps more seriously, the excellent bilateral programmes that we undertake will be bound to suffer severely.
Another significant factor in addition to the question of level is quality, about which a number of

293
your Lordships have spoken. It is rightly claimed that the quality of the British aid programme is high. I hold that opinion. I also suggest—this is something which has not been said in these terms in the debate—that our programmes are well targeted. A recent survey of aid programmes to sub-Saharan Africa shows that British aid was suitably concentrated upon that geographical area and was also targeted upon the right social needs within that area. Even conceding that the quality of our aid is high, and that its priorities are well selected, we still cannot escape from the problem of volume which is the aspect that occupies most of our minds.
Perhaps I may give one current example: the conference which is to be held at Dakar later this month organised by the OAU is designed to look at the assistance needed for African children. It is a carefully prepared meeting to be addressed by the presidents of the African nations and it is designed to illustrate to the developed countries the problems facing the children of Africa who are, after all, the poorest people in the poorest continent. It is not a fund-raising meeting. It is intended to explain to the developed countries the nature of the problem and the strategies which the African countries intend to adopt. I understand that the Minister cannot attend the meeting, but I hope that it will be possible for authoritative representatives to be sent from this country to make their contributions, to listen to what is being said and to bring back their impressions for us to act upon here.
I conclude that there are three criteria which determine the effectiveness of an aid programme: level, quality and targeting. One other factor needs to be added: national interest. We normally approach aid policy primarily as a humanitarian matter or, as others have put it this evening, as a moral obligation. It is right to see it in those terms, but we cannot escape the fact that short-term political questions are inevitably involved. That includes the issue of human rights. I am glad that the Government have recently been paying more attention to that matter. We must also recognise that the amount of aid which we can contribute to international organisations will influence what we can do within them. I have to say that in some international organisations which I am acquainted with and involved in, it seems to me that if we reduce the contribution that we are now making, we shall diminish the influence which we can exercise within them. I should personally find that a matter of great regret.
However, our national interests range more widely perhaps even than that. We have an interest—a very strong one—in the future stability and political orientation of the developing world. If we look back on the post-war history of the developing world, it is remarkable that they escaped the contagion of the Marxist/Leninist totalitarianism as lightly as they did. It left terrible damage for us to see in Africa today, but it might have been a great deal worse. We need to provide more than sympathy; we need to provide more positive encouragement to help these nations
294
make the right political choices in the future. That, I believe, means a substantial, well directed aid programme.
I should like to give one other example of the way in which the contribution we make by way of aid could have a powerful effect on our future national interest. I refer to the ultimate effect of the AIDS epidemic which is now raging in Africa. I do not think it is fanciful to suppose that the fate of the African continent in the next century may be largely determined by the children now aged between five and 15, living in Africa. These are the children who are too old to have acquired the disease from their mothers and too young to have been infected by others yet. Very many of these children are already orphans or will shortly become so. Many in turn will, I fear, fall victims to the disease themselves. But those who do not die, the minority who survive, will have the heavy burden of supporting the rest of the population among whom they live. They will have grown up in conditions of great insecurity, loneliness, privation and, perhaps most important of all, psychological disturbance.
It is not hard to imagine the political dangers of Africa led by men and women who have grown up in circumstances such as these. I do not wish to exaggerate something we cannot exactly foresee, but I fear the danger of turmoil in Africa in the next century, if events take their course unaided from outside. It is, I submit, very much in our interests to help these societies to tend their orphaned children by providing local communities with the resources they need to sustain them as best they can. Although our aid contribution is also coping with this problem as best it may, I doubt whether it will be large enough to make the commitment which I would like to see.
Of course, the AIDS pandemic is not the only illustration I could give to make my general point. A substantial, well-funded aid budget is not only a worthy humanitarian cause, excellent though that is, but it is also common sense, as I think the right reverend Prelate said, to the mutual advantage of both donor and recipient. I hope that the current levels of the aid programme may be steadily increased to meet these broad objectives.
10.24 p.m.
Lord Monkswell: My Lords, I am glad to be able to add my little voice to the other voices in the debate which was introduced so well by my noble friend Lord Judd on the subject of the need to maintain and effectively increase our overseas aid programme. The debate itself is timely when tomorrow we shall hear the results of the Government's latest deliberations on the future of the economy and how to deal with the problems that the Government have brought us to so far.
Having said that I wished to add my voice to those other voices that have made a plea for our overseas aid programme not to be cut—as the whispers seem to suggest it might be —I thought it might be useful to expand a little bit and to look at the whole situation in an historical perspective. One of the things that has worried me is the way we tend to look on aid as charity

295
rather than as a responsibility of what I would describe as good government, linking the ability to pay and the equity of our world together.
In 1798—noble Lords may wonder why I have mentioned that year—William Pitt introduced income tax. That income tax was introduced to pay for the fight against Napoleon—that is, the Napoleonic wars we were engaged in at that time. It is interesting to reflect that that levy of tax was set at 2 pence in the pound. I have just worked out that is a figure of 0.83 per cent. and that is higher than the 0.7 per cent. figure we are asked, internationally, to contribute now.
Noble Lords may ask why we should compare the contribution of 0.7 per cent. now with the income tax of William Pitt of 1798. At that time this nation was engaged in a war. I would suggest that the whole world is now engaged in a war against the Four Horsemen of the Apocalypse—a war on want.
If we do not succeed in winning that war, we shall all be diminished. The noble Lord, Lord Bridges, has just mentioned the subject of AIDS, which is the plague of the 20th century. It is probably the equivalent of the Black Death in the Middle Ages. Unless we take effective steps to deal with AIDS, it will have an enormous and unforeseen effect on the world's population.
There is a large degree of famine, ignorance and loss of life due to natural disasters, all of which contribute to the instability of our world. That instability in our world affects us all. Last Sunday, only a few days ago, we all stood for two minutes' silence to commemorate the sacrifices that have been made on a worldwide scale twice this century. Those sacrifices came out of the instability of the world as it was then. Two major instabilities have resulted in two major catastrophes for this world of ours that impinged on us very directly.
If we do not take action to prevent those sorts of instabilities recurring, we and our children will be subjected to the horrors of world conflict. Given the technology we have nowadays, that conflict will be even more horrendous than those other two conflicts that have taken place this century.
