Lords Sitting of 6 December 1993

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

Falkland Islands: War Crimes Inquiry
Lord Buxton of Alsa Lord Buxton of Alsa asked Her Majesty's Government:
Whether they will take steps to end the inquiry into alleged war crimes committed in the Falklands.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, in August 1992 the Secretary of State for Defence referred the allegations to the Crown Prosecution Service, which asked the Metropolitan Police to undertake an investigation, which is in progress. The extent and nature of that investigation are operational matters for the commissioner in which Ministers cannot intervene. As soon as the investigation is completed the police will submit a report to the Director of Public Prosecutions who will than decide whether any action needs to be taken.
Lord Buxton of Alsa: My Lords, I thank the noble and learned Lord the Lord Chancellor for his reply. I apologise for being inattentive at the start. In asking him a further question perhaps I may draw his attention to the fact that it is nine months since I raised this matter in your Lordships' House, when all noble Lords thought that it should be dealt with as quickly as possible in order to avoid embarrassment or humiliation.
Does the noble and learned Lord agree that evidence taken by the police in Argentina from members of the defeated armed services must on any the country concerned is the United Kingdom, France, Ecuador, or any other country: it is beyond credence that evidence from defeated armed services will not be biased and therefore suspect. Therefore, is it not now impossible to bring charges against any member of our own valiant and heroic task force since the public will never believe that the evidence on which charges are based is not suspect or biased? Is it not time for the Government to intervene, as I am sure any other government in the would would, in order to avoid our sinking further into this ever-worsening quicksand which must result in some embarrassment or humiliation to somebody?
The Lord Chancellor: My Lords, as I said, the Director of Public Prosecutions considered the matter and it was thought right that the Metropolitan Police should be invited to inquire into the allegations. That is what is happening. It would be premature to make any decision upon the matter until the report on those investigations is complete and is submitted to the director. Obviously the source of any evidence which the report discloses will be relevant in considering what
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is to be done in the light of the report. However, that is a matter to be considered at the appropriate time. I am certainly not in a position to offer any comment upon it now.
Regarding time, if they are to be thorough such investigations necessarily require some time. I have no reason to believe that the Metropolitan Police have taken longer over the inquiry than circumstances would justify.
Lord Stoddart of Swindon: My Lords, will the noble and learned Lord the Lord Chancellor confirm that the allegations being investigated are based on a book? Will he further confirm that the allegations of war crimes refer to incidents which occurred on the battlefield in the heat of battle? Can he let me and the House know whether a similar inquiry is being made in Argentina in response to allegations that Argentinian soldiers engaged in similar war crimes? Finally, is it not a disgrace that British soldiers should be placed in this position at this time?
The Lord Chancellor: My Lords, it is extremely important for the proper safeguard of any fighting forces that in the event of members of those forces being captured they are treated properly. The Geneva conventions to which we are party are intended to make those obligations plain. The allegations which are being investigated are such that in the view of the Crown Prosecution Service they require investigation. I cannot say whether they concern matters that should be regarded as occurring in the heat of battle. Obviously that is a circumstance which must be taken into account. I have read reports about investigations by the Argentinians. I am not in a position to say what is occurring in that connection at present.
Lord Rawlinson of Ewell: My Lords, will it not ultimately be a matter for the Attorney-General in his semi-judicial role rather than as a member of the Government, to decide whether a prosecution should be launched, taking into account all matters such as the public interest?
The Lord Chancellor: My Lords, my noble and learned friend is perfectly correct. The ultimate decision is one taken under the superintendence of the Attorney-General. The report has been called for by the Director of Public Prosecutions. It will be made to the director.
I should like to emphasise, as my noble and learned friend has done, that it is a matter for those with a responsibility for prosecution. It is not a matter for government as a whole. In giving the reply that I have given, I speak in this Chamber on behalf of the Attorney-General.
Lord Williams of Mostyn: My Lords, does the noble and learned Lord agree that a noble purpose in sending the task force to the Falkland Islands was to maintain the rule of law? Is it not therefore more appropriate to follow the course indicated by the noble and learned Lord, Lord Rawlinson of Ewell, in order to indicate that in this country at least we follow the rule of law, whether convenient or uncomfortable?
The Lord Chancellor: My Lords, the purpose of sending the original task force was to maintain the rule of international law. I am sure that we are all thankful that that enterprise was so successful. It is essential that we as a country should maintain the rule of law in all circumstances. The inquiry is being pursued under that policy with a view to an appropriate decision being taken in the light of the full circumstances disclosed by the inquiry about whether or not any further proceedings are required.
Lord Campbell of Alloway: My Lords, perhaps I may ask this question of my noble and learned friend the Lord Chancellor. When is it expected that a decision will be made on whether or not to charge any of those men with murder; and by whom will that decision be made?
The Lord Chancellor: My Lords, the decision will be taken following the receipt of the report. I am not in a position to say at this moment precisely when that report will be completed. A decision will be taken by the prosecuting authorities; that is to say, the Director of Public Prosecutions under the superintendence of the Attorney-General.
Lord Strabolgi: My Lords, why is the issue a matter for the Metropolitan Police and the Attorney-General? By tradition, usually acts committed on active service are dealt with by the services themselves and come under the Advocate-General's Department; or has everything changed nowadays?
The Lord Chancellor: My Lords, everything has not changed. However, this matter was referred by the Ministry of Defence to the Crown Prosecution Service. That service invited the Metropolitan Police to make the inquiries. That may have a bearing on the question asked by the noble Lord, Lord Stoddart of Swindon, as to the precise nature of the allegations in question. However, that is the course of events that has taken place. I believe that to be appropriate in the circumstances of this specific case.
Lord Renton: My Lords, since this is a military matter, will not the Judge Advocate General be consulted by the Crown Prosecution Service?
The Lord Chancellor: My Lords, in taking appropriate decisions, I am sure that the Crown Prosecution Service, the Director of Public Prosecutions and the Attorney-General will consult all whom they believe to have a proper role in tendering advice in the circumstances of this matter.

NHS Hospitals: Research
2.46 p.m.
Lord Ashley of Stoke Lord Ashley of Stoke asked Her Majesty's Government:
Which NHS hospitals are in the top five for their research ratings, and what steps are being taken to ensure that research is not impaired by NHS market changes.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, for the first time this year the eight London postgraduate special health authorities have been rated for research but the results are not published in the form of a league table.
We are committed to the protection of good quality research and development in the NHS and a task force has been established to advise Ministers as to how best to protect and develop research within the new NHS.
Lord Ashley of Stoke: My Lords, I am grateful for that reply. However, will the Minister tell us what action is planned by the Government to rescue the University College group of hospitals from destruction by market forces? Will she bear in mind that that group has the highest possible reputation for research? It is because of the extra costs associated with outstanding research that it is now threatened with closure. It is on that account that the Government should step in to save that group.
Baroness Cumberlege: My Lords, before answering the supplementary question, perhaps I may congratulate the noble Lord on exceeding his three score years and 10 by another year and wish him many happy returns.
The Government are very concerned to protect research and because of that we commissioned a study to determine the excess costs attributable to research and development in postgraduate teaching hospitals. That study was completed in October and has provided the basis of support in relation to prices for the special health authorities. We intend to subsidise research and development at around 40 per cent. of overall annual expenditure for at least a three-year period.
Lord Walton of Detchant: My Lords, I welcome the establishment of the task force which the noble Baroness has just announced. In the review, will that task force be invited to take account of university-based research undertaken in clinical departments which is impossible to distinguish in many instances from that carried out within the NHS hospitals? Will the task force further take note of the reduction of funding of many university clinical departments as a result of the transfer of funds from the university budget to that of the research councils?
Baroness Cumberlege: My Lords, the task force will consider that matter. Also, the study to which I just referred, which was commissioned by the management executive, identified the excess costs that are attributable to research and development in post-graduate teaching hospitals. So to some extent the matter is taken care of.
We have seen an enormous increase in the amount of money that has been put into clinical research over the past 10 years. The total funding for the current year is £71 million. In addition, there is £150 million capital that is promised over two years, which represents a growth of 20 per cent. in three years. That will also take into account the increase in student numbers and the reorganisation of medical education and research in London.
Lord Molloy: My Lords, in addition to the welcome point which the noble Baroness made, would it be sensible for the department to ensure that staff associations are kept in touch with the specialist medical scientists? That is vital for the improvement of our National Health Service.
Baroness Cumberlege: My Lords, we work very closely with all the staff in the National Health Service.
Lord Bruce of Donington: My Lords, will the noble Baroness give the House the identities of the persons comprising the task force, their occupations and qualifications?
Baroness Cumberlege: My Lords, it would take a great deal of your Lordships' time to do that because there are 150 expert persons of distinction involved in the process.
Baroness Jay of Paddington: My Lords, will the Minister confirm that much of the important research and development done in the health service is carried out in hospitals which are not special health authorities? Although we welcome the special funding which will be given to them, following the point made by my noble friend Lord Ashley about the University College hospitals and the Middlesex hospitals, can the noble Baroness confirm that they have the highest research rating for undergraduate research and teaching in this country but that they will not receive any special funding under the arrangements which she has announced?
Baroness Cumberlege: My Lords, I wish to reassure the noble Baroness that this is just a first step. We are anxious to assess the research that is taking place in all the hospitals in the country, but it will take some time and the first step is just the special health authorities.
Lord Shepherd: My Lords, I appreciate that if 150 people are involved it would take too long to mention them at Question Time, but will the noble Baroness ensure that the names of those in the task force will be made available in the Library?
Baroness Cumberlege: Yes, my Lords, certainly. They are contained in the booklet, Special Health Authorities Research Review, and I shall place it in the Library.

Common Agricultural Policy: Cost
2.55 p.m.
Lord Jay Lord Jay asked Her Majesty's Government:
What has been the total expenditure in pounds sterling in 1993 on the common agricultural policy, and what total is proposed for 1994.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, the cost of the CAP to the European Community in 1993 is estimated at £27.6 billion. The 1994 draft budget has been set at £28.1 billion.
Lord Jay: My Lords, now that we claim to be at the heart of Europe, is it not rather disappointing that not merely is there not to be a decrease, but there is to be a further major increase in the wasteful and extravagant expenditure of huge sums of public money?
Earl Howe: My Lords, think that the important point to make is that, following the reform of the CAP, the cut in support prices and the increase in direct payments to farmers will result in consumer savings, but increased taxpayer costs. The overall resource cost will be lower than it would otherwise have been. At the end of the reform period, annual costs imposed by the CAP on consumers should be around £1 billion lower in the UK and around £8 billion lower for the EC as a whole.
Lord Boyd-Carpenter: My Lords, can my noble friend say whether Her Majesty's Government insist upon obtaining a reduction in that enormous and wasteful figure?
Earl Howe: My Lords, I agree with my noble friend's premise and the Government have consistently argued that the cost of the CAP remains far too high. It hampers the efficient allocation of resources within the economy. We are pressing for further reductions in support levels so that costs can be reduced.
Lord Bruce of Donington: My Lords, is the noble Earl aware that, despite all the pressure and persuasion that the Government say they exert "at the heart of the Community" in these matters, gross contributions to this sum by the United Kingdom from the Consolidated Fund represent some £3 billion? Included in the expenditure for which the Minister has given the total, some £1 billion is wasted on a ridiculous tobacco subsidy and tobacco consideration which are quite useless to the United Kingdom and to Europe. Moreover, the sum includes £1.5 billion in respect of the storage of surplus foods in the European Comrnunity.
Earl Howe: My Lords, the emphasis of CAP reform is to reduce the reliance on intervention and storage costs about which the noble Lord feels so strongly. The thrust of the Government's position is to work over time towards a more market-oriented CAP with less reliance on agricultural support generally.
Lord Cockfield: My Lords, is it not the case that the cost of the common agricultural policy expressed in pounds sterling is greatly inflated by the devaluation of sterling—a development no doubt vigorously supported by the noble Lord, Lord Jay? In order to put the matter into perspective, and to assist the noble Lord, Lord Bruce of Donington, can my noble friend say how much of the money comes back to the United Kingdom in the form of agricultural subsidies, export restitution and the British budget rebate?
Earl Howe: My Lords, my noble friend is absolutely right because the switch-over mechanism under the green currency system has meant that various ERM realignments since the autumn of last year have added some £1.2 billion to the budgetary costs of the CAP. That is something which we regard as most regrettable.

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On the other hand, our receipts under the CAP are estimated at £2.1 billion in 1993 and £2.8 billion in 1994. Our share of the receipts will rise over the full period of CAP reform to 9 per cent. of total CAP expenditure.
Lord Jay: My Lords, is the noble Earl aware that the cost has increased in billions of ecu as well as sterling, and that has nothing to do with devaluation? Although I am sure he is doing his best, is it really much comfort that we are now paying people to produce nothing, whereas previously we were paying them to produce too much?
Earl Howe: My Lords, the noble Lord will himself be aware that there is no doubt that the CAP, as originally conceived, fulfilled a worthwhile purpose—namely, to eliminate food shortages in Europe. With the achievement of that objective, the justification for the CAP will rest much more on its cost-effectiveness. That is the thrust of our policy, as I have explained.
Lord Elis-Thomas: My Lords, will the Minister agree that one of the most important aspects of the reform is the transfer of resources into agri-environment initiatives? Although those initiatives involve the reduction of production support, they mean that there is support for sustainable agriculture and a maintained countryside landscape.
Earl Howe: My Lords, I am grateful to the noble Lord because he has enunciated very well the dual thrust of the policy as it now is—namely, to ensure a supply of food as well as a well managed countryside.
Baroness Oppenheim-Barnes: My Lords, as my noble friend the Minister referred to the possible benefits to consumers, will he also make it clear to your Lordships' House that the CAP has cost every family in the country since the time we joined the Community an enormous amount extra, well above what we would have had to pay for food if we had not had the CAP? Can he say whether the figure of £1 billion which he mentioned will completely redress the problem or only partly do so?
Earl Howe: My Lords, there will still be a cost to consumers under the common agricultural policy at the end of the reform period. However, what I can say is that the savings that would be made in the absence of the CAP are often overestimated. If there were no CAP then world prices would be markedly higher.
Lord Stoddart of Swindon: My Lords, does the Minister agree with the Secretary to the Treasury that the common agricultural policy costs every consumer in this country £1,200 a year?
Earl Howe: No, my Lords, I do not agree with that figure, for the reasons that I have just stated. I believe that it overestimates the position that would exist were the common agricultural policy not there.
Lord Pearson of Rannoch: My Lords, I wonder if my noble friend can go a little further with an answer
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which he gave earlier to this House and explain precisely whether the Government will be working overtime to reduce the iniquities of this absurd policy; or whether they will merely be working "over time", which I fancy might take a little longer?
Earl Howe: My Lords, we shall be working very hard indeed to see that, over a period of time, the cost of the CAP comes down.
Lord Dormand of Easington: My Lords, we have been told many times by the Government, and again today, about the difficulties of securing a reduction in this ridiculous amount. Does the Minister agree that the fact that the matter has been raised again by so many noble Lords today shows how much concern there is about it? On this occasion will the Minister be specific and tell the House what are the main obstacles to the reduction?
Earl Howe: My Lords, we are one member state in a Community of 12. As the noble Lord will be aware, agreement on matters of this kind should be reached as far as possible by consensus. It is not always possible to do that in the twinkling of an eye. Nevertheless, I believe that we have made real progress over the past few years, not least in the CAP reform measures of May 1992.
Lord Gallacher: My Lords, will the noble Earl tell the House whether the implementation of the MacSharry proposals will, in the aggregate, result in a reduction in the cost of the CAP, or will it mean in effect that, although the MacSharry proposals may reduce surpluses, there will be no reduction in the global cost of the common agricultural policy?
Earl Howe: My Lords, the MacSharry proposals as subsequently amended will reduce the cost of the CAP, if one defines the cost as the budgetary expenditure for the Community combined with the cost to consumers.

London Underground
3.2 p.m.
Lord Ezra Lord Ezra asked Her Majesty's Government:
What action they propose to take to prevent breakdowns on London Underground due to ageing plant and equipment.
The Minister of State, Department of Transport (The Earl of Caithness): My Lords, responsibility for the maintenance operation of the Underground network lies with the management of London Underground Ltd.
Lord Ezra: My Lords, is the noble Earl aware that it is estimated that there are some 30 years of underspending on the Underground to be overcome in order to make the service reliable and efficient? In those circumstances, was it not a little unwise for the proposed investment in the Underground to be cut by something like one-third last autumn? Do the Government realise that, in the antiquated state of the infrastructure that presently serves the Underground, further breakdowns

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are almost inevitable, causing inconvenience, disruption and possible accidents? Is that not a matter that the Government should take seriously into account?
The Earl of Caithness: My Lords, we do take the matter most seriously into account. That is why in the next three years some £3 billion will be spent by London Transport on investment. That is 10 times more than in a three-year period under the last Labour Government.
Lord Molloy: My Lords, how can the Minister give that appalling reply to the noble Lord, Lord Ezra; namely, that London Transport is the responsibility of London Transport, or words to that effect? Has he not heard that 5,000 to 6,000 Londoners were walking through mud and water to get to safety? Does he realise that people's confidence in London Underground is now diminishing? Will he agree that ultimately the safety of people travelling on London Underground or anywhere else in the United Kingdom must rest with our Parliament? That is why the noble Lord, Lord Ezra, put his Question to the Minister. Will he now endeavour—it will be a big endeavour—to give a straightforward, honest reply?
The Earl of Caithness: My Lords, the noble Lord surprises me. I answered the Question put by the noble Lord, Lord Ezra. The reasons why the noble Lord, Lord Ezra, couched his Question in those terms are entirely a matter for the noble Lord. Obviously, the noble Lord, Lord Molloy, knows the noble Lord's mind. As always, safety will be a top priority, and LUL will not run an unsafe service. I hope that the noble Lord, Lord Molloy, would be the first to say that £3 billion over the next three years is a lot of money, and a great deal more than has been put in before.
Lord Bottomley: My Lords, the Minister referred to what happened under the last Labour Government. I can tell him that the trains ran on time very satisfactorily, unlike today. The Government carry responsibility for the tragic circumstances in which the Tube system finds itself. Will the Minister agree that spending money in the future will not solve the problem, and that something must he done now?
The Earl of Caithness: My Lords, there has been a steadily increasing profile of expenditure under the Conservative Government since they came to power in 1979. That is why investment will be at record levels.
Lord Boyd-Carpenter: My Lords, would it be possible to persuade London Underground to spend all its available resources on restoring the quality of the equipment of its current services and to cut out expansions?
The Earl of Caithness: My Lords, London Underground will be spending some £1¾ billion on existing services, and that includes refurbishing the Central Line, which will be completed in the not too distant future. Fifty per cent. of the electrical faults at present suffered by London Underground are on the Central Line. That is why that line is being tackled first and as a priority.
Lord Allen of Abbeydale: My Lords, is the Minister aware that this morning at three Underground stations I encountered five escalators that were not working, including one at Embankment, which involved a very long climb, an occupation that is totally unsuitable for an elderly Peer? I do not know what the official statistics show about keeping up to the standards laid down by the Government, but my impression is that conditions get worse rather than better. The Government must presumably be interested in the impact that that must have upon our foreign visitors. Can the Minister say whether it is the result of shortage of money, or whether we are not very good at making machinery?
The Earl of Caithness: My Lords, I am sorry that the noble Lord suffered the problems that he did this morning; my sympathy lies with people who are not Peers who also suffered the same difficulty. I do not have the figures with regard to escalators; but I can say with regard to lifts that the target for 1993–94 was a 92 per cent. service, and the current performance is 91.3 per cent. I remember answering exactly the same Question from my noble friend Lord Boyd-Carpenter some years ago. What I do know is that the service has improved considerably and we shall continue to set high standards for London Underground.

Business
Viscount Ullswater: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord Henley will, with the leave of the House, repeat a Statement that is to be made in another place on Hong Kong.
London Docklands Development Corporation Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Broadcasting: Select Committee
The Chairman of Committees (Lord Ampthill): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That as proposed by the Committee of Selection the following Lords be named of the Select Committee on Broadcasting—

L. Allen of Abbeydale,

L. Ardwick,

B. Eccles of Moulton,

L. Graham of Edmonton,

L. Mancroft,

L. Morris of Castle Morris,

E. Strathmore and Kinghorne,

L. Thomson of Monifieth (Chairman),

E. Winchilsea and Nottingham.

That the Committee have power to adjourn from place to place and to report from time to time;
That two be the quorum of the Committee;
That the Committee have power to appoint specialist advisers.—(The Chairman of Committees.)
On Question, Motion agreed to.

Parliamentary Broadcasting Unit Limited (PARBUL)
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That as proposed by the Committee of Selection the following Lords be named as members of the Parliamentary Broadcasting Unit Limited (PARBUL)—

L. Boston of Faversham,

E. Strathmore and Kinghorne,

L. Thomson of Monifieth.—(The Chairman of Committees.)

On Question, Motion agreed to.

Parliamentary Office of Science and Technology (POST)
The Chairman of Committees: My Lords, I beg to move the third Motion standing in my name on the Order Paper.
Moved, That as proposed by the Committee of Selection the following Lords be appointed to serve as members of the Board of the Parliamentary Office of Science and Technology (POST)—

L. Dainton,

L. Flowers,

B. Platt of Writtle.—(The Chairman of Committees.)

On Question, Motion agreed to.

Trade Marks Bill [H.L.]
3.9 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Strathclyde): My Lords, I beg to move that this Bill be now read a second time.
This is a long and rather technical Bill, though that should not dent the eagerness with which it should be welcomed. It is of great practical importance to business. We know this because business has been telling us so. The reason businesses want it is that it will save them money—estimated at around £30 million a year. When we were unable to include it in the programme for the previous Session, businesses wrote to tell us how important trade marks are to them and how crucial it was to modernise the law governing them. When press speculation this autumn suggested that pressure on the programme might once again displace this Bill, they lobbied again. Since the Queen's Speech, several businesses have taken the trouble to write to thank us for including the Bill.
Moreover, we are confident that we are giving industry the Bill that it wants. In 1990 the Government published a White Paper Reform of Trade Marks Law, setting out their proposals for legislation on this subject. This received a very favourable reception from business and from professionals working in this field.
The cornerstone of the Bill is an EC directive, No. 89/104, to approximate the laws of the member states
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relating to trade marks. It forms the basis of the substantive provisions in Part I of the Bill. This is an important single market measure and is one of the few measures listed in the Commission's White Paper Completing the Internal Market, which still awaits implementation.
The directive does not attempt a wholesale harmonisation of national trade mark laws. Rather it concentrates on those areas where differences between the position in respective member states can distort competition. In particular, it harmonises the conditions for validly registering a trade mark and the rights conferred by registration. In other words, if the House will excuse the cliché, it helps to achieve a level playing field.
For example, one of the issues which trade mark law must address is conflict between marks. If a trade mark whose registration is applied for conflicts with a mark already on the register, then it is liable to be refused. Most countries have rules for assessing such conflicts. The position in Germany, however, under the unharmonised law is that conflict is very readily found. There are therefore many instances where a mark cannot be registered in Germany because it is held to conflict with an earlier trade mark, even though the two marks happily co-exist, without causing confusion, in the rest of the European Community. Indeed, the barriers to trade which result from the differences between German law and that of other member states are responsible for many of the trade mark cases that have come before the European Court of Justice. Implementation of this directive will reduce or eliminate those differences.
Let me give two further examples. While an earlier mark may prevent the registration of a conflicting later mark, if the later mark does get onto the register, then after the passage of time it cannot normally be challenged. In France, however, under the old law, it was possible for a mark to be cancelled on such grounds even after it had been on the register for several decades. The directive prohibits such a challenge after a period of five years. Most member states' laws require that a trade mark be used for the goods or services for which it is registered, and provide for it to be cancelled if it is not used. Denmark, however, had no such requirement but has now introduced it in its law implementing the directive.
As far as the United Kingdom is concerned, the main changes that will be required in order to comply with the directive are twofold. First of all, the test for what may be registered as a trade mark will in future essentially depend on whether it is in practice capable of distinguishing its owner's goods from those of another. Thus for example the case law that has built up under the existing law makes it difficult or impossible to register a geographic name, or a laudatory epithet, as a trade mark. In future, if the mark is distinctive in the marketplace it should be registrable. Likewise the three-dimensional shape of goods or their packaging will be registrable as a trade mark, provided it is actually distinctive.
Secondly, the rights conferred by the registration of a trade mark will be broadened. At present, a trade mark owner can sue someone for infringement only if they

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use the mark on the precise goods for which it is registered. If the other person uses the mark on similar goods, or uses it to sell services related to the goods for which it is registered, then he would have to fall back on an expensive and unpredictable action for passing-off. Clause 9 of the Bill, in implementation of the directive, extends infringement rights to cover similar goods. Moreover in the case of a mark having a reputation, it extends them to non-similar goods, where unauthorised use of the mark would take undue advantage of the mark or be detrimental to its distinctive character or repute.
I hope that I have demonstrated that implementation of this directive will, by modernising the law and reducing differences between member states, assist in the completion of the single market and bring real benefits to United Kingdom business.
The directive should have been implemented by the end of 1992. The Government are proud of this country's record in implementing single market measures and regret that it proved impossible to meet the deadline for this directive. As the House will be aware, however, pressure on the parliamentary timetable has been particularly fierce. Implementation by statutory instrument was of course considered, but the Government's view was that that would have been very difficult and the results unsatisfactory. I believe that industry shares that view and I am sure that the House does too.
As well as implementing the directive, Part I of the Bill deals with the procedures involved in trade mark registration. Here the Bill implements the deregulatory promises in the White Paper, in particular in regard to the simplification of the registration of assignments and licences.
Under the present law, where the proprietor of a registered trade mark applies to register the same or a similar mark for similar goods or services, the registrar requires that the two marks be "associated". Marks that are associated cannot be sold separately. The purpose of that is to protect the public against being misled into thinking that different goods bearing identical or similar trade marks originate from the same source when in fact they do not. For the same reason, the registrar is required to examine any application to assign a trade mark in respect of only some of the goods for which it is registered. All that involves work for the Patent Office (which has to be paid for by its customers) and work for trade mark owners and their agents. In the Government's view, it is disproportionate to any consumer protection benefits that it may produce. In any case, it is the parties concerned who would have the most to lose if an assignment leads to confusion. After all, the purpose of a trade mark is to distinguish its owner's goods; he is not likely to connive at a situation in which his business is confused with someone else's.
Another deregulatory change concerns the licensing of trade marks. Before the Trade Marks Act 1938, which this Bill repeals and supersedes, there was no statutory recognition of trade mark licensing. Indeed, there was doubt as to whether such a licence could be granted without impairing the trade mark's capacity to distinguish, thereby endangering the validity of its registration. The introduction in the 1938 Act of a
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system of registered users was therefore a radical step. The legislators at that time, however, felt that a system of unrestricted licensing could lead to deception of the public. For that reason, the only form of licensees given statutory recognition was registered users. The law requires an application to register a user to be accompanied by voluminous documentation, and requires the registrar to examine it, calling for further documents if necessary, and to register the user only if he is satisfied that this would not be contrary to the public interest.
Times have moved on. The public have grown accustomed to goods or services being supplied under licence from the trade mark owner, for example, as part of a franchise operation. Moreover, as with assignments, the strongest guarantee against the public being deceived is that it is in the proprietor's best interests. A trade mark is valuable property in terms both of its power to attract customers and of the royalties which can be demanded from licensees. It is in the owner's interest to ensure that licensees use it properly. The Bill therefore simply provides that a trade mark may be licensed. In response to the wishes of industry, provision will be made for licences to be recorded on application from one of the parties, but it will be voluntary.
It could be said that the framers of the 1938 Act and its predecessors saw the Registrar of Trade Marks as having a consumer protection role. In our view, this should no longer be the case First of all, there are other bodies, official and unofficial, which are much better placed to perform such a role. Moreover, modern consumers are more sophisticated than was the case half a century ago. Secondly, as I have tried to explain, the vetting of assignments and licences by the registrar seems to be directed at protecting the public against an unreal danger —that trade mark owners will connive in the devaluation of their property. Certainly the elaborate procedures demanded by the present legislation are disproportionate to any benefit to the public. Scrapping them is reckoned by business to contribute getting on for half of the £30 million which the Bill will save them annually. The other half will come from the ability to use the Madrid Protocol. That forms a major element of Part II of the Bill, which deals with international matters.
At present, a UK trade mark owner who wants to protect his mark in overseas markets must apply separately for registration in each of the countries concerned. That involves going through whatever procedures each country requires and paying fees in local currency. It may be necessary to employ a local lawyer—indeed, some countries insist on it. As can be imagined, all that involves a great deal of trouble and expense.
Trade mark owners in most other European countries, by contrast, are able to avoid many of the problems by making use of an international arrangement called the Madrid Agreement. Under this, a trade mark owner can obtain an international registration, which has the same legal effect in those member countries that