Why should we not think of aid in terms of an income tax? Perhaps one way of looking at the issue is to make up for the system which we operate at present. In effect we make the poor of this world poorer by buying their products cheaply. We get rich at their expense. It is not equitable to make the poor poorer and become richer ourselves. That creates instability. One way to counteract that is to levy an income tax on the rich and distribute the benefits to those who are not rich.
In practice, when we deliver aid to the third world and other countries we receive more in the demand for our products than we give in cash terms. Surely, we could devise a system whereby we give cash—rather like child benefit in this country—and not tokens to be spent in the company store, which is one of the horrors of the way in which we deliver aid nowadays.
Unless we look sensibly at the future and the way we organise world affairs and unless we are prepared as a country to play our part in those world affairs on an equitable basis, providing something like a world
296
child benefit paid for by progressive taxation in the form of a global income tax, I fear for the very future of human existence and this world of ours.
10.32 p.m.
Lord Ponsonby of Shulbrede: My Lords, it is my understanding that we now give less aid as a proportion of our national wealth than all our European partners bar Ireland. This evening we are debating the prospect of a further reduction in that aid. I regard that as a shameful position for us to be in.
Britain remains a powerful and leading nation in the world, with tremendous influence in international institutions such as the UN, the European Community and the Commonwealth. I believe that we should be leading the way in meeting the target of 0.7 per cent. of which so many noble Lords have spoken. It is my personal belief that that target is too modest, but that is another matter.
Over the past few years we have seen the break-up of the Soviet Union. That has led to even greater demands on our resources. Over the summer I was fortunate enough to visit Siberia. Yes, my Lords, I was literally sent to Siberia—in a professional capacity, as an engineer. While I was there I saw a well-developed technical infrastructure. There was a great deal of expertise and specialism in the realm of oil exploration and development, which is my own profession. I also encountered a great sense of bewilderment among the Russian people. They are bewildered about the rampant inflation they are experiencing and their loss of status—in their own eyes—and they are frightened of being "ripped off" by predatory Western oil companies.
The Russians have a great deal of excellent environmental legislation, but I saw precious little evidence of their implementing any of their own environmental standards. When I pressed the environmental and engineering experts I met they shrugged their shoulders and said that it was too expensive.
When one talks to the Russians about how they believe they can solve their own problems their answers are usually quite simple. They think they need more investment, more money and a greater input of technology. I believe that they underestimate their problems. From my experience, their managerial and bureaucratic system beggars description. I know that the Government have set up the "know how" fund. From what I understand, that is a good start, but I think there is scope for extending its realm of influence to more ground level managerial advice, particularly auditing. There is also scope to help the Russians strengthen their civil society by the setting up of free trades unions, and particularly the voluntary sector about which we have heard so eloquently this evening. Those extra elements would help the Russians defend their own quite high standards in the realms of social care.
Russia has tremendous mineral wealth. It is almost the richest country in the world in that respect. Its educational standards are arguably the equal of almost any country in the world. There is absolutely

297
no excuse or reason for the creation of any dependency in that country. All aid must be practical. I wonder whether the Government can look at more imaginative measures, like adjusting the fiscal regime, to encourage companies to invest in Eastern European countries.
I am not arguing that it is a better investment of our aid to give it to the East than the South. I am arguing for more resources because there is a greater need. At the Rio conference the Prime Minister, Mr Major, said that developing countries would need our help to meet the cost of development and environmental protection. He was right. We should give that help, and give it gladly.
10.37 p.m.
The Earl of Onslow: My Lords, it is interesting that the noble Lord, Lord Ponsonby, has just returned from Russia. He is aware that Russia was the first country to develop an oil industry round Baku and in the Caucuses at the turn of the century. He may be aware that in 1914, Russia had the largest grain exporting port in the world (Odessa), and that between 1880 and 1914 it had the highest industrial growth record of the industrialised world. It is interesting to note that the German general staff begged the Kaiser to make sure that they went to war with Russia before 1917; otherwise, they were terrified that Russia's industrial might would be enough to swamp Germany instantly. Between 1922 and 1992 Russia by incompetent and ruthless government has managed to fritter away all those advantages.
Everybody in the debate this evening has said it is essential that aid should be increased. I suspect that in this debate I am going to be in a minority of one. I am going to ask your Lordships to ponder the question: does aid do any good at all? I shall try to demonstrate the point like Henry Fonda who, in the film Twelve Angry Men, persuaded a jury that wanted to hang somebody to find him innocent.
First, we have to establish what aid means. Aid is not aid to poor people; it is a government to government transfer. It is money raised by the poor from the poor, the middling and the better-off people in this country by general taxation, and it is paid over to the governments of those countries. I have in front of me a list of the various countries which have been in receipt of British Government aid. The figures come from my noble friend's department. In due course, I shall go through some of them.
The noble Lord, Lord Judd, waxed lyrical and compassionate about the poverty and horror found in this world. I do not in any way underestimate our anxiety for those poor people. I do not argue for a reduction in the aid budget because of meanness or lack of charity. I argue for a reduction in the aid budget because, as I shall try to show your Lordships, it does harm. The money does not reach the people for whom it is designed. It provides import substitution, so that more money can be spent on arms. A sum of £80,000 million was given by western aid to Ethiopia in the decade 1979–1989. Where did that money go? It did not go to the poor; it did not go to the starving;
298
it did not go to those people whose plants had been crushed by tanks. It went for the tanks which ran over the plants. It went to the factories in Kiev and Murmansk which build those tanks. That is where all that money went.
For instance, why do we give India a vast amount of aid? India has three times the number of soldiers that we needed in 1939 to police the whole region from Aden to Hong Kong. India has two aircraft carriers-admittedly what could be classed as clapped out second-hand British ships, but nonetheless two aircraft carriers. It has an ocean-going navy and an atomic weapons programme. And India receives a large subvention from the British taxpayer. That means that the British taxpayer subsidises and makes it possible for India to buy those things because the Indian Government does not then have the necessity of providing the wells and proper development of its own infrastructure. The Indian Government does not run a proper trade policy. It makes exporting and importing difficult and restricts wealth.
I shall now skip delicately over the border into Bangladesh, where there was a gentleman who, at the expense of the American taxpayer, learned how to make jeans. He set up a jeans factory and prospered mightily. He set up another jeans factory and another jeans factory. And soon he was a very rich Bengali gentleman. He made a lot of his money by sending good quality jeans to the United States of America. That should have been the ideal answer to development aid. What did the United States of America do? Because the South Carolina jeans manufacturers complained, they put on anti-dumping duty. The net result was expensive jeans in South Carolina, one bankrupt Bengali businessman and no more jeans manufactured in Bengal. That is what I say is wrong.