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the applicant has designated as though a trade mark application had been filed direct with the authorities of those countries.
The United Kingdom is not a member of the Madrid Agreement because our system does not fit well with it. In most of the countries in the agreement there is little or no examination, so that fundamental objections to a trade mark may come to light only when there is litigation. By contrast, our trade marks system is based on registration only after a full examination, so that registration carries a high presumption of validity. The system of time limits and fees under the Madrid Agreement is tailored to the deposit-type systems of most of its members. Adherence by the UK would, for example, mean foreign trade mark owners being subsidised by domestic users of the system, which is clearly unacceptable.
Although the Madrid Agreement has functioned for over 100 years and has a membership of over 30 countries, its membership has been fairly static. In particular, it has not appealed to countries with systems like ours, such as the USA, Canada, Japan and the Scandinavian countries. For that reason, a protocol to the Madrid Agreement was concluded in 1989 which overcomes all the difficulties we had with the old agreement. The UK took a leading part in the negotiations leading to the protocol, and we have signed it. Ratification however needs this Bill. Clause 50 provides for the making of regulations for giving effect to the protocol. Were I asked to name the single most important provision in the Bill, I would say that that is it. That is certainly the message we have been getting from businesses, who foresee major savings from being able to use the protocol. The protocol is not yet in force. There is no point in ratifying it for countries party to the old agreement until a substantial new country is also ready to do so. All the signals are that UK ratification of the Madrid Protocol is what is needed to set it in motion.
Part II of the Bill makes provision with regard to Community trade marks. I shall not say a lot about those. The Bill does not establish or give effect to Community trade marks; that will be achieved by a directly-applicable council regulation which, it is hoped, is now nearing agreement in Brussels. All the Bill does (in Clause 48) is to provide for consequential provisions to be made by regulation. The Community trade marks system will operate in parallel with national systems, offering trade mark owners a choice of which suits them best.
Part II also gives explicit effect to some obligations concerning trade marks under the Paris Convention for the Protection of Industrial Property. In particular, those are obligations to protect well-known marks and emblems of other countries and intergovernmental organisations. Hitherto, the Registrar of Trade Marks was able to take account of some of those obligations in the exercise of his discretion over registration. Other aspects of the obligations might be met through an action for passing-off. However, that is a less than satisfactory situation and, as I said, the Bill will give explicit effect to all those obligations.
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Parts III and IV of the Bill contain administrative and other supplementary and general provisions and the usual final provisions. Much of that re-enacts (with modifications) provisions in the existing law concerning such matters as the powers and duties of the registrar, appeals and trade mark agents. I shall single out two changes for mention.
First, I turn to Clauses 86 to 88 which concern trade mark counterfeiting. Provisions making the fraudulent use of a trade mark were introduced into the 1938 Act in 1988 by the Copyright, Designs and Patents Act. Those clauses replace those provisions with a widened scope. Section 58A of the 1938 Act was cast in terms of deception of the customer. Since that was enacted, there has been a dramatic growth in the sale of what are sometimes called "brand copies"—garments, watches and so forth which feed on the reputation of famous trade marks while the trader is able to escape prosecution under the Trade Marks Act by admitting that they are fakes. It was thought in some quarters that such goods would still be caught by the Trade Descriptions Act, but a ruling earlier this year showed that that is not so. That prompted much lobbying of my department to change the law. Some of the lobbying came, as might be expected, from the owners of the famous marks being copied. However, we were particularly struck by letters from other traders who deal in the genuine goods and who complain of being undercut by market stalls or boot fair traders selling blatant copies.
Clause 86 is, as I say, broader in its scope, and the offence of trade mark counterfeiting is defined in much the same terms as trade mark infringement. I might add that there is an obligation to apply criminal sanctions against wilful counterfeiting under the intellectual property code being negotiated in GATT.
Secondly, Clause 96 breaks new ground by putting on the trade mark owner the burden of proving that the mark was used, where that is contested. That was foreshadowed in the White Paper and welcomed by trade marks practitioners. As I mentioned earlier, it is possible for an interested person to apply to have a mark cancelled from the register if it has been out of use for more than five years. Under the present law, the burden of proving use rests on the person seeking the cancellation—generally someone wanting to register a similar mark. It is difficult and time-consuming to prove a negative, whereas if a trade mark is being used it is a straightforward matter for the proprietor to show that and reasonable for him to be called upon to do so.
Finally, some general remarks about the White Paper. Several countries in the world have trade marks laws which are based on ours—mainly, but not exclusively, Commonwealth countries. When the White Paper was published in 1990, it was generally expected that its implementation would mean us moving away from those countries at the same time as we harmonised with our Community partners. It is therefore interesting, and gratifying, to find that reports or draft laws published in several of those countries—Australia, New Zealand, India, Hong Kong, South Africa—cite or follow our White Paper.

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This is, as I said, a long Bill. However, that does not mean that it is cumbersome. There has been clarification rather than compression. The present law was much criticised for complexity and obscurity. The amendment Act, passed in 1984, while performing the valuable task of introducing registration of marks for services, unfortunately made the text of the law even more complicated. The present Bill provides a completely new and self-contained code governing the registration of trade marks. Those professionally involved with trade marks who have seen it have supported both the policy and the presentation. I hope and trust that your Lordships will be able to do likewise, and I commend this Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Strathclyde.)
3.27 p.m.
Lord Peston: My Lords, my first task is to welcome the Bill. It represents a considerable improvement to the law of trade marks and related matters. It is an overdue embodiment in out law of EC Directive 89/104. I am delighted to see the legislation start in your Lordships' House. Of course, I do not believe that the Bill, as drafted, is perfect. I shall illustrate this afternoon places where it is somewhat obscure, where it is less than convincing and where it can be strengthened. But we can deal with that more fully in Committee. I am delighted also that it is proposed to take the Committee stage in a Public Bill Committee, away from the Floor of your Lordships' House. The Bill is technical and not at all party political. It will be a good test of our ability to work together in the best tradition of our House; to improve a Bill but to retain its essence.
As an economist I have always been fascinated by problems of intellectual property. We dealt with the major area of copyright in 1987–88. No doubt we shall need to come back to that and patents when the intellectual property aspects of the Uruguay Round come to be incorporated into British law. Trade marks and passing off seem more esoteric. In my view they are just as interesting, especially when we consider their role in enhancing competition and consumer protection.
The non-specialist may not appreciate what is so fascinating to the economist; namely, that trade marks which grant a firm a degree of monopoly power and appear to strengthen what is called, "imperfect competition", actually promote competition and, unless they are abused, are advantageous to the consumer. They strengthen competition by enabling the producer to identify and promote those goods or services he offers. They signal to the consumer the quality of those goods or services and their commercial origin. Properly enforced, trade mark law can prevent the use of marks which may deceive or confuse the consuming public.
At the same time, the law in this area protects the property rights of the proprietor or owner of the trade mark. But I cannot emphasise too often to your Lordships what, for want of a better expression, I call the "Adam Smith doctrine"; the justification and purpose of business activity are to satisfy consumer demand. Firms exist for consumers; not the other way round.
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Let me now go on to say some things about the chief aspects of the Bill. I cannot cover every topic of interest—we can wait for Committee stage for that. One immediate reason for welcoming the Bill is that it reduces the need for action on passing off by extending the ambit of registered trade marks. But there remains great scope for the use of passing off actions. Given that there are many similarities from the public's point of view—that is, there are no apparent differences between an unregistered trade mark and a registered trade mark, and the licensing provisions in regard to registered trade marks are clear while those in passing off are a mess—can we not take the opportunity to bring those latter aspects in line in the Bill? Both consumers and firms would gain. It is a matter for consideration whether we can devise appropriate amendments in Committee.
I welcome the closeness of the Bill to the directive in general, but I have to ask whether the language and continental drafting techniques, if I may use that expression, will satisfy British lawyers in this area. Expressions I have in mind are, for example. "bad faith", "good faith", "bona fides", "well known trade mark", "reputation" and so on. We need some explanation of what such terms mean, or are supposed to mean.
Clause 1 of the Bill makes clear that distinctiveness is vital and is not a proviso, as stated in Article 2 of the directive. As is well known, distinctiveness is fundamental to our conception of trade marks. The problem is that, having emphasised that and therefore having departed from the directive in Clause 1, Clause 3, which concerns absolute grounds for refusal, now appears to be ambiguously phrased. This again is probably a matter of wording, and the drafting can be tidied up in Committee.
I turn to Clause 5, which is about relative grounds for refusal. This seems to offer a simple and effective approach to the problem, but again the use of language may be confusing. Both the words "identical" and "identity" are used. I know that that occurs in the directive as well. As I understand the matter, which is another way of saying "as my advisers tell me", to an English lawyer a change of word or expression generally signals a change in meaning. My judgment is that we ought to stick to "identical" at all times, if we can.
I shall now jump ahead to Clause 42, There are wording problems here. Although subsection (1) (d) bears some resemblance to the law under the old Act, there was no real way a mark could be removed from the register because of a change in the quality of the goods. I understand that, while everyone knows what the word "quality" means as a matter of common sense, there are difficulties with its application under the new law. Nonetheless, the clause as a whole has a welcome clarity. Again, in another part of Clause 42, the words "proper reasons" appear. I am advised that the expression "proper reasons for non-use" have no meaning in English law. I would welcome the Minister's views on that.
It is also Clause 42 which covers a couple of other important matters. One is that a registered trade mark

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gets that status either from use or intention to use—that is also what Clause 28(3) is about. We must ask—the Minister was somewhat alluding to this—whether the revocation provisions cover the case where it becomes apparent that there was no intention to use from the outset. On the face of it, it does not. This relates in addition to what is the available line of defence against improperly registered trade marks.
The grounds for revocation are extremely important. One reason for that has been mentioned by the Minister—we have already accepted that there can be Community trade marks which can be registered, and are then fully protected in the UK. Clause 7 allows the Secretary of State to do away in due course with substantive examination of applications by the registrar. If the extent of substantive search and examination is reduced, and the Community mark route becomes the cheaper one, we have a problem. The Community route will become the favoured one, and for Community marks, I reiterate that I am advised that very little will be required by way of examination. Therefore many marks may be registered with little justification, and there will be more cases in which revocation becomes vital to protect a rival trader. We must see in Committee whether we have drafted revocation requirements tightly and strongly enough.
On the general question of trade marks, unlike other forms of intellectual property, they have a continuing function in the market place. That is why the wording of Clause 42 is so important. They are indicators of origin. I mentioned at the outset that they are also, at least to the public, indicators of quality, though, I am advised, this has only been recently recognised in United Kingdom case law. The question we have to ask ourselves is whether one purpose of the Bill is for us to catch up with European jurisprudence which sees trade marks as indicators of quality as well as origin. This takes me back to economics. Contemporary economic analysis interprets a trade mark as a quality symbol. Two questions then arise. Do we need, and do we have the power, to revoke a registration if the firm, having established a high reputation for its products, subsequently goes down market? We see that happening all the time. How far do we allow a firm to extend its existing trade mark to new ranges of goods or services, the quality of which is not apparently up to the standard of existing ranges?
Clause 42 refers to "geographical origin". This, together with Schedule 2 (on certification marks), explicitly recognises that this class of registration can indicate geographical origin, something we have been slow to protect in this country. Geographical names are presently prima facie not registrable in English law. Stilton is protected, as is Champagne, at common law, but the common law and associated trade mark law is quite rightly reluctant to extend this kind of recognition too far. Nonetheless, we shall need to scrutinise the way this clause and the relevant schedule operate. Indeed, in due course we may have to go further and with respect to geographical names protect our consumers of produce as well as, for example, the French do.
Once again the subject of economics arises. The
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single market is supposed to mean the end of protection across the Community, and not allow the favouring of the domestic producer within the European Union. But it is not illegal for consumers to wish to purchase from domestic suppliers as a matter of principle. It is up to them. The difficulty is that geographical origin is not what it used to be. In a world of free trade many goods, if not most, contain components made in other places. With multinationals having factories in many countries of the European Union, a product with the same trade mark may be manufactured in a variety of countries. The word "Peugeot", which I assume is a registered trade mark, does not necessarily mean—does not at all mean—"Made in France" any more, and without a doubt "Ford" does not mean "Made in England". I have to ask, therefore, whether there are not problems of misleading signals of geographical origin that can arise here. I hasten to add that, even if there are, it is not clear what one can do about them.
I turn to unregistered trade marks and what I believe is called the "honest concurrent user", a subject to which the noble Lord alluded in his speech. I am referring to a firm which has built up its own reputation with a name or trade mark the same as or similar to another registered one and would itself like to get on the register. Unlike the old law, in the new law there appears to be nothing enabling the registrar to register such a mark. The only protection for such a trader arises under Clause 10, which makes honest concurrent use not an infringement. My interpretation of Clause 10(3) is that the reference there is to use in a particular locality. The trouble with it is the use of the words "particular locality". Does that rule out the expansion of the honest concurrent user's business?
More generally, the purpose of these reforms is to make registration easier and to give greater protection. This will be done, first, by refusing registration of similar marks for similar products—and in some cases even for dissimilar products, as the noble Lord has himself pointed out—and, secondly, by extending the scope of infringement so that use of the same or a similar mark on goods for which the proprietor is not registered is still actionable. Encouraging registration can only be helpful. It helps firms in that they can the more easily avoid clashes.
This takes me back to Clause 1 and the use of the word "detrimental". Will the effect of that be too strong? On the face of it, it seems to rule out, for example, comparative advertising—"My product is better than that product" where I mention a trade mark—although that is often helpful to consumers. In this connection certain remarks in Clauses 9 and 11 seem to affect so-called parallel importing from non-European Union countries. Is that the case; and if it is, what is the justification?
Clause 19 refers to threats. The basic question is to do with a firm's response to what it truly believes to be an infringement. I assume that threats will normally be made against the producer who makes illegal use of the relevant trade mark, and this remains permissible. But where does the retailer stand who has acquired these goods? Why should he be protected from threats, since his goods are deceptive? He should not be able to claim

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as a matter of course that threats against him are unjustifiable. But equally, should a retailer not be protected against an unscrupulous firm which knows that the goods are genuine, but wishes the retailer not to sell them, and thus threatens the retailer with
"proceedings for infringement of a registered trade mark"?
This is a question of balance. I am interested in the Minister's immediate response, if any, but we will of course pursue this in more detail later. I add that if there is proper examination by the Trade Marks registry in the first place, threats of action may become largely irrelevant.
My next remarks are to do with enforcement. Obviously, the proprietor of the trade mark must be assumed capable of looking after himself. But the law as drafted sees a role for trading standards officers. This is not new, but I take this opportunity to praise the work of these public servants in this and many other areas. The problem is, partly because of shortage of funds, but also because different authorities vary in their priorities, that interventions on trade marks and passing off differ in different localities. I am not one for a dull uniformity or wish to stifle initiative, but it makes little sense for trade marks to be better protected in one part of the country than another.
Clause 88 on enforcement seems to be very strong. It has, of course, to be read in the light of Clauses 86 and 87 which combine to specify offences together with court proceedings and appeals. We have to ask—I believe that I heard the Minister say this but I repeat the question: is the intention to make enforcement in all its forms easier and more effective, and does the Bill succeed in doing that?
As the Bill recognises, we are also well into the territory of the Trade Descriptions Act 1968. Many of the infringements arising in respect of trade marks are close to or connected with offences covered by trade descriptions. Again it is worth asking—we shall come back to it in Committee—whether there are improve-ments to the Trade Descriptions Act which we should take this opportunity to introduce.
A particular trades description problem I must mention relates to something the Minister said. It concerns what is called the honest fake and the honest faker. Consider a street trader in Oxford Street selling fake Rolex watches very cheaply. They are so cheap nobody could reasonably believe they were genuine. The point holds a fortiori if the seller himself calls out, "Buy my fake Rolexes". I assume Rolex have a case under trade mark law, but the best way to deal with these infringements is under trades description legislation.
Can the Minister assure us that no unnecessary complications arise in such a case and also that the Trade Descriptions Act will not need to be amended? If I revert to what noble Lords know to be my more cynical mood, I believe that I can be persuaded that anyone who buys such a watch cheap deserves no more protection than caveat emptor. For their own education the only way they will learn is if they get their fingers burnt! Perhaps that is too cynical.
Another topic I must raise under Clause 86 is what the lawyers call mens rea. The first part of this clause seems to say that an offence is committed if the
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defendant does the act with an intention to gain or cause loss. There is no requirement that he knows or has reason to believe that his use is an infringement. But in contrast in subsections (2) and (3) words like "knowing" or "having reason to believe" and "believed on reasonable grounds" appear. I ask the Minister: is it the intention of the Government that those expressions should not appear in subsection (1)? I also ask why the question of belief in subsection (4) of this clause pertains only to whether use was licensed by the proprietor? Why not in all circumstances?
I was intrigued to hear the noble Lord say that perhaps the most important part of the Bill was the incorporation into our law of the Madrid Protocol. I shall have to reflect on that. I am always willing to be persuaded by the Minister, but to make life easier, can he make sure that copies of that protocol are made available to noble Lords, notably me, before we get to the Committee stage of the Bill? If it is that important I should have read the actual words.
My conclusion is simple and it is the same as when I started: I welcome the Bill. I shall do all I can to help it proceed onto the Statute Book. I look forward to the work in Committee where we can get down to detail arid improve the Bill where that is necessary.
3.45 p.m.
Baroness Hamwee: My Lords, I start by thanking the Minister for his very clear exposition of the objectives of the Bill. It is a technical Bill and is therefore that much harder to deal with in straightfor-ward language. Before I deal with a little of the detail, perhaps I may just take a moment to say that I am sure other noble Lords, as I do, will miss the involvement of my late noble friend Lord Lloyd of Kilgerran. I am sure that he would have seen that we all took the right decisions in the debates on this Bill.
The Bill has been generally welcomed by those who have an interest in the matter and we therefore must welcome it too. But it makes it all the more important that we ensure that the Bill takes every opportunity to do all that the consumer needs by way of protection and that opportunities are not missed. We need to strive for a less expensive and less complicated system than we have at present. The layman, inquiring about trade mark protection, is both blinded by science and baffled by cost. The new legislation must not become an experts' charter. Throughout we must remember the consumer.
I recently had cause to inquire about the cost of protecting as a trade mark a character that was to appear in an educational video. The makers of the video thought that the character might become attractive for rather wider exploitation. Inquiries revealed advice that registration in 13 classes, at a cost of about £11,500 per class, should be quite seriously considered. That was for the United Kingdom alone. I believe that there is a very great deal that we could do to assist those who produce innovative work and whose work needs to be protected. The changes which are introduced must help the individual who has need to protect himself even if his means are not very great.
Like the Minister, I too am interested in the relationship between trade mark protection and other

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forms of protection such as passing off and copyright. We need to be sure that we provide an effective, straightforward means of enforcement. I was interested to see Clause 19 in the Bill to which the noble Lord, Lord Peston, referred. That provides a,
"remedy for groundless threats of infringement proceedings".
I have heard that welcomed by those who have been on the receiving end of threats from the makers of a recent film about dinosaurs who have been seeking to protect and restrict the term "dinosaur" and "Jurassic" for their own use. That has an air of absurdity, but it also put into a new light for me the wisdom of government Ministers using words like "neanderthal".
For me the serious point here is I am not convinced it is appropriate that there should be a statutory restriction of the threat of proceedings. We need to start from the basis that the law is there to be used and that we must be very cautious about restricting people's ability to use it.
I too welcome the anti-counterfeit provisions which provide for distasteful activities which we would all think were quite immoral and which should be made criminal offences. I hope that the United Kingdom will no longer be the home of the counterfeiter. It is a scandal that items like jeans, perfume and jewellery are sold on the strength of their counterfeit brand names. I am concerned about the resources which will be required for the enforcement of the new provision and the extension of the responsibility of local weights and measures authorities. I agree that it is probably appropriate that they should take on the work, but we need to be aware of the additional strains that would put on the system. We also need to see whether additional powers are required so that the attack is not merely on the small middleman who is selling the goods, but is aimed at getting information from that middleman so that we can find out who is producing the goods, because that person is the real villain. We need to look also at the relationship between civil and criminal proceedings.
Counterfeiting is not confined to trade-marked goods. The Copyright, Designs and Patents Act introduced criminal offences where copyright was infringed, and the Government recognised the seriousness of that. The Minister referred to the fairly recent court ruling that the use of a disclaimer is a defence to proceedings for infringement, and referred to traders using a disclaimer and then trading with impunity. I welcome the provisions which will assist the manufacturers whose goods sell because of a trade mark.
However, the proposed provisions are of no help to one of this country's major industries, the record industry. I use the word "records" to cover compact discs, cassettes and all other forms of record. They sell because of their content. Traders are now deleting the trade mark from the packaging, and record piracy is continuing to cost the industry something of the order of £20 million per year. In Committee, I shall be inviting your Lordships to consider using this Bill to extend to trading standards officers powers to search and seize
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counterfeit goods where they believe that an offence is committed or will be committed under the equivalent copyright legislation.
Like other noble Lords, I welcome the simplification of registration in more than one class although I shall want to be assured about how the system of classification will be prescribed. As the Bill is drafted, there is a very brief reference to "prescription".
I hope that we can be assured also about the cost of transition to the new system. It must not involve expense for existing trade mark holders. On the costs of enforcement, the Bill provides that the relevant court is the High Court. I think that we might usefully discuss in Committee the use of the specialised patent court where the costs incurred might be less.
We shall need to debate a great deal of the detail and many of the definitions. The two that struck me were the words "identity" and "similarity". The classicists among your Lordships will, I am sure, have a field day in helping us to distinguish those two provisions and perhaps in persuading us that they are not sensible words to use in such close conjunction.
Finally, I welcome the provisions which will bring us into line with the rest of Europe. I am sure that the noble Baroness, Lady Hooper, will give us the benefit of her experience in making sure that we have the right provisions. I welcome the fact that the DTI has discussed the matter fully with the industry. I believe that there are still some matters which industry would like us to debate and which may not have been taken on board in the Bill as drafted. I hope that we can take on all reasonable points that are raised with us. I look forward to dealing with the detail in Committee.
3.53 p.m.
Baroness Hooper: My Lords, it is now almost exactly a year since I tabled a Question asking when legislation would be brought forward to implement the proposals in the White Paper and to comply with the European Community trade mark directive. In fact, it was on 8th December last year. That Question was prompted by the Institute of Trademark Agents among others and I know that they, as well trade and industry generally, are delighted that we now have this Bill before us and that it is starting in your Lordships' House. I feel certain, as the White Paper was published more than three years ago and has been the subject of intensive and wide consultation, that it will be possible—it should be possible—to deal with it efficiently, thoroughly and expeditiously.
In any event, I think that the Bill is very readable, even if it is long and technical as my noble friend the Minister said, and that must be good for our consumer on the Clapham omnibus. I, too, am grateful to my noble friend the Minister for setting the scene, telling us about the anomalies that have existed and explaining the Bill's provisions with his customary panache, if I might put it that way.
It is not necessary for me to reiterate at length the advantages that will result from enabling traders to protect their marks internationally in a number of countries by means of a single application. But I understand that a conservative estimate of the savings is

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some £10 million per annum. There will also be savings as a result of the less restrictive requirements for registration and the formalities for licensing and assignrnent—not to mention the greater expense that some companies have suffered in having to resort to sometimes lengthy passing-off actions in order to protect their marks. The fact that considerable savings in public service manpower are listed in the Bill's explanatory memorandum is, of course, an additional plus factor.
As the noble Baroness, Lady Hamwee, said, it will certainly give us all satisfaction to know that we no longer lag behind other major trading countries in the area of trade mark protection. As well as being fair to our own industry, this will surely make us more attractive to foreign companies which wish to invest here. In that respect, perhaps I might ask my noble friend the Minister for an update of a previous question that I have posed. How many of our European Union partners have already complied with the trade mark directive?
As has been said, although a few points relating to the Bill as drafted may get a preliminary answer today, others may require more detailed examination and explanation at later stages. Many of the issues that I had intended to raise have already been referred to by the noble Lord, Lord Peston, and the noble Baroness, Lady Hamwee. However, one additional issue that I think should be tackled is the fact that the Bill does not specifically address the problem of availability of registration for retail services. As such registration is possible in, for example, Australia, New Zealand, South Africa, the United States and in some other European countries, it would be useful to have further clarification on that point. The Bill provides a golden opportunity for that.
There is also the subject of comparative advertising, which has already been touched on, in which an advertiser uses a competitor's trade mark to identify a competitor's product and compare it with his own. The Bill does not tackle that—or, at least, it does not attempt to clarify the issue. That point was mentioned by the noble Lord, Lord Peston. There may be good reasons for not making that clarification, but the lack of clarity is seen in some quarters as leaving both trade mark owners and those who wish to engage in comparative advertising in an unsatisfactory and uncertain position. Any clarification on that point from my noble friend the Minister would be welcome.
Counterfeiting is another matter to which my noble friend the Minister referred when introducing the Bill and which is causing certain sectors of our industry considerable problems. The enhancement of anti-counterfeiting measures in the Bill is therefore very welcome. But there is scope for further action—for example, tougher sentences for counterfeiting offences could give added bite.
There is also an exemption for private imports in the Customs Provisions of the Bill. The noble Baroness, Lady Hamwee, referred to the need to find methods of tracing not only the middlemen in these matters, but also the producers. Although the exemption for private importers is an existing provision of our law and, on the
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face of it, seems entirely reasonable, apart from the knock-on effect that any sale of a counterfeit product may have, there are, it appears, some regular travellers who abuse the exemption by regularly importing small quantities of watches, garments or the like. So that is another matter of principle which could well be dealt with.
On a more specific point, Clause 7 empowers the Secretary of State to make an order to discontinue refusal to register a trade mark on relative grounds, but that power is tied to the start-up of the Community trade marks system which we all hope will take place soon, but which could take place from any time onwards into the next century. Is it not possible to provide more certainty by specifying a set period, preferably four or five years only? The noble Lord, Lord Peston, referred to that matter, but he was speaking rapidly at the time so I am not sure that he made that point.
I, too, say that I do not wish to seem to be niggling by raising those questions and minor points, which could be subject to amendment in Committee and at other stages, because I believe that this is an important, good Bill which will benefit our industry. I end as I began, by congratulating the Government on introduc-ing the Bill good and early in the Session, and on the fact that, overall, the Bill provides a well thought out, comprehensive updating of our trade mark law. I am pleased to be able to give it my support.
4.1 p.m.
Lord Reay: My Lords, I should like to say just a few words in support of the Bill. I congratulate the Government on having found parliamentary time for it. It is the type of Bill—highly desirable, with no obvious enemies and wanted by officials and industry alike—that Ministers, especially, dare I say it, politically ambitious Ministers, are tempted to leave on the shelf because of the lack of political mileage to be got out of it.
As I am advised by the CBI, I should like also to record its thanks to the Government for introducing the Bill, and in particular its appreciation of the thorough consultation process which the Government and their agency, the Patent Office, conducted before bringing forward the Bill. That has produced an unusual situation, whereby the CBI is at present not seeking any amendments to the Bill, despite its having more than 100 clauses and being on a subject which concerns its membership directly. All congratulation to the Government, the Patent Office and its enlightened and capable director, Mr. Paul Hartnack. If only all legislation could be so well prepared. Perhaps it shows what can be done when politics does not rear its ugly head.
The Bill is necessary, partly because of the obsolescence of existing national legislation and partly because of the need to comply with the European directive. Industry has no quarrel with the harmonisa-tion proposed under the directive. On the contrary, the ability in future to make a single trade mark registration which will be valid throughout the member states of the Union is seen to be one of the chief benefits of the Bill and a necessary feature for a single market. The degree