We do not buy the product of the poorer countries. There is a Multi-Fibre Arrangement which puts a whacking great tariff on the things that poorer countries can make. Our children, or we whose children seem to want trainers at vast expense all the time, have to buy expensive trainers because there is a tariff on them to keep out the cheap ones which poorer people can make. That is what impoverishes countries. It is aid that harms, not trade.
I shall read out from my list because it will be interesting to hear. We give a total of £312,000 in development aid to Hong Kong. We give China £5 million-worth of development aid. Why do we give China development aid? We give oil rich Indonesia £10 million. We give India lots of money: £85 million. My figures are right. I have them from the Overseas Development Office. We give Sri Lanka £30 million. I refer only to British aid. We give Zaire—it used to be called the Belgian Congo—£312,000. Mr. Mobutu has a hairdresser flown over from New York to do his wife's hair once a week on the presidential yacht which is anchored in the River Congo. He is terrified of going ashore because some other gentleman will shoot him. That country receives aid. What does that aid do? It keeps President Mobutu in power. Is that what we want to do? Does that help the poor? No, it hinders them. It is interesting to note that we give Nigeria vast

299
quantities of money. Nigeria has oil coming out of its ears. It has ships lying off the port of Lagos with cement hardening in the holds.
We are wasting our money and we are helping to keep corrupt governments in power. I yield to no man my concern or compassion for the people whom the noble Lord, Lord Judd, and the right reverend Prelate, described. I should like people to ask: is aid going where it is needed? Does it do anything other than harm? If anyone says to me, "Look at the success of Marshall Aid," I shall reply to them, "Marshall Aid lasted only four years. The vast majority of it went to us; and it did not get us out of our economic difficulties. Some of it went to Germany. Germany got out of her economic difficulties by the currency reforms of 1949 and manufacturing goods that people wanted".
Did Venice start the spice trade with the whole of the world with start-up aid from Justinian? Of course it did not. It did so from what is between the Venetians' ears. It is not development aid that is required because that keeps rotten, corrupt and useless governments in power.
The people in Somalia and Ethiopia have no government. Of course one's heart bleeds for those people. Young men are going around in Toyota trucks with triple-mounted 500 Brownings on the back. There is chaos and anarchy. Somalia could easily feed itself if there were any form of civilised and sensible government. Any country will starve if conditions of barbaric civil war take place. In the Hundred Years War the Jacquerie rose and France starved; and France has the richest European agriculture in the world.
Please can we question the ethos of development aid? I am as sure as I stand in this Chamber that it is actively harmful and does no good whatsoever. It keeps tyrants in power and impoverishes the poor. Let us buy what those countries produce; and then they will become richer, just as Venice did. After all, Venice would have been considered part of the third world by the cognoscenti of Antioch and Constantinople in the sixth century AD.
10.48 p.m.
Lord Desai: My Lords, it is late in the day. Many points have been raised and I wish to take a new direction. There is obviously no point in urging the Government to increase aid or not to cut aid. If they are still deciding their Autumn Statement, they are in more trouble than I think. Let us assume that the figures were decided some time ago with some deliberation. I have no doubt that the noble Baroness has fought a good fight. Whatever the outcome will be, it will be so.
As the noble Lord, Lord Prentice, said, in general there is a certain apathy in all political parties about international aid. One has to flog Labour Party general management committees to devote five minutes to a discussion on aid. I have done so. It is a thankless task. However, given all those considerations, let us remember that this is a rich country. Our GDP in nominal terms is over £600 billion. That is not a small sum of money. We give away £1.8 billion in aid
300
and if it were to be 0.7 per cent. that figure would be about £4 billion. That is not a bad sum of money to have. I also agree with the noble Earl, Lord Onslow —he may be surprised—that it is correct to ask searching questions about who gets the aid and whether it reaches the right people.
I believe that the ending of the Cold War gives us a chance to think afresh about the whole issue of international aid, not only aid from Britain but from the entire world. While the Cold War lasted our dictators were better than their dictators and therefore we had to keep our dictators in power while some of them bought arms from their dictators, which is another matter. The so-called new world order, for what it is worth, presents a historic opportunity for us to think in a different way not only about the amount of money we give but how we give it and who receives it.
Furthermore, we must look critically at whether government to government aid is a proper instrument. That depends on good governance. There is no reason why we should not insist on good governance as a way of utilising money properly. I believe that in the emerging new world order, we are in a strong and unique position through our Commonwealth connections, our place in the European Community and the Lome Convention. One finds that in all the United Nations bodies a great deal of British expertise has been involved for a long time. If you are a British citizen you have no chance of obtaining a United Nations job because the place is full of Brits. Therefore, the international aid scene has been very much a British achievement.
I shall speak on that issue rather than the question of more or less money. While the Cold War lasted, while many hangovers of the old Empire lasted, aid was an embattled field. There was a great deal of blackmail and cajolery on both sides. There were many base motives for which aid was given but it was dressed up as humanitarian aid. It is ironic that now a whole new vista has opened up. Soon after I arrived in this House I was requested by a radical group from Gujarat to ask Her Majesty's Government to insist that the World Bank asks the Government of India to meet their commitment to the Narmada River project. Several poor tribes are being displaced by the building of the new dam and their only recourse is not to the Government of Gujarat and not to the Government of India but to the World Bank and the British Government.
That is indeed a great irony because still residing on the left I was struck by the fact that we were using previously derided international institutions such as the World Bank to insist that there are poor people in the poor countries of the world whose governments are not a good guarantee when it comes to the question of human rights. I have had personal experience of to what extent many third world governments resent judgments on their human rights.
It may be—not this evening but on another occasion—we shall have to think about the morality of conditionality. Until recently, people have resisted conditionality, saying that it is an invasion of the sovereignty of many nations. We must ask ourselves:

301
what is national sovereignty about? Is national sovereignty being used in the interests of the people of those countries or not? Why should a government be allowed to torture their people? While that may be done because we cannot prevent it, should we not stand up and say that we do not like it? There are certain moral values which we should stand up for.
We are all in sympathy with attempts to improve the lot of the poor. I believe that, very often, aid works. I take on board the many examples which the noble Earl, Lord Onslow, gave. However, I should say to him that my former colleague and friend the noble Lord, Lord Bauer, had been telling me that for many years. It is an extremely important point. But now is the time to ask ourselves about notions such as human rights conditionality. Should we not insist that certain human rights standards are maintained by countries which receive aid?
The Earl of Onslow: My Lords, is not the noble Lord going down the road of that splendid character in the Jungle Book called Peter Sahib, Protector of the Poor? He is going down the road of the honourable Indian civil servant and saying, "We must govern to make sure that those people carry out their human rights obligations." If we are not very careful, that is the end of the road at which he is looking.
Lord Desai: My Lords, that may be so. I am not worried about that. I am saying that those questions have not been thought about. I have a weakness for mathematically constructing indexes and I have done that in regard to the human rights performance of different countries. At one United Nations meeting I was accused of being Eurocentric, which amused me no end. I said, "Yes, of course I am being Eurocentric because I do not think that a country has a right to torture its people." The countries which complain about Eurocentric human rights buy Eurocentric guns. As regards the technology of weapons, they espouse European values, so why do they do not do so when it is a question of humanitarianism?
We must not be complacent or arrogant but we must be tough. When the new world order is constructed, I hope that it is more democratic than the old world order. I hope that we shall look after the poorest of the third world as well as the poor of the first world. However, in a long-term way on another occasion we must ask ourselves what are the best forms of giving aid. Let us give more aid. Let us fulfil the criteria of 0.7 per cent. although I should like the figure of 1 per cent. to be given in aid. However, I believe also that issues like conditionality will not be escaped. The whole notion of national sovereignty, on which we have a battle in another sphere of our current politics —subsidiarity and so on—will be open, because we live in a very global world. In that global order in which we live, it may turn out that through the United Nations or other government agencies, we may have to think seriously about what are the various forms of giving aid and what is the best way in which to help the poorest people.
As regards GATT and the Uruguay Round, although for a long time the third world was
302
suspicious of GATT, if not hostile to it, through the 1980s third world countries have moved to a position in which they want freer trade. They want GATT to succeed. It is not succeeding. That is not because of the third world's attitude to protectionism but because of the subsidies given to very rich farmers. It has been a great loss that in its long membership of the EC, Britain, as the one country which does not have a strong farming lobby—in spite of what one may think listening to debates in your Lordships' Chamber—should have long ago set our mind very firmly against the common agricultural policy, which is an abomination. There is no other word for it. It is a vast waste of resources. Apart from what it costs us it costs the third world quite a lot. The idea is that the GATT process should be held up because of a small number of farmers in another country which shall remain nameless. We should have said long ago that freer trade is important. We have preached to the third world about trade and not aid. As the noble Earl, Lord Onslow, said, we have to protect the Carolina jean makers and our own inefficient manufacturers.
As part of the new world order we shall have to say that if it is to be trade it has to be done in such a way that the third world can benefit from it. Ultimately, while aid will be good for the many poor of this world, in the long run they will have to produce things which they can sell and which somebody will buy. That will give them income. There is no other way of doing it. In a sense the sum involved is £6 billion at one per cent. That will be equivalent to £1 per person in the third world—not very much money in either relative or absolute terms.
Eventually, the problem of rural poverty in the third world is going to be solved when the world poor have the skills and assets to produce things which others will buy either in their country or abroad. That is the only factor which economics can contribute to the problem. If that happens we shall have to have an economic order which genuinely frees trade. It helps countries to relocate industry in their backyards. Let them innovate and thrust forward in these various directions. I know that this is a political minefield. Thank God I am not speaking from the Front Bench.
There are a number of these problems which we shall all have to think about. I hope that this opportunity which my noble friend Lord Judd has given us is the first of many which we shall have in this House to think in new ways about not only British aid but in a multilateral and global sense. Let us think of new ways of solving the problems which have not been solved properly for a long time. A great deal of money has gone down the drain.
11.2 p.m.
Lord Rea: My Lords, as the penultimate speaker before the noble Baroness replies, it is obvious that many of the points which I was going to make have already been made far more eloquently by other noble Lords. The drift of my remarks has been summarised very well by the right reverend Prelate in the words of Archbishop Temple. I remind noble Lords that they were: self-interest dictates that which justice demands.

303
Many speakers have outlined the kind of gains that we might get in this country, but not so many have outlined the dangers which are lurking if we do not alter the present gross discrepancies in wealth which exist between North and South. As the noble Earl, Lord Onslow, said, not all overseas aid is necessarily helpful. The developing world is littered with schemes which have ground to a halt, from the groundnuts scheme onwards. Luckily, as many speakers have pointed out, I believe that the ODA has learnt from this kind of experience and is now running pretty well targeted bilateral programmes. That is more than can be said for some of the activities of the multilateral organisations, however laudable their aims.
The World Bank has been mentioned. It is always being shot at. It has a very mixed reputation in developing countries. An article in last Friday's Guardian headed,
"How to waste 5 billion dollars a year",
described the findings of a high-level internal World Bank inquiry called Effective Implementation: key to development impact. One of the saddest findings was that 43 per cent. of water supply and sanitation projects had met with problems. These are developments that are basic to public health improvements.
Overall, about one-third of projects failed, mainly because they were insufficiently tailored to local conditions. I quote from the article:
"Bank staff appeared more driven by pressure to lend than a desire for successful project implementation. They often insisted on international consultants to prepare projects resulting in poor quality suggestions because the consultants 'from New York or London'"—
I am sure they were not from London—
"had no experience of the country."
That mistake is largely avoided by the ODA, and its strong support of non-governmental organisations who are in touch with local needs is one guarantee of that. But of course large-scale projects such as could be financed by the World Bank are very much needed. I am just thinking particularly about a new sewerage system for Lagos or Jakarta—vast projects which no one who has not got a lot of money could think of launching. I do not know whether there are enough experts in the world to think about a proper sanitation system for Calcutta.
I hope that the ODAs expertise can influence the next round of World Bank projects so that they are more wisely chosen and better implemented. As we are a major donor we should be able to insist on that. Even today or tomorrow the next round of funding of the International Development Association, as the right reverend Prelate pointed out, is being decided. As many other speakers said, I am sure that the best way to help a poor nation to get on its feet is not through prestigious visible projects but in less visible ways through a multitude of small projects.
Here I would just mention the International Fund for Agricultural Development, which has a good record of success in the way of helping small farmers. Sadly, it is much less well funded than the World Bank. I should like to ask the noble Baroness whether it can be resurrected. It is now languishing. What are the current obstacles?