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of harmonisation imposed by the directive is not seen to be excessive. Indeed, it brings with it some other incidental advantages; for instance, industry welcomes the opportunity for the first time in this country to include shape in a trade mark registration, as with the Coca Cola bottle. That is a European import into the thinking on this subject.
In time, I should expect that the number of registrations recorded by the British Patent Office in Newport will decline as registrations shift increasingly to the Community patent office in Alicante. Alicante is not, of course, the centre of the universe. Trade mark registration tends to require personal appearances. Of course, a visit to the Mediterranean always has its attractions. Industry is reconciled to the decision, but I am bound to say that there is concern that the Community patent office will load onto its fees a great deal of extra cost, deriving from the need to operate in several different languages, to attract skilled personnel off the beaten track and so forth.
Will my noble friend the Minister give an assurance that the Government will watch closely the fees which the Community patent office charges, and do their utmost to ensure that they do not develop into a source of grievance for industry? I am sure that Her Majesty's Government do not want to see the single market given a bad name in that way.
There is another matter which has already been raised upon which I should like to ask the Government for clarification. In the wake of the case of Queen v. Price, the enforcement authority (the Trading Standards Office) is, I am informed, now wary of bringing prosecutions against street traders selling counterfeit goods in case it should again be pleaded successfully in their defence that no offence has been committed provided under some sort of disclaimer the trader has acknowledged that the goods are counterfeit. The noble Lord, Lord Peston, raised that matter. From what my noble friend the Minister said in his introductory speech, it is plain that the Government are aware of the problem. I am not clear whether my noble friend was saying that once the Bill is enacted that situation need no longer pertain because there will be in future be no doubt that an offence is still being committed despite the disclaimer.
The Bill will bring considerable savings to industry: savings in the present costs of making multiple trade mark registrations; in the cost of bringing infringement action; and costs resulting from the loss of trade. Those are difficult to quantify, although an attempt has been made to do so. The Government quoted some figures in the Bill's preamble, and my noble friend the Minister repeated them this afternoon. The Government are showing that they have taken to heart the concerns and needs of industry. I wish the Bill a swift passage.
4.7 p.m.
Lord Lucas of Chilworth: My Lords, at the outset perhaps I may echo what the noble Baroness, Lady Hamwee, said about Lord Lloyd of Kilgerran. I worked with the noble Lord on a number of associated Bills a
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few years ago. I greatly enjoyed working with him. His knowledge of copyright and patents will be sorely missed.
My noble friend Lady Hooper described the Bill as being, although technical, reader friendly. The trouble with a reader friendly Bill is that we can all see the easy, readable way of adding to it, and of using the Bill as the hook upon which to hang all manner of highly desirable provisions. Although we may wish to make amend-ments, in Committee we should resist the temptation to add to the Bill because it is greatly desired and overdue. The sooner it is on the statute book, the sooner the benefits will be felt by all concerned.
I shall touch on just two elements of the Bill. My noble friend the Minister rightly drew attention to Clause 86 which relates to anti-counterfeiting measures. I recall at the outset of the Uruguay Round attending a Minister's meeting on that point in New Zealand. We are pussy-footed about anti-counterfeiting measures. Counterfeiting is sheer, absolute piracy. We must deal with it in those terms. It is no good pretending that it happens elsewhere—as indeed it does—and so it has nothing to do with us. If domestic law can be stiffened by the Bill, then it must be. Nevertheless, I should like an assurance from my noble friend the Minister that the fight against that piracy is still going on internationally. Therefore, I too am delighted that the Bill will ratify the Madrid Protocol. Nevertheless, other conventions must be brought into play. They deal with countries which have not ratified that protocol and will not be party to it.
My noble friend Lord Reay and the noble Baroness, Lady Hamwee, referred to the possibility of giving trading standards officers powers under the Bill to enforce Section 107 of the Copyright, Designs and Patents Act 1988. My noble friend Lady Hooper suggested that the Bill might be the vehicle for the introduction of tougher new sentences for counterfeiting offences. I have a great deal of sympathy with both thoughts, and I agree with them. It is one of the issues on which one might hang "goodies", which may have to be resisted. Might we expect legislation in the not-too-distant future which takes care of those matters which are dealt with in legislation now sadly out of date? My noble friend does not have to be more specific than that.
The second issue I wish to raise is that of retail services. The Bill deals with service marks and trade marks which are to be drawn together and it removes from the old Act the necessity of proving that the service given is for the provision of money or money's worth. In effect, retailers will be able to register a complementary service. That may be the provision of shopping bags or baskets and crèche facilities where no money necessarily has to change hands.
The trouble is that as the Bill stands whatever complementary service is offered—as I say, that might be a crèche, a shopping basket, the free polishing of shoes, the pressing of a suit or the drying of a raincoat while one shops in a store—each would have to be registered. I understand that the Bill does not provide for the single registration of a retail service. That might be, for example, Marks and Spencer or C & A. While the former can register their products under the trade

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mark—St. Michael or Canda respectively, which is virtually a patent on a product description—most consumers would recognise a reputation, a guarantee of quality and a service offered by names such as M & S and C & A. There are others—I do not single out those two retailers as being special.
It is the belief of the retailers that their reputation is at stake if that retail service cannot be registered. They also believe that the name is conducive to customer loyalty. We have heard of examples such as the shop which had on its front its name spelt "H" a short gap and then "arrod". I do not believe that many people would regard that as being "Harrods" but Harrods most certainly did. Harrods brought an action in Sydney under Australian law. They won the action. The other shop was prevented from using the name "Harrods", which has implicit in it quality, reliability and a certain reputation. There have been other cases in this country.
If one were able to register the names that would protect a retailer, that would be helpful; but I am not aware of such a provision in the Bill. Can my noble friend the Minister give me an assurance on that matter? If not, perhaps he will permit me to frame an amendment which will allow retail services to be included in the trade mark registration.
As my noble friend Lord Reay and other noble Lords have said, this is a jolly good Bill and everyone wants it. I look forward to a fairly short Committee stage. I am sorry to see the noble Lord, Lord Peston, shake his head. If he speaks very fast perhaps we shall be able to shorten the proceedings. The sooner the Bill is on the statute book, the better for all concerned.
4.17 p.m.
Lord Cawley: My Lords, I apologise for omitting to put my name on the speakers' list. Until 1973 I was a practitioner in trade mark law. I had frequent jousts before the Registrar of Trade Marks with the late Lord Lloyd of Kilgerran. Sometimes he won and sometimes I won.
When during the past 35 years measures relating to intellectual property have come before the House I have taken the opportunity to advocate a comprehensive trade mark Bill. More than 10 years ago I told the House that I would probably rise in my place in my 90s to congratulate a future government on introducing such a measure. I was pessimistic because I am only 80 years of age. The legislation is many years overdue and it has my full support in principle.
4.18 p.m.
Lord Strathclyde: My Lords, at the beginning of the debate I explained in some detail how the Bill is important for business. The remarks made this afternoon indicate that that view is generally shared in this House, and I welcome that. Noble Lords have indicated that they will wish to look more closely at certain aspects. That is to be expected. I look forward to hearing in Committee the views of the Members on the provisions of the Bill.
I too share what has been said about the late Lord Lloyd of Kilgerran. When I was a Whip in the Department of Trade and Industry I dealt with the noble
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Lord on many occasions. He was always extremely helpful to me when I was ignorant, which I often was at that stage.
I thank my noble friend Lord Reay for his congratulations on the way in which the Government handled themselves during the consultation process. I look forward to his contributions during the next stages of the Bill. I am also grateful for the contribution made by my noble friend Lord Cawley and his explanation of some of the history of the Bill.
The noble Lord, Lord Peston, started by quoting Adam Smith. I am extremely grateful to him for quoting Adam rather than John, and I hope that he will continue to do so.
He asked about the licensing of unregistered trademarks. That and many other questions which he raised are exactly the kind of matters which we shall discuss in great detail in Committee. But perhaps I may touch on one or two of the general points which he made; in particular the question of interpretation of the language used in the directives. I agree that there may be problems as regards interpretation, but in general harmonisation is best served by sticking closely to the directive. Courts in this country are now increasingly used to implementing Community language. However, we can discuss that further.
The noble Lord, Lord Peston, and my noble friend Lady Hooper, among others, asked about comparative advertising. This Bill aims at a flexible approach so that comparisons that are useful to consumers will be allowed, whereas parasitic comparisons may be caught out.
The noble Baroness, Lady Hamwee, the noble Lord, Lord Peston, and my noble friends Lord Reay and Lord Lucas of Chilworth all spoke about counterfeiting. We believe that this Bill is sufficient and that there will be no need to amend the Trade Descriptions Act. As regards international counterfeiting, the measures to improve protection against counterfeiting worldwide are being actively pressed for in the GATT negotiations, which I hope are currently nearing their conclusion.
I can assure my noble friend Lord Reay that the Bill strengthens anti-counterfeiting provisions and should be very much welcomed by enforcement authorities because it will make their job considerably easier.
Lord Peston: My Lords, I accept entirely the point which the noble Lord makes that we shall go into further details on these matters, but perhaps I may ask him whether counterfeiting will be dealt with under this legislation or whether it will simply be via this Act into the Trade Descriptions Act.
Lord Strathclyde: My Lords, I believe that I am right in saying that it will be dealt with under the provisions of this Bill but some provisions of the Trade Descriptions Act will also apply.
The noble Baroness, Lady Hamwee, made a valid point that the system may be too costly. Officially the fees are £185 per class, which gives seven years' protection. The noble Baroness quoted costs of £110,000, which seems to be slightly excessive, but