304
In health, of which I have personal experience in the third world, I know that I can count on the noble Baroness to be a strong supporter of the concept of primary health care. I was present at the annual general meeting of Health Unlimited, at which the noble Baroness spoke. It was a good speech, giving an informed overview of the health-care needs of the South. In particular, I appreciated her emphasis on the need for appropriate technology. If I may quote her words back to her:
"Children and adults need low-cost technology to tackle those health problems that have the greatest social and economic consequences."
That was music to my ears, and here, like the noble Lord, Lord Bridges, I have to declare an interest in that I am chairman of a non-governmental organisation called AHRTAG—the Appropriate Health Resources and Technology Action Group. I know that the noble Baroness puts some of her money where her mouth is because the ODA is a major contributor to my organisation, which aims at providing educational resources for health workers in primary health care in the developing world.
To return to the benefits that we receive through well-targeted aid, as my noble friend and others have pointed out, we get orders for British industry. Overseas aid can be part of the mechanism for promoting growth, which is at last in fashion, in our industrial output. In the longer term, good trading relationships flow from the contacts made during the implementation of aid projects and especially technical assistance and training programmes. We probably lost millions, if not billions, of orders as a result of cutting grants to overseas students during the 1970s. I know that that was done by a Labour Government—all the worse, I say.
Bilateral and multilateral project aid is one way of opening up markets for our goods. A much quicker way would be to tackle, as other noble Lords have pointed out, the vast amount of commercial and official debt which is crippling the poorer countries of the third world. The servicing of that debt swallows up as much as, and in some countries more than, is given as aid, which is surely a ludicrous situation.
There are several real dangers in allowing the present situation of economic stagnation and often contraction to continue in the countries of the South. In the first place, as other speakers have pointed out, poverty leads to unrest and civil and international conflict is more likely, with consequent flows of refugees from the actual military conflict or from the famine which almost inevitably follows. Poverty itself will result in the movement of economic refugees to developed countries because there they will be prepared to work for lower wages than other workers. That encourages racism and the political movements that go with it. We are already seeing that in several European countries—France and Germany are particular examples. A better and more prosperous Vietnam would have led to fewer boat people coming out of Vietnam or would have made it more acceptable for them to return home.
Rapid population growth—I am surprised that no one has mentioned population—is associated with poverty and underdevelopment. Even before modern

305
contraceptives were available in Europe, population growth rates decreased in parallel with economic and social development. The same will occur, and is occurring, in the South. Immediate help with family planning is needed which will help women in the developing world. But the greatest long-term falls in fertility come when couples see that smaller families lead to greater prosperity and better opportunities for their children. This stage can be achieved only when development reaches a take-off point with high levels of literacy, particularly female literacy, and better job opportunities.
We need a generous overseas aid budget not simply to eliminate the degrading poverty of the nations of the South but for our own economic health and the survival of democratic values in the world.
11.13 p.m.
Lord Bonham-Carter: My Lords, this has been a long debate and it is now very late. Like the noble Lord, Lord Rea, most of what I was going to say has already been said. I shall try to do my best therefore to avoid repeating what noble Lords have already said and confine myself to the very few things which have not been said or which I think should be said with more vehemence perhaps than heretofore.
I must confess that I think that the date of the debate is particularly unfortunate. If it had been three weeks ago, we might have thought that we could influence, although that might be thought to be an optimistic idea, the Government's decisions which will be announced tomorrow. If it had been three weeks hence, we might have been able to discuss how we could best deal with whatever the Government's decisions turn out to be. Three weeks ago we might have thought that we could help the noble Baroness in her uphill task. Three weeks hence we might have guided her in the priorities which she should pursue. However, we are unable to do that and therefore we must do our best to express our views on this vexed and familiar subject which we have discussed many times before.
It is the case—I shall be trying to answer some of the points made by the noble Earl, Lord Onslow—that the need has scarcely been more urgent. I believe that most people are agreed that in the Horn of Africa 23 million people are at risk and that in southern Africa 18 million are at risk. The fear that has been expressed again and again in tonight's debate is that our present economic troubles will be used as an excuse for reducing the part that we can play in dealing with this crisis of humanity.
The noble Earl, Lord Onslow, made a very interesting speech which I, like the noble Lord, Lord Desai, thought derived something from a reading of the works of the noble Lord, Lord Bauer. However, it seems to me that he did not distinguish between different types of aid. Aid is not just something which can be treated in a totally homogenous way; there are different forms of aid which are given in different ways and which have different impacts. For example, there is emergency aid—
The Earl of Onslow: My Lords, I feel that I must interrupt the noble Lord. His criticism is completely accurate. In my notes, I had a reference to "ambulance aid". That is something which is fundamentally different from development aid. My criticism is of the latter which I genuinely believe to be actively harmful and something which does no one any good at all—except keep corrupt governments in power.
Lord Bonham-Carter: My Lords, that was not altogether apparent from the noble Earl's speech. I just make the point that emergency aid is a concept which is actually at the top of the present agenda. What is happening in Bosnia? Well, we are using troops to transport food to people who would otherwise not get it. That aid is crucial and is the kind of aid which we need to give both in the Horn of Africa and in southern Africa. To just talk about aid as though it is counter-productive is, in my view, extremely misleading.
There is also tied aid, by which I mean aid that is tied to buying products from the country which provides the aid. That practice is often extremely damaging; for example, airlines and steel works are sometimes tied in such arrangements and have often been mis-used. There is also political aid upon which the noble Earl spent a great deal of time. That was most manifest in the cold war and led to the supply of arms to extremely unattractive characters on the Left and on the Right and was totally contrary to the spirit of aid about which the noble Lord, Lord Judd, was talking.
To say that all development aid has been a waste of time is contrary to the facts. I believe that the "Green Revolution" in India—I am ready to be corrected on this —had something to do with aid. What is remarkable about that revolution is the fact that India with a population which is growing at a vertiginous rate is now feeding itself and, indeed, is even exporting some food. It would not have been able to do so without the Green Revolution. Therefore, to pretend that that had nothing to do with aid is, quite honestly, contrary to the facts.
However, the noble Earl made an interesting point when he started to question—although he did not pursue it—what makes some countries take off. We do not know quite as much as we should about that, but it is a matter to which I shall return shortly. Of course he and other people are right to say that trade is as important as aid; but they are not mutually exclusive. You can have a proper and decent trading policy and, at the same time, provide aid which is well adjusted to the needs of the country to which it is directed.
There are two other points that I should like to make before I sit down. I see that the noble Lord, Lord Monkswell, wishes to intervene. I give way.
Lord Monkswell: My Lords, I am obliged to the noble Lord. When he talked about the green revolution and about India feeding itself, the noble Lord wondered whether he would be contradicted. I am afraid that I have to put forward a small point of contradiction. As I understand it, the green revolution in India hinged upon two factors: one was the technological change in the development of new

307
strains of rice which enabled there to be higher productivity; and the other, which is rather curious, was Jimmy Carter's decision not to give the aid that had been given in the past. One of the effects of that was a major reduction in agricultural machinery manufacture in the western world which threw many workers in the western world out of work.
Lord Bonham-Carter: My Lords, technological aid is important. It is one of the most important kinds of aid that can be offered. So far as concerns the green revolution and the result of technological aid, in the sense of passing on better ways of doing things, that justifies the point that I was trying to make.
I want to touch upon just one other important point which I believe was mentioned by the noble Lord, Lord Bridges, alone, although I do not know whether it was mentioned while I was out of the Chamber. It is the consequence of devaluation. It is difficult to assess what the result of devaluation will be. It is not good enough to say, as Mr. Lennox-Boyd said earlier this week or last week, that it will be slight, because only 4 per cent. of goods used in our aid programmes are paid for in dollars or other currencies. Devaluation must affect the quantity of goods and services which a given number of pounds will purchase. The effect will be fed through into our economic system in due course.
That means that it is crucial that aid is indexed. Unless it is indexed, there will be an automatic cut. Although people will differ about what it will be, let us say that it will be between 7 per cent. and 10 per cent. Without being indiscreet about what will be in the Statement tomorrow, I hope that the Minister will assure us that that is something that has been taken into account, otherwise there will be a severe cut at current prices in the aid that we give.
The third issue is one that was raised by several noble Lords: priorities. What are our priorities in giving aid? In development aid, I have a special obsession. The highest priority is literacy. If we look at the countries that have taken off, we will find that literacy in South-East Asia is in the order of 70 per cent. while that in Africa is about 40 per cent. The inheritance from the British Empire in education lies in higher education not primary education: five universities in Nigeria, X universities in Central Africa, but inadequate primary education.
I was talking the other day to an Indian Member of Parliament who was over here. He said that India was now exporting graduates to the west, but that it was difficult to persuade the Indian Government to engage in a massive programme of primary education, and what is almost impossible is to persuade them to engage in a programme of primary education for women. Unless women are educated, there will be no progress in the matter of population, a point rightly raised by one noble Lord. I am afraid to say that education does not appear to have any effect upon the sexual activities of males. The only way to achieve birth control is through the education of women. That will not merely help to deal with population growth, but in third world countries agriculture is primarily a female occupation. If there is to be an advance in agriculture, female literacy is important. If there is a
308
literate female population, the women will see that their children are educated. So I put as a priority in aid, literacy and, above all, literacy among women. I hope that the Minister, as a literate lady, agrees with me. I greatly look forward to hearing her response to the debate.
11.25 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, I should like to begin by thanking the noble Lord, Lord Judd, my noble friend Lord Prentice, the right reverend Prelate and many others for the kind remarks that they have made during the course of the debate. It has been a wide-ranging debate and at twenty-five past eleven at night, there is no way in which I can answer every question that was posed. I hope that your Lordships will understand, because you need your beds just as I need mine. I would like to respond in general terms and then on specific issues —if there is a specific answer—to write.
One of the interesting factors in our debate tonight has been the concern of your Lordships to get these issues right. It has been heart-warming to hear it, but I must say right at the outset to my noble friend Lord Onslow that we must do something about the facts and figures that he has been fed. I do not know who has been feeding them to him—I can guess, but I do not know for certain. What I want to do is to make sure that every pound of British aid is spent in the interests of proper development and trade.
The Earl of Onslow: If my noble friend will allow me, the figures come from the ODA.
Baroness Chalker of Wallasey: No, my Lords, I am afraid that my noble friend misinterpreted some of the ones that he read out because I did not recognise them. I am sure that I would have done, had they been in context.
Your Lordships might hope that tonight I should —but I do not think noble Lords really expect me to —anticipate the outcome of the public expenditure survey which will be announced by my right honourable friend the Chancellor of the Exchequer tomorrow.
Like Mark Twain, reports of the demise of the aid programme and its Minister have been greatly exaggerated. The Government are fully aware of and appreciate the many concerns that have been expressed in your Lordships' House and in another place and by our excellent non-governmental organisations about the future level of aid. Government nevertheless have to face economic realities and my noble friend Lord Prentice put this well when he explained what had happened, not just in the time of Conservative governments but of Labour governments too, of which the noble Lord, Lord Judd, was even a member.
There are many important claims on the public purse. The Government's overriding economic objective must be to keep public expenditure under firm control and build for economic recovery.

309
Nevertheless, I assure your Lordships that the Government remain firmly committed to maintaining a substantial and effective aid programme.
Our record is sound. Since 1987–88, the Government have increased their aid to developing countries substantially—by 8 per cent. in real terms. Our expenditure last year—1991–92—at nearly £1,800 million, was 3 per cent. higher in real terms than the previous year. The noble Lord, Lord Ponsonby, made a very interesting speech and I shall come back to one or two of his points later. May I remind him that in 1991 we had the fifth largest aid programme in the world? This financial year it will exceed the £1,835 million planned. Perhaps I may also say to my noble friend Lord Onslow that we have been making sure year by year not only that it is better targeted, as many of your Lordships have kindly commented tonight, but that none of it is wasted. We have those checks and balances; we do not pay money to despot dictators, as I sometimes read in the British press.
As my noble friend Lord Prentice and the noble Lord, Lord Bridges, intimated, it is important at all times to look not only at how much we spend, but at how we spend it. It is neither logical nor sensible to separate the quantity of aid from its quality. Donors and recipients alike all agree on that. The Development Assistance Committee of the OECD, as was said a couple of times this evening, has repeatedly recognised the effectiveness of the British aid programme. One reason for that is our focus on the poorest countries. About 80 per cent. of our bilateral aid goes to countries with an annual per capita income of 700 United States dollars or less. The programme is highly concessional. All our new aid to the poorest countries is on grant terms which avoids adding to their debt burden. That is an absolutely crucial feature of it.