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those are the kind of costs which include provision for legal advice. In many cases that can exceed the net worth of the advice actually received.
Baroness Hamwee: My Lords, in defence of my profession, I should say that the fees to which I referred were fees of trademark agents and not of solicitors.
Lord Strathclyde: My Lords, it is always nice to hear the noble Baroness protecting her profession, which she does most capably.
The noble Baroness raised the matter of copyright piracy. This Bill deals specifically with trade marks and it is doubtful whether copyright changes are within the scope of the Bill. However, I understand the points which the noble Baroness raised.
My noble friends Lady Hooper and Lord Lucas of Chilworth made some interesting observations on registration for retail services. In a test case in 1989 taken up by a number of large retailers and supported by the British Retail Consortium, the Court of Appeal decided that "retail services" was too vague a term to afford the protection which was sought. Their Lordships felt that its use would disadvantage others, and that is still the Government's view. We said in the White Paper that there is no need to seek registration for retail services used by a third party; for example, a trade mark as a name of a shop. The law would clarify the extent of the remedy for infringement. That is done in Clause 9. However, if retailers are unhappy about the extent of the protection given by Clause 9, we can discuss that matter in more detail in Committee.
My noble friend Lady Hooper asked where the directive has been implemented. I can tell the House that it has been implemented in France, Denmark, Italy, Greece, Portugal and Spain. It is still awaiting implementation in this country, in Ireland and in Germany. The Netherlands, Belgium and Luxembourg have codified the law, which awaits ratification by their Parliaments.
I said earlier that we have consulted extensively on this Bill, but we do not claim to have every single detail absolutely right. Now that the Bill has been published, my department will continue the process of discussing it with interested parties and will listen carefully to what is said. I am delighted that the overall message which I take away from this Second Reading debate is that the Bill is welcomed, and on that basis I commend it to the House.
On Question, Bill read a second time.
Lord Strathclyde: My Lords, I beg to move that the Bill be committed to a Public Bill Committee.
Moved, That the Bill be committed to a Public Bill Committee.—(Lord Strathclyde.)
Lord Simon of Glaisdale: My Lords, I do not oppose the Motion but I should like to utter a slight note of reserve. I certainly do not oppose it because all those noble Lords who have dealt with the subject today have approved of it going to a Public Bill Committee. But my hesitation is lest we should become slap-happy about the procedure.
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Certainly if any Bill should go to a Public Bill Committee, this is the kind of Bill which should do so. The disadvantages are two general ones and one particular one. In general, a Committee of your Lordships' whole House is an admirable forum for detailed discussion. Secondly, there is a danger that governments may use recourse to a Public Bill Committee merely to load more and more legislation onto your Lordships' House. On this occasion certainly one welcomes it because the Bill was squeezed out of last Session's business. On the other hand, that it is now in on the basis of it going to a Public Bill Committee means that room is made for another Public Bill.
The third reason is a particular one: that the Public Bill Committee sits during the morning and afternoon and therefore is denied the assistance of a Lord of Appeal in Ordinary unless he is prepared to run the risk of disrupting the judicial business of your Lordships' House. Your Lordships heard today from the noble Lord, Lord Cawley, whom we all hope will be on the Public Bill Committee. He is an expert on this branch of the law. But there is another great expert who is a Lord of Appeal in Ordinary.
That situation obtained during discussion of the Charities Bill. In that case, the use of a Public Bill Committee was undoubtedly a success. But it meant that the greatest expert on charity law—my noble and learned friend Lord Browne-Wilkinson—was not available. As it happened, on that occasion another great expert—my noble and learned friend Lord Brightman, who had retired as a Lord of Appeal in Ordinary—was available. However, it is undoubtedly a matter that should, it is to be hoped, be borne in mind before we rush into sending Bill after Bill to a Public Bill Committee.
Lord Boyd-Carpenter: My Lords, I share the hesitation and apprehensions of the noble and learned Lord, Lord Simon of Glaisdale, about the Motion. After all, it is the basic function of the House fully to discuss legislation. A variation of our procedure which will exclude the great majority of Members of your Lordships' House from taking part in the Committee stage does, therefore, require to be looked at somewhat carefully. I shall be interested to see how it works.
However, I would welcome in advance an undertaking from the Minister that, because the Bill will have been to a Committee, the Report stage will not be hustled and that, if necessary, an additional day will be given in that respect so that some of the discussion which would have taken place in a Committee of the Whole House can, therefore, take place on Report. In the light of the amendments tabled and of previous discussion, I would welcome an assurance that rather more time than usual will be allotted for the Report stage of the Bill.
Lord Allen of Abbeydale: My Lords, I hesitate to raise a question as regards what the noble Lord, Lord Boyd-Carpenter, has just said, but the experience on the Charities Bill Committee showed that non-Members of the Committee were perfectly free to come to the Committee and to move amendments, a privilege of which they took very full advantage. I believe that the

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experience on the Charities Bill suggested that the procedure was a good one for a very limited category of Bill. My own view is that the Bill now before us happens to fall in that category. However, a few things did go wrong and questions were raised on the Charities Bill Committee. I trust that full note was taken of that fact in settling how the proposed Committee—that is, if it is approved—will operate.
Lord Strathclyde: My Lords, I am grateful to the noble and learned Lord, Lord Simon of Glaisdale, for reminding us of our responsibilities in making the decision. Of course, those responsible for making the decision have weighed up the advantages and disadvantages of the procedure and have decided that, on balance, this is precisely the kind of Bill that should be dealt with under the special procedure. The Bill before us is one which involves no party controversy and one which will, I think, benefit from the particular detail and expertise that can be given under the special procedure.
My noble friend Lord Boyd-Carpenter asked whether we could have an extra day on Report. I am a believer in debating such matters fully. However, as to whether or not an extra day will be given will depend on necessity. Obviously, my noble friend the Chief Whip will maintain discussions through the usual channels. I am also grateful to the noble Lord, Lord Allen of Abbeydale, for his support in regard to the procedure. There have been only about six times over the past 12 years when we have needed to use the special procedure. I suspect that, on balance, noble Lords feel that it has worked extremely well.
On Question, Bill committed to a Public Bill Committee.

Hong Kong
4.35 p.m.
The Parliamentary Under-Secretary of State, Department of Employment, (Lord Henley): My Lords, with the leave of the House, I should like to repeat a Statement being made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs.
"I will, with permission, Madam Speaker, make a statement about Hong Kong.
"We have an important job to do in the remaining years of British sovereignty in Hong Kong. We intend to carry out these responsibilities, with the support of this House. Part of our task will be to make arrangements for the elections to the district boards, municipal councils and the Legislative Council in 1994 and 1995.
"There is no argument between Britain and China over the principle that Hong Kong's democratic institutions should continue to develop. That is set out in the Sino-British Joint Declaration. It provides that by 1st July 1997 Hong Kong's legislature will be constituted by elections. China's Basic Law for Hong Kong after that date spells out more fully that process of political development.
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"The issue is how these principles should be turned into practical arrangements. The proposals which the governor put forward in October 1992 with our full support were carefully framed to be consistent with the Basic Law. We have all along wished to proceed in agreement with China, in order to assure continuity in this important part of Hong Kong's life. That is why we have put so much effort since April into achieving an agreement in the talks with China.
"The talks have been concerned with complex electoral issues. But the underlying question is simple. Will we bequeath to Hong Kong an open and democratic system offering the electorate a genuine choice? Or will we settle for a system based on small electorates open to manipulation and corruption?
"The answer to that question affects the character of Hong Kong. Hong Kong owes its success in large measure to the rule of law supported by a clean and efficient administration. If that precious asset is to be preserved in modern circumstances, the territory needs an elected and credible legislature which can stand up for its way of life.
"That is why elections held under British administration in Hong Kong must be fair, open and acceptable to the people of Hong Kong. On that basis, we have made a concerted effort through 17 rounds of talks to reach agreement with China. I discussed matters twice with the Chinese Foreign Minister during this period. The Prime Minister sent a message to the Chinese premier. We have offered to make important moves to accommodate Chinese views, without compromising our essential requirements, as part of an acceptable agreement.
"We made plain from the outset that the talks could not continue indefinitely and that it would be for the Legislative Council to consider and pass the necessary legislation. This will be a time-consuming task. Some 48 constitutional and electoral instru-ments in Hong Kong are affected and may need amendment. All the primary legislation needs to be in place by July 1994. Some of the more urgent measures need to be on the statute book by February.
"When time began to press, we therefore explored fully the possibility of an interim agreement, which would enable us to get on with legislation on the more urgent issues, and gain a little more time to resolve the remainder.
"I explained to the Chinese Foreign Minister in New York on 1st October that this aim would not be achieved by an interim package limited only to the district board and municipal council elections. To deal with all the more urgent issues, an interim package needs to include the voting age and the voting method for all three sets of elections, including the Legislative Council, and the abolition of appointed membership in the district boards and municipal councils.
"The Chinese side evidently had no difficulty of principle with an interim package covering some LegCo issues. They accepted our proposal that the voting age should be lowered to 18 for all elections. They also seem to have had no difficulty of principle

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with our proposal that the voting method should be single seat-single vote. They accepted that this should apply to the district board and municipal council elections. But they refused to accept as part of an interim package that the single seat-single vote method should apply to the Legislative Council.
"We and the governor consider that there are compelling reasons for including this proposal in the interim package: in practical terms it would otherwise be necessary to legislate twice on the voting system, using up legislative time which will be in short supply next year; the single seat-single vote system enjoys widespread support in the Legislative Council. If we had accepted the Chinese position and introduced legislation to apply this voting method to the district boards and municipal councils only, the council might have extended the measure to apply to the elections to its own body. That would lead straight back to further difficulties with the Chinese Government. We would not have saved time: we would have wasted it.
"Despite our best efforts, it has not been possible to reach agreement on this issue. The question of abolishing appointed members also remains un-solved. Time has now run out for pursuing these points.
"It is necessary to introduce legislation on them into the Legislative Council before their Christmas Recess. That will allow work to begin straight away in a Bills Committee. The Governor has therefore announced that he will publish draft legislation on 10th December for introduction on 15th December.
"These proposals are largely uncontroversial in Hong Kong. We had thought that they were uncontroversial with China. On a number of them it was possible to reach a common view in the talks. In those cases the legislation will reflect that. The Governor is not at this stage legislating on the main issues which remain in dispute, namely the functional constituencies, the composition of the election committee and objective criteria for the through train.
"We are not breaking off the talks. We have proposed a further round in December to pursue agreement on the remaining issues. We are prepared to work seriously and constructively to that end. We strongly hope that the talks will continue.
"Britain and China have to carry out what they agreed, namely to preserve Hong Kong's way of life and success while transferring sovereignty. That is a unique and difficult task best carried out together. The Joint Declaration makes clear the fundamental British responsibility up to 1997. We and the governor are committed to working with China in the interests of Hong Kong. We look for corresponding commitment from their side".
My Lords, that concludes the Statement.
Baroness Blackstone: My Lords, I am grateful to the Minister for repeating the Statement. I reiterate what we have said on numerous occasions; namely, that we have always supported moves towards greater democracy in Hong Hong. We believe that these relatively modest
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proposals for further democracy are consistent with the Joint Declaration. We understand that they are also consistent with the Basic Law.
This Statement is bad news for the British Government and, far more important, it is bad news for the people of Hong Kong. Why, after a year's discussion, are even the simplest of these proposals apparently still unacceptable to the Chinese Government and even an interim agreement beyond the reach of the Foreign Office, British Ministers and the Governor of Hong Kong? Why have Her Majesty's Government been unable after 17 rounds of talks to persuade the Chinese Government that the implementa-tion of these proposals is necessary?
Perhaps the Minister could give a little more detail about why the talks have collapsed and why the Chinese Government will not accept the single seat/single vote proposals that have been put to them. What hope can there be for agreement on the main issues in dispute such as functional constituencies and the objective criteria for the through train when there has been failure on these less important interim measures? Is it not apparent that the UK Government got off on the wrong foot when proposals for political reform were announced in October 1992 and never recovered from the bad start that was made as a result of the failure to consult the Chinese Government adequately at that time?
I do not wish in any way to imply that the Chinese Government's intransigence on these and other matters is acceptable. We on these Benches have been consistently critical of their human rights record, as we have of their handling of the Tiananmen Square demonstrations in 1987. However, we cannot be other than deeply concerned about the way in which our relations with the Chinese Government on the future of Hong Kong appear to have deteriorated in the past year and a half. Those who thought that the handling of these matters by the British Government and the Governor of Hong Kong lacked subtlety have been proved to be right in the light of these latest developments.
Is it not increasingly likely that the Chinese will now set aside these proposals in 1997 and introduce their own plans? What hope is there for the through train? Is it not also clear that without a substantial recovery of trust and serious further negotiations leading to agreement there is nothing that the UK Government can do to stop that happening?
The Statement says that the Government are not breaking off the talks. Can the Minister tell the House what the Government intend to do if as a result of today's announcement the Chinese refuse to pursue talks on the remaining issues? These are important questions that must be answered.
In addition, what can the Minister tell the House in the way of assurances that pressing ahead with the proposals for political reform on a unilateral basis will not jeopardise existing arrangements for the new airport and other major capital projects that have been agreed?
Today's Statement on the failure to come to any agreement on the practical arrangements to implement earlier agreements can only give rise to considerable anxiety among all those with an interest in the peaceful

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transfer of sovereignty in 1997 and in the long-term prosperity of Hong Kong. Above all, there must be anxiety about the great risks that are being taken with the future of the people of Hong Kong and their wish for an open and democratic system.
Lord Bonham-Carter: My Lords, I should like to join the noble Baroness, Lady Blackstone, in thanking the Minister for repeating the Statement made by his right honourable friend in another place.
In these circumstances it is easy to be wise after the event. We on these Benches have always supported Mr. Patten's initiative and we maintain that position. Of course it would have been better had democratisation been initiated at an earlier date, but that was not the position which faced the Governor when he took up his post. I take the view that it is better late than never.
We have to face up squarely to the very weak negotiating position in which we find ourselves. Our ability to find our way through the position which the Statement describes so frankly and vividly depends on our ability to convince the Chinese of the importance to them of the prosperity of Hong Kong, the degree to which they see that that prosperity depends on the rule of law in that city state, and the extent to which they are prepared to allow two systems to co-exist. There is no real leverage which we can exercise unless we can convince them of those elementary and crucial factors. In looking at the position in which we find ourselves today we have to confront those serious facts.
There are two other points which I should like to raise. The Chinese position affects their standing in the world, to which they are sensitive. That standing was not improved by Tiananmen Square. It is not improved by what is happening in Tibet. It has not been improved by their response at the APEC meeting to President Clinton's approach to them on human rights. In that connection I should like to ask the Minister whether we can be confident that we and the United States Government stand four-square on the position of Hong Kong and what their position is in relation to Hong Kong. It will not be improved if China remains intransigent about Hong Kong and the proposals which Governor Patten has made. They do not wish to stand alone against the tide of events in the 20th century. I do not believe that they want to jeopardise the main conduit for investment into Southern China which is transforming that whole area.
Of course we must be prepared to compromise in the negotiations, as in any negotiations, but it takes two to negotiate. If someone refuses to negotiate there is not very much that the other party can do. However, I do not believe that we should be prepared to compromise too far on the way that the legislature is elected because the rule of law depends on that.
I should like to mention the importance of the position adopted by the business community in Hong Kong. It is essential that there should be no split between business and the democratic movement within Hong Kong. The business community should be encouraged to stand behind the position adopted by the Governor. It seems to me that it has not been good news that Mr. Murdoch has sold his paper in Hong Kong to
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someone who, it is generally believed, will not support the governor but will support Beijing. We can only hope that other businessmen do not behave in the same fashion.
Lord Henley: My Lords, perhaps I may respond to the two Opposition Front Bench speakers first before I take questions from other noble Lords.
I welcome the partial support that we received from the noble Baroness, Lady Blackstone, and the Labour Benches and the more fulsome support from the noble Lord, Lord Bonham-Carter, although he much regretted that events had not occurred earlier. However, I believe that he answered the question himself when he said that we have to start from where we are. That was the position that the Governor was in.
Very simply, the noble Baroness, Lady Blackstone, asked why we could not obtain an agreement, and what hope there was for future discussions. She stated that this was bad news for Her Majesty's Government and for Hong Kong. It is certainly not due to lack of effort or lack of willingness on the part of Her Majesty's Government. Her Majesty's Government have negotiated with the Chinese Government on many occasions. Nor has there been any lack of willingness on the part of Her Majesty's Government—again I stress the point—to compromise. In the end one has to ask the Chinese authorities why there has been failure. I believe the noble Baroness answered those questions herself in part by saying that there was a degree of intransigence on the part of the Chinese.
We believe that we need a system which recognises the genuine aspirations for democratic government of the people of Hong Kong and which allows further development post-1997. We believe that it is our plain duty to administer Hong Kong to the best of our ability up until 1997. That obviously includes those elections. We believe that the proposals which Governor Patten has put forward respond to those aspirations.
With regard to hope of future discussions, the Chinese Government themselves have a strong interest in a smooth transfer of power in 1997. The Chinese Government have a strong interest in a democratic and prosperous Hong Kong. We believe that if the arrangements then in place are working well and are consistent with the Joint Declaration and Basic Law, as we believe that they are, we cannot see why they should be changed. We cannot see why it is in the interests of the Chinese so to change them. Again, I stress the points made by the noble Lord, Lord Bonham-Carter, as regards China's position with the remainder of the world community. I do not believe that China's position will be in any way improved by the authorities' intransigence on such matters.
Perhaps I may say a few words on the airport issues upon which the noble Baroness touched. Our views are that those matters are quite different and should be dealt with separately and on their merits. We believe that the Chinese officials have frequently said exactly the same thing. I think that everyone agrees that Hong Kong needs a new airport if it is to remain an international trade and financial centre. The Hong Kong Government will be getting on with work on the airport where

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possible. It is still necessary to resolve some of the financing issues with the Chinese and we hope that that can be done so that the airport can be ready on time.
Finally, perhaps I may reiterate that we believe that there will be a good deal of water flowing under the bridge between now and 1997. However, I stress that it is not only in our own interests that those matters are resolved but also in the interests of the Chinese and of the people of Hong Kong.
4.55 p.m.
Lord Callaghan of Cardiff: My Lords, there can be no doubt that the Government have had a difficult hand to play ever since the signing of the Sino-British agreement. However, I cannot congratulate them on the way that they have played it. The old saying is, "You should speak softly and carry a big stick". That is fine, but one should not speak loudly if one has no stick. I fear that the Government have got themselves into a cul-de-sac because they have totally misunderstood the basis of negotiations with the Chinese Government, who are not a democratic government. They do not therefore accept the normal canons of behaviour that we in this country, or indeed in the western world generally, accept. The Government have got themselves into a cul-de-sac; they cannot now satisfy the people of Hong Kong completely, and we are now endangering our long-term relations with China. It is a terrible example of ineptitude.
When I went to Beijing in May, I had a long talk with President Jiang Ze Min. On my return I reported fully to the Prime Minister on what I thought the position was. I told President Jiang Ze Min that I believed that the British Government were negotiating in good faith and wished to come to an agreement but that it was quite obvious from the difference between us that there would have to be a compromise in the view that we were expressing. I am not privy to any secret discussions; we all know that secret discussions about which we know nothing take place nowadays. However, on public ground no compromise has been made that the Chinese could accept.
They are not a democratic government. If they were, we should be starting from a different basis. However, they believe that the proposals which the Governor of Hong Kong has made—I believe that he has been the guiding spirit, and much responsibility rests upon him—have stretched the spirit, if not the letter, of the agreement to the uttermost, and the string will stand no more. They believe that the British have been seeking to—I shall not continue. I have taken up my time.
I simply say this to the Government. The Government have no particular strength on this matter. They are building on sand at present. They should recognise their weakness and begin to negotiate on the basis of reaching a settlement.
Lord Henley: My Lords, I respond briefly to the noble Lord, for whom I have the utmost respect. As I believe the noble Lord admitted, the negotiations are very difficult. We negotiate from very different positions of strength. I have to say to the noble Lord that
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there has been considerable compromise by Her Majesty's Government throughout the many negotia-tions which have been held; and there will be many more negotiations. I reject his criticisms of our attempts to negotiate. There have been many meetings. I stress that there have been compromises by Her Majesty's Government. We would obviously be prepared to consider any further proposals by the Chinese Government.
However, it is important at this stage that we go ahead on this particular front. We intend to do so. We have offered further meetings; and certainly further meetings have been offered with the Chinese Government later this month.
Lord Geddes: My Lords, I welcome the Statement from the Minister on two counts, first, that a Statement has been made, and, secondly, certainly from the British side, that talks are to resume. To my knowledge exactly a year ago bar two days this House had a quite significant debate on exactly this subject. There were many speeches from noble Lords of enormous eminence who warned Her Majesty's Government that they must take this matter very carefully indeed. In that context, I agree almost wholeheartedly with the comments of the noble Lord, Lord Callaghan.
Her Majesty's Government have got themselves into a cul-de-sac. Perhaps I may instance briefly one example thereof. I refer to the statement, if I heard it correctly, about not only pursuing the single seat-single-vote system but that Her Majesty's Government had thought that the limited proposals were uncontroversial with China. By definition, the single seat-single vote system is not acceptable to China, not least on the criterion of the through train. They have said that consistently. I urge the Government, please, to take on board that one has to negotiate with the Chinese in the way that the Chinese accept, and not as Westminster accepts, which the Chinese simply do not understand.
Lord Henley: My Lords, my noble friend is quite correct in that we thought that some of our proposals were largely uncontroversial in Hong Kong. We also thought that some of them were largely uncontroversial in China. I have to say to my noble friend that we were able to reach a common view in talks on a number of matters. As I said to the noble Lord, Lord Callaghan, talks will certainly continue, and we have proposed a further round of talks in December. We will keep our door open and be prepared to continue discussions with the Chinese Government for the benefit of the future of the Chinese Government, ourselves and the people of Hong Kong. I certainly take note of what my noble friend had to say, with his great experience of the Far East, and I am sure that my right honourable friend the Foreign Secretary will take it on board.
Lord Marsh: My Lords, is the noble Lord aware that since negotiations in this round began, there have throughout been voices which warned the Government of the impossibility of achieving results on the stand which they were taking? There is a division between the business community and the government, or a large section of it. Sir Percy Cradock and virtually every other

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former adviser of the British Government have warned them on the issue right the way through. I should be interested to hear the Minister's views on the recent article on this subject by Sir Percy Cradock. The Government are pursuing a line about which people have warned them, but they refuse to accept the possibility that what they see as a legitimate negotiation could be and is seen by the Chinese as a classic example of British 19th century arrogance which fails to recognise the realities of who will rule Hong Kong in 1997.
Lord Henley: My Lords, I have seen Sir Percy's article. I regret that I have not yet had time to read it, but officials have. Sir Percy is a distinguished former public servant and he is obviously entitled to his views. But we do not believe that it is right to say that there has been any change of policy on Hong Kong. We remain committed to the approach as set out in the Joint Declaration and we need to get on with urgent legislation. There is no reason why that should damage wider co-operation, which I believe is self-evidently in the interests of Britain, China and Hong Kong. That is why we say that the discussions will continue.
Lord Bottomley: My Lords, have the Government considered the wise words uttered today by Sir Percy Cradock.? They are reported in the press and, as we all know, Sir Percy was our ambassador in China at the time of the Joint Declaration. Have the Government considered the economic consequences of not carrying China with us? The recent cancellation of an order submitted for an underground railway by GEC may be a warning of what is to come.
If we act unilaterally, is there not a danger that the Chinese will do the same? The Chinese have already indicated that they will not recognise the agreement and will introduce a new legislature after the transfer of power. Do we really wish to end the last days of British responsibility in chaos and disorder? I hope that the Government will do everything possible to secure an agreement with China.
Lord Henley: My Lords, of course the noble Lord is right to underline the concerns of business. But, as I think the noble Lord, Lord Bonham-Carter, made clear, and I agree with him. business is not the only concern that we should underline on these occasions. There is the concern of the people of Hong Kong which must be borne in mind. I responded to the question which the noble Lord, Lord Marsh, asked about Sir Percy Cradock's article in whatever newspaper it was.
As regards any damage to the Hong Kong economy and the way of life of the Hong Kong people, what we are looking for is stability. We believe that our way forward is the right way to go and it is important that democratic processes should start. As I made clear in the Statement from the Foreign Secretary, for those reasons it is important that that process should continue as early as possible. We believe that what we are proposing does not go beyond the Basic Law which the Chinese agreed. We therefore believe that it would not be in the interests
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of the Chinese, post-1997, as I said in my response to the noble Baroness, Lady Blackstone, to change what we had already brought in at an earlier stage.
Viscount Slim: My Lords, is it not a fact that politicians generally speak politics? As the noble Lord, Lord Bottomley, said, there is a great need to consider the commercial angle. As other noble Lords have already quietly advised the Government, that is definitely being forgotten. We talk of Hong Kong, but it is the British business in China that will be paramount in the future to the nation. China has to be the largest market for Great Britain in the next 80 to 100 years. It is surely the duty of the Government to get the matter straightened out. So far, as I see it, the Statement merely makes excuses for not obtaining a conclusion to the conversations and talks.
I believe that it is up to Her Majesty's Government, at the right moment and in the right place, to give a little, to make certain that we get agreement before we find that British business in Hong Kong and China is completely ruined.
Lord Henley: My Lords, I do not accept the remarks of the noble Viscount about making excuses. Obviously our commercial interests with China are very important. Trade with China is growing. The balance of trade is in China's favour, and we would wish to maintain any close commercial relations. We do not believe that, with the trade growing, and particularly since it is growing in China's favour, any disagreements over Hong Kong which we believe can be resolved should necessarily spill over into any broader bilateral relationship, whether in trade or other matters.
Lord Mackie of Benshie: My Lords, I wish to ask the Minister a simple question. I thought that my noble friend Lord Bonham-Carter made an excellent point about world opinion. He asked an important question: is the United States—a much more important country than ourselves—at one with the Government's policy?
Lord Henley: My Lords, I can certainly confirm that the United States is fully in support of our policy on Hong Kong.
Lord Stewartby: My Lords, can my noble friend say whether, during the long series of exchanges with the Chinese Government, we have been able to gain a clear understanding as to why they have objected to a number of the proposals which have been put forward? Will he be good enough to comment on an impression which I gained from a visit to China last month? I met a number of people, both in government and out of it, and my impression was that there is in China an absolute determination that Hong Kong should remain a very successful and prosperous commercial centre. However, there was also a considerable nervousness that it might provide a base from which political agitation could be developed to undermine the government itself in China. I should be grateful if my noble friend could comment on that.
Lord Henley: My Lords, I would rather not speculate on exactly why there is intransigence on these matters from the Chinese. Obviously it is a matter for

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the Chinese Government. I can confirm that it is in the Chinese Government's interests that Hong Kong should remain prosperous after 1997. We believe that it should also remain democratic, and we do not believe that it would be in the interests of the Chinese Government to disturb the processes which have already started and which might disrupt any chances of prosperity continuing and growing.
Lord Shepherd: My Lords, I had hoped, having had relations with Hong Kong for many years, that 1997 would see a transfer of power and responsibility between the United Kingdom and China in a way in which there was friendship and confidence. I do not think that the Government can believe, from the interventions made today, that this House feels that that is likely to be achieved. I do not blame Her Majesty's Government entirely. I believe it is the result of a lack of understanding. My noble friend Lord Callaghan said that the Chinese are not democratic. All that I can say to the noble Lord is that in all my experience, the People's Republic of China has honoured every agreement, political or commercial. I believe that the agreement that was made between Mrs. Thatcher (the noble Baroness, Lady Thatcher, as she now is) and the People's Republic of China will be honoured to the full.
My anxiety—one which I am sure will be felt most in Hong Kong tonight—is that the handing over of power will not be in the spirit in which the agreement was made. Therefore I hope that the Minister, while recognising his difficulties in not having direct access to the department, will see that the message of this House that will go to the Secretary of State is that we shall need to recover the spirit of the original agreement, and to find ways and means by which all the problems can be overcome. To say that we wish to see a democratic structure in Hong Kong is, I have to say to the noble Lord, rather late. I recognise that, having been a Minister of State in the Commonwealth Office who tried to bring some of it about. But there was resistance and difficulty. I think that it is probably too late now to go to the very threshold of antagonism between the two great countries who will have to make the success of that agreement possible and right for the people of Hong Kong. I hope that the noble Lord will recognise genuine anxieties, not only here but also in Hong Kong, and that some new steps have to be taken to recover some of the goodwill that we had together when we signed the agreement.
Lord Henley: My Lords, as the noble Lord will know, any feeling in this House will certainly be taken note of by my right honourable friend the Foreign Secretary. He will certainly take note of what the noble Lord had to say, and also note the remarks of all other noble Lords. The noble Lord said that it was all rather late. But, as the noble Lord, Lord Bonham-Carter, said, we have to start from where we are. It is no use pretending that we have not done things in the past. There were reasons why we could not do things in the past, and no doubt the noble Lord will know why he could not do things in the past. I say to the noble Lord that 1997 is still four years away. Much can happen in
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that time. We shall certainly continue to negotiate and to seek agreement so far as is possible with the Chinese Government in the best possible interest of the people of Hong Kong.
Lord Harmar-Nicholls: My Lords, my noble friend accepted the message from the noble Lord, Lord Shepherd, which I believe was very wise. As the noble Lord said, it was based on experience. Hong Kong is not a new problem for Parliament. We have been involved in these matters for many years. We have had delegations from Hong Kong and we have had duels year after year. I do not believe that anyone who listened to the exchanges over those years expected the position to be very different to what it is. It was quite clear that, as we got nearer to the hand-over date, the real difference between rigid communism and our democratic approach would show itself. The only message which ought to come out of what has been said is this: all the best with continuing the negotiations; achieve what you can, but the vital aim at the back of our minds is, however it ends, in or before 1997, it must not end in acrimony. It must be ended in the spirit in which the agreement was made. Quite apart from individual items, which will be battled for, let us see that that overall spirit is not completely lost.
Lord Henley: My Lords, I simply could not agree more with my noble friend. These matters must not end in acrimony. Perhaps I may add just one rider. They must also end in the interests of the people and the economy of Hong Kong.