We have rigorous criteria—economic, technical, environmental—and we shall continue applying them to ensure the quality of all the programmes and projects we support with official funds. Another reason why the British aid programme is effective is because it is well targeted. It is targeted on areas of key relevance to the aim of promoting long-term sustainable development; the sort of development that enables developing countries to produce, to trade, to earn their own livings. I remind your Lordships that three-quarters of the income of developing countries comes from trade not from aid. I wish that it was seven-eighths, nine-tenths and even higher proportions.
We have six key areas—economic reform, good government, the reduction of poverty, the promotion of human development, the environment and the development of the private sector. Let me say briefly a little about each of those areas.
I shall start with economic reform. Sustainable development needs sound economic policies including sensible prices and exchange rates, controls on public expenditure in the developing countries and efficient public services. We do our best through technical co-operation to make sure that that happens in country after country. It is very interesting to look at
310
the countries that have pursued sensible economic reform over a number of years. It is quite clear that they are getting better growth rates and they are stopping the nonsenses of the past. I accept there were nonsenses in the past, but we have at long last got the donor community acting together to bring about sensible economic reform.
The second area is the promotion of good government which involves issues such as the competence of government; its legitimacy and its accountability to its people; broad participation of the people in the development process; and respect for human rights and the rule of law. That has been mentioned by many noble Lords tonight.
The third area is the reduction of poverty—appalling grinding poverty which, for all the scientific brains in a few countries, still exists among a mass of the people in those very same nations. We achieve that both indirectly through promoting economic growth and by direct action among the poorest in projects such as slum improvements, and particularly in education projects at primary level and education projects for women's literacy. The noble Lord, Lord Bonham-Carter, referred to that matter. If one makes women literate, one achieves so much more for the long-term than one seems to be able to achieve through the education of men. So be it!
The fourth area is the promotion of human development, including better education and health, and the promotion of childbirth by choice not chance. I agree very much with the words of the noble Lord, Lord Rea, on that subject. Here is an area where the provision of good primary health care convinces women their children will live longer. One therefore encourages them to follow sensible family planning policies. That is obviously another key part of our work.
The fifth area is helping developing countries to tackle environmental problems. The noble Lord, Lord Ponsonby, mentioned his recent visit to Siberia. The situation in some parts of Eastern Europe and the former Soviet Union, in terms of environmental problems, is chronic. The task there is so mammoth that we all have jobs for lifetimes to come. Through technical co-operation and our know-how funds we are seeking to help those countries to tackle their problems for themselves. We are not tackling their problems for them but giving them the knowledge and the know-how to do it for themselves. We are working alongside them so they develop the ability to control their own pollution as time passes.
The sixth area is the promotion of the development of the private sector as a crucial contributor to economic growth. Sustainable development has long been at the core of the aid programme. The UNCED conference in Rio explicitly recognised that we cannot separate sustainable development from the environment. I know how much the noble Lord, Lord Judd, and others care about that. In Agenda 21 we set out a blueprint for sustainable development into the next century. I can assure your Lordships that we shall mobilise the aid programme in support of those goals of Agenda 21. In fact, we are already doing so to a large extent.

311
The process of promoting development is important for us all. Improvements in the prosperity of developing countries helps their economic growth, encourages world economic growth and will provide a better environment for British companies to trade and invest. Much of the work of our aid programme provides that very employment for British companies which we so much want and for the individuals who do such a splendid job working in the developing countries.
A number of comments were made by the noble Lord, Lord Judd, my noble friend Lord Prentice and the right reverend Prelate concerning the targeting of aid. We accept the internationally agreed target but, like most other donors, we are not in a position to set down a timetable for reaching it, if we have not already achieved it or exceeded it. Future levels of aid will continue to depend on the economic circumstances of individual national governments and on other calls on public expenditure. I know, and regretted, that for the calendar year 1990 the ODA figure fell to 0.27 per cent. of GNP, but in 1991 it was 0.32 per cent. Over the five years we have maintained the average at 0.30 per cent. or a little above. It is significant that we have maintained that average over a period when our programme has grown substantially in real terms. As I have said many times, it is also important that we look at how we have spent the money.
As we went through the debate I noticed some comments about a possible reduction in money for development assistance in the EC budget. I can assure your Lordships that wherever those figures came from in the first place, they were not correct. The figure which is being considered for development assistance under the budget for 1993, including food and emergency aid, represents an increase of about 5 per cent. on the original commitment for 1992. I shall consider again what the noble Lord, Lord Judd, said, but I can assure him that he need have no fears on that score.
While I am on the subject of the European Community development budget, which the noble Lord mentioned, I should point out to the House that the 1992 aid budget was nearly 20 per cent. higher than in 1991 and the 1993 preliminary draft budget is more than 2 billion ecus, which represents a 15 per cent. increase over 1992. Therefore, with the latest amendments, that will rise by 0.1 billion ecus to 2.1 billion ecus. That is in addition to the EC budget. We have the Community aid to ATP countries through the Lome Convention, which so far this year is over 1.6 billion ecus. Your Lordships probably already know that all the aid to Eastern and Central Europe is separate from and additional to that for developing countries; so in both areas we are raising the amount that is being spent.
It would be easy to talk for some time about the follow-up to UNCED. The Rio conference was a fascinating one, as I made clear in your Lordships' House on our return. We shall contribute our share of the 3 billion ecus pledged by the European Community at Rio for specific projects and programmes in key Agenda 21 sectors. We made it clear in our Community statement there that the
312
member states could only announce individual contributions in accordance with their national budgetary procedures. In common with a number of other member states, although there may be some announcement tomorrow, we are by no means yet able to complete the process and we shall still have to decide the details of our contributions in the weeks ahead.
The right reverend Prelate, in his very interesting speech, commented particularly on debt. With the Trinidad terms promoted by my right honourable friend the Prime Minister, the story in relation to debt is very much better than it used to be, but there is still a long way to go. We have led the way in promoting measures to relieve the burden of debt but, as I said, there is more to be done. The Trinidad terms currently reduce the eligible payment due to governments by as much as 50 per cent. Your Lordships will recall that my right honourable friend the Prime Minister wanted that to be two-thirds of the outstanding debt. We have not reached that agreement with all other donors, but we shall press for even greater debt relief to be made available to the low income, heavily indebted countries which need it. We want them to be able to stand on their own feet, run sensible economic policies and get growth in their economies.
The noble Lord, Lord Monkswell, made reference to net resource transfers. Net transfers to the poorest countries have become strongly positive throughout the 'eighties and now the 'nineties. Some middle-income countries in Latin America have made net transfers to industrialised countries; but that is due largely to a fall in net bank lending which arises when countries are in a position to repay their debts. The official flows have increased considerably. Recent figures from OECD, which are much more comprehensive than those from other sources, show that developing countries received £23.5 billion more in 1991 than they paid out.
We have also been looking at net private flows. The figure relating to 1990, which was interpreted by some as showing that developing countries had paid £6.1 billion to United Kingdom banks, was certainly not a true reflection of net bank lending. During the past year the Bank of England has undertaken work to make sure that all financial transactions are taken into account. The revised figures for total flows from the private sector to developing countries in 1990 amount to £1.7 billion. The preliminary estimates for 1991 again show repayments of claims to United Kingdom banks but they decrease to £680 million, and there is an increased total net flow from the private sector to developing countries of £2.3 billion. The situation is gradually improving. It is those kinds of big financial movements that will help those countries to invest of their own accord in the infrastructure they need if they are to establish their own industries.
The right reverend Prelate spoke about private investment going down. The one thing that private foreign investors need more than anything is confidence before they invest in developing countries. They want to be sure they can repatriate their profits and dividends, operate in a liberal and transparent economic environment and that host governments will

313
not do U-turns in economic policies. In supporting economic reform programmes, our aid is helping to create the right conditions for foreign private investment. That too is critical to getting growth in developing countries. Your Lordships know that confidence takes time to build. Where countries persist in the right economic path we are beginning to see real returns. Mauritius, Botswana and Ghana all show how it can be followed through and are now attracting foreign investors.
Some comments were made about tied aid. We will try to get as much untying of aid as possible because we believe it right that the money made available by donors should be used in the most effective way for the recipients. That means having the freedom to buy in region and in country and not to have the aid tied. I wish a few of our partners in the Community could go along that path with us as fast as we wish to go, but we will continue to push it for the good of the recipients of the aid programme as well as better value to the taxpayer who gives the money in the first place.
The noble Lord, Lord Taylor, mentioned the future of the aid and trade provision. I am afraid that I cannot give him any information about that until we have concluded the public expenditure decisions. What I will say is that I am well aware of how valued this is by industry but it should not be seen as a subsidy to industry; it should be there to get economic regeneration in developing countries started as well. That is always something that we must have in the forefront of our minds.
A number of noble Lords have spoken about respect for human rights. We are seeking to make sure that that, as part of our good government policies, is pursued in all our aid giving. We seek to proceed by offering incentives—handing out carrots, not sticks-but we are quite prepared to stop new aid. Indeed, we have done so. We are quite prepared not to pursue projects, if we believe that the government of the country is going down the wrong path and not a path of good government.
My noble friend Lord Onslow made a speech which, I hope the right reverend Prelate will forgive me for saying, was very much like the curate's egg, because there were parts as regards which I agreed with him. Of course we want to see trade and money properly used. But where it is being properly used-and it is largely British aid-we watch for growth and sensible developments. Studies on the effects of aid show that on balance increases in investment contribute to growth. The benefits of aid are confirmed by the record of our own aid projects, and on evaluation—all our projects are evaluated. Some 80 per cent. of them seem to have been partially or wholly successful. There are examples of benefits from well planned and executed projects. I shall not detail them tonight, but there are many to be seen. One of the new departures in recent years has been the stimulation of small and medium-sized industries in the developing countries. That is exactly what they want and how they will progress.
It is very tempting to keep noble Lords in the Chamber for a good hour further, but I promised not
314
to do so. My noble friend Lady Trumpington pulls a bigger punch than I do. But let me just say that we have had a quite exceptional year in respect of people in real need overseas. The needs in southern Africa have probably been the worst ever known as a result of drought. There are the needs in the Horn, the needs in Yugoslavia, the needs of people in Iraq and the needs of people in eastern Europe and the former Soviet Union. We have played a very significant part as a nation and in our presidency of the EC in making sure that the right kind of technical co-operation is given, and the right donations to the United Nations agencies which have been seeking to do so much—I mention in particular UNICEF, of which the noble Lord, Lord Bridges, is such a prominent member—to give help where and when it is needed.
But we are not only concerned with emergency aid. As the noble Lord, Lord Rea, said, the need for long-term development aid exists in order to prevent the emergency aid being required at some future time. I know that the noble Lord, Lord Judd, believes that.
While I cannot answer all the questions of noble Lords in the debate tonight, and certainly cannot put every mind at rest, I can say that we seek to fit the assistance that we offer to the real assessed need of the country. We seek to do that in a way which is both cost effective and as simple as possible, so that it cannot go wrong. Simple is beautiful in many places. That is why we back bodies such as the Intermediate Technology Development Group and many others who are bringing new ways of doing things to the developing world. We do it with remarkably little funds sometimes.
Like any spender, if I had more, I could use it. But I promise your Lordships' House that whether it be with the know-how funds that the Prime Minister announced just two days ago to President Yeltsin doubled, with another £50 million going to the Soviet Union; or whether it be through our work in multilateral organisations, we seek to get value for money.
Like the noble Lord, Lord Desai, I am not satisfied with everything that goes on, be it in the World Bank, the EC or other multilateral institutions. But I give noble Lords this assurance. We shall do all we can in the Overseas Development Administration to make sure that the faith in my department which has been very clearly demonstrated by the debate tonight is not misplaced.
On the subject of GATT, a healthy global economy and an open trading environment are vital for the developing world just as they are for us. The GATT Uruguay Round is the top trade priority in our presidency of the Community. We have gone back, and back again, when it looked as though the negotiations were breaking down. My right honourable friend the Prime Minister has been unceasing in dragging people back to the negotiating table. We shall continue to support the Commission in its efforts to reach agreement with the United States. The President of the Commission assured my right honourable friend the Prime Minister on Monday that it was his wish that negotiations should resume, as they have done this week. The United States has

315
expressed the same wish. We shall go on working for a solution to avoid the use of punitive tariffs which would do nobody any good.
Finally, we are in the middle of transition to a new international order. It is not easy. The UN faces new challenges. The EC faces new challenges. We do too. But we have to make sure that we measure up to the needs of the developing world in which there are many people who literally cannot help themselves. We also need to be tough and fair with leaders of countries who could do a great deal better with their own
316
resources let alone with what they receive from donors. I assure my noble friend Lord Onslow and the remainder of your Lordships' House that we shall not only play our full part in the international effort to bring about a better world, but we shall do so with a very firm eye on the British taxpayers' money and on value for money for all the people in the developing countries.
House adjourned at eight minutes before midnight.