European Communities (Definition of Treaties) (European Investment Fund) Order 1993
5.15 p.m.
The Earl of Caithness The Earl of Caithness: rose to move, That the draft order laid before the House on 18th November be approved [1st Report from the Joint Committee].
The noble Earl said: My Lords, I beg to move that this House approve the European Communities (Definition of Treaties) (European Investment Fund) Order 1993.
Noble Lords will recall that a year ago in Edinburgh at the conclusion of the UK's presidency of the European Community, the European Council agreed a package of measures to promote economic recovery in the EC. One of those measures was a request that the ECOFIN council and the European Investment Bank give urgent and sympathetic consideration to the establishment of a European investment fund. That work has now been substantially completed, with agreement being reached on the precise role of the fund and on the draft statute which sets out its rules of operation. So the Brussels European Council on 29th October was able to commit itself to bringing the fund into existence by the new year.
The new fund had its origins within the European Investment Bank. That is one of the Community's least-known and perhaps least appreciated institutions.
Its primary purpose is to provide medium- and long-term loans to capital investment projects which further the economic development of the Community. It now operates on a very considerable scale and the UK is a major beneficiary.
In 1992, total lending amounted to nearly £13 billion, of which £1.8 billion was lent to projects in this country, making the UK the, third largest recipient among EC member states. Although the fund will be based at the bank's headquarters in Luxembourg and will be staffed by bank personnel on secondment, legally and financially it will be entirely independent of the bank. There are two reasons for that. The first is operational. The fund will complement, not duplicate, the bank's role. It will not make loans, but instead provide guarantees. In due course it may also take equity stakes in enterprises. Under its draft statute, the fund will operate in support of two classes of undertaking, small and medium-sized enterprises and planned European networks, projects to improve the links between the member states' national transport, telecommunications and energy networks. Initially the fund will provide guarantees for loans made by other financial institutions. Such guarantees are a form of insurance, for which the company which benefits will pay but which will make it easy to borrow money on reasonable terms. After two years its shareholders may allow the fund to take equity holdings. Here it would concentrate particularly on small and medium-sized enterprises. The fund would not take a holding in its own name, but rather acquire stakes in financial institutions which specialise in holding such equity.
The second reason for the fund's independent status is legal and institutional. The fund would have an initial subscribed capital of 2 billion ecu, that is £1.5 billion, of which the European Investment Bank would hold 40 per cent. It is envisaged that the remaining 60 per cent. would be divided equally between the Community itself, represented by the Commission, and those of the Community's private sector banking institutions which wish to become members. That participation by the private sector is important since guarantees will not be provided directly to small and medium-sized enterprises but rather through the agency of local banks with expertise in their relevant area. The fund will be run on a commercial basis and may pay dividends on its capital.
The procedure for setting up the fund is somewhat complex. Legally what is required is for the board of governors of the European Investment Bank, which includes my right honourable friend the Chancellor of the Exchequer as United Kingdom representative, to set up the new body and then invite the Community and private sector banks to join. However, in order that that be done, the statute of the bank must be amended to provide the Government with the necessary powers, for the statute is a protocol of the Treaty of Rome. An amendment to the statute is thus an amendment to the treaty. In order to make such an amendment, member states must first agree the change at an intergovernmental conference; and then each must ratify the change in accordance with its own procedures. The required IGC
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met in Brussels on 28th March, and it is in order to enable ratification by the UK to take place that I have moved this order today.
This order provides far the necessary small amendment to the Treaty of Rome to be regarded as one of the Community Treaties aS defined in Section 1(2) of the European Communities Act 1972. The amendment would add a new article, Article 30, to the Protocol on the statute of the European Investment Bank. If the amendment is ratified by all member states, that article would enable the board of governors of the bank to create the European Investment Fund by unanimous decision. Once specified in order, a treaty is to be conclusively regarded as one of the Community Treaties. The order in council has to be approved in draft by a resolution of both Houses; hence, there is this debate.
To sum up, the concept of the European Investment Fund was given a big push by the initiative launched last year at Edinburgh under the UK presidency. The fund itself would prove a useful addition to the Community response to the key problems of unemployment and loss of competitiveness. Because it is targeted on small and medium sized enterprises, the important engines of economic growth and employment generation and on trans-European networks, it will encourage private sector initiative, work with the grain of the enterprise culture and so help improve competitiveness and employment. I commend the order to the House.
Moved, That the draft order laid before the House on 18th November be approved [1st Report from the Joint Committee]. —(The Earl of Caithness.)
Lord Peston: My Lords, I thank the noble Earl for his remarks on the order. I can speak quite briefly, for two reasons. One is that the order was discussed at some length in the other place. Secondly, this is the kind of European socialist initiative which we on this side strongly support and of which we should like to see more. I am delighted to see that the noble Earl has come round to our way of thinking on matters of this kind. This is precisely the way, but on a larger scale, in which we can deal with problems of unemployment in Europe. Let me add that I join with the noble Earl in applauding the work of the European Investment Bank which, as he rightly said, is unappreciated but quietly does very useful work.
I want to raise a couple of technical questions which I did not see answered in a way that I could understand in the other place when his honourable friend the Economic Secretary replied to the debate there. I am still a trifle lost as to the nature of the Government's commitment. The fund essentially is a guarantee, and we know that some enterprises go wrong. If the fund were to make some misjudgments—it would be through no fault of its own since the market works so that some things succeed and others fail—who would bear the cost? The Economic Secretary seemed to say that there were absolutely no public finance consequences of the fund at all. When the noble Earl has a chance to reply, I wonder whether he would explain precisely why that would be so.

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Secondly, is there any deep significance in the ability of the fund to take an equity interest in the small and medium enterprises? I take it that the fund is technically a public sector body within the Community—or perhaps the noble Earl could tell me whether that is true—in which case, taking an equity interest sounds to me like nationalisation, certainly on a small scale but that kind of activity.
Those are technical points. I am not approaching them politically but wearing my economist's hat. I am rather interested to know the answers to those questions. Broadly, the point of my intervention is to welcome the existence of the fund and the support for it. I hope that it succeeds and that its scale of operation will increase.
Lord Bruce of Donington: My Lords, I too should like to express an interest in the order that is to be discussed today. I cannot entirely share the enthusiasm of my colleague, the noble Lord, Lord Peston, for its socialist content. I fail to detect anything of even a remotely pink hue. It has never been my philosophy that matters of this kind should be placed in the hands of professional bankers, and I do not see very much input from governments here.
In the Act itself, the preamble starts off by being:
"Determined to provide for the necessary financial instruments for the strengthening of the internal market and economic and social cohesion".
Those words have had a familiar and weary ring over the years. So far they have resulted, at any rate in Europe, in unemployment running from 17 million and rapidly approaching 20 million. So the determination expressed is very welcome.
Again in the preamble there is a reference to the European Council in Edinburgh giving consideration to the establishment of the fund:
"to promote economic recovery in Europe".
I am a little disappointed by the use of those terms. It seems to me that those concerned do not yet seem to have made up their mind as to what European economic recovery consists in. For some it is a recovery of the very rich to the detriment of the poor. Therefore economic recovery is not always the correct description when it is applied to the country as a whole or even to the Community as a whole.
I turn to Article A, which after all is the protocol itself and which advocates the addition of Article 30. Paragraph 2 states:
"The Board of Governors shall establish the Statute of the European Investment Fund by unanimous decision".
Over the years I have grown very distrustful of bankers establishing anything for the broad and general economic and social benefit of the Community. Paragraph 2 continues:
"The Statute shall define, in particular, its objectives, structure, capital, membership, financial resources, means of intervention and auditing arrangements".
And so it continues. Given the history of the banking community generally over the past 20 years or so, on balance I would sooner that these matters be determined by the people's representatives politically rather than by the Bank.
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Paragraph 4 states that the "European Economic Community"—that is now an obsolete term and I am not quite sure whether it should be the European Union or the European Community:
"may become a member of the Fund"—
It does not say "shall"—
"and contribute to its subscribed capital".
It continues:
"Financial institutions with an interest in the objectives of the Fund may be invited to become members".
It does not anywhere say that governments in themselves can or intend to become members. I take it that that was the point taken by my noble friend. He wondered whether there was some remote possibility of nationalisation afoot. I see that it is quite impossible on the basis of paragraph 4.
In general, I begin to wonder how this measure will be applied. If the normal banking considerations that have littered the Community and the world spectrum over the past 25 years are any guide, then banking judgments as to the application of these guarantees would appear on the face of it to be unlikely to add much to the benefit of mankind in the Community. We can only hope—and, indeed, it is with hope in mind that I receive this order with some interest.
I note, incidentally, that the governments concerned—or the state presidents—have delegated the signing of this measure not, as is customary, to Ministers to sign on their behalf but universally to members of COREPER. That is the COREPER of old. I expect that COREPER cooked it up and I expect that COREPER will ultimately be responsible for it. I hope that it will not be too much to the detriment of what remains of the European Community.
5.30 p.m.
The Earl of Caithness: My Lords, I was delighted to see the noble Lord, Lord Bruce of Donington, in his place this afternoon and to witness the fact that life has returned to normal with the healthy disagreement between him and his Front Bench on all matters European. It was pleasant to hear his straight contradiction to the noble Lord, Lord Peston, that this is a nice, socialist-type agreement. The noble Lord, Lord Bruce, saw nothing pink in it whatever.
I was puzzled that the noble Lord, Lord Peston, thought it was some kind of socialist-type agreement. When the matter was discussed in another place it was voted on and the true socialists in the Labour Party came out in force to vote against it. People like Mr. Skinner and Mr. Cryer, not known for their Right-wing views, did not seem to believe that it was much of a socialist piece of initiative. It is true that the Government own part of the EIB capital and that, through their membership of the EIB and the Community, they will have a stake in EIF. But that is so for many international financial institutions. I recommend that the noble Lord, Lord Peston, considers the analogy with the IMF.
Lord Peston: My Lords, perhaps the noble Earl will allow me to intervene. I saw the relevant copy of the Commons Hansard. The matter was voted on but I do not see the name of the honourable gentleman Mr. Skinner as voting against it. Around three people voted

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against it and they did not include Mr. Skinner, though I do not accept that he is the true embodiment of pure socialism—but that is another matter.
The Earl of Caithness: My Lords, I understand that Mr. Skinner was a Teller who voted no.
Lord Peston: My Lords, I beg your Lordships' pardon. A Teller counts as a vote.
The Earl of Caithness: My Lords, I am not 100 per cent. conversant with procedures in another place. In this House Tellers certainly count and I assumed that they counted in another place. I see the noble Lord, Lord Bruce, nodding and therefore assume that I am correct.
I was drawing the analogy with the Government's stake in IMF. The EIB and the EIF certainly cannot be regarded as interventionist. They are not engaged in telling industry how to run its affairs, but rather with enabling companies to raise finance which may not otherwise be available or available only at a higher price. Considering the potential benefit, I suggest to the noble Lord, Lord Peston, that that can only be good for business.
I do not believe that there is any deep significance in the question of taking an equity interest. It will be taken by intermediaries—the financial institutions—in relation to the small and medium sized enterprises. As the noble Lord, Lord Bruce, reminded the House, the EIF will never take more than 50 per cent. equity and therefore will not take a controlling interest in the enterprises.
I understand the dislike of bankers felt by the noble Lord, Lord Bruce. One or two other people are perhaps not as keen on bankers as they were five years ago. But I am sure that the order will be all to the good and I commend it to the House.
On Question, Motion agreed to.

Universities
5.33 p.m.
Lord Annan Lord Annan rose to ask Her Majesty's Government what action they will take to reduce bureaucratic burdens on universities.
The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper because the Government have inflicted four bureaucratic burdens upon the universities during the past three years.
The Higher Education Funding Council requires universities to create mechanisms for ensuring the quality of teaching. The council next requires a quite separate assessment by another quango of the quality of each subject taught. Thirdly, it requires the quality of research in each department to be assessed. Finally, it requires the costs of such research to be calculated in what one can only call a grotesquely complicated way.
I shall not weary the House by examining each of those processes in detail; I shall take just one. In my hand hold the book for those who have to assess the teaching in another university. It runs to 63 pages. It begins by setting out 11 criteria which they will have to use. It then sets out another six criteria that universities
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must satisfy in order to enable the outside assessors to judge whether such teaching is excellent, just satisfactory or unsatisfactory. That is called a template so as to impress universities that the Higher Education Funding Council is in the forefront of technology.
Three copies of the self-assessment must be sent to the Higher Education Funding Council. Universities must also provide five statistical indicators on entry profile, expenditure per student, progression and completion rates, student attainment and what employment or further study each student entered when completing his or her first degree.
Next comes course documentation under six headings. Samples of the written work of each student, including marking schemes and exam papers, must be produced. Details of intake and progression, welfare services, staffing and staff development, academic development plans, outline of management structure and quality control must be provided. Finally, the university is asked about the resources allocated to the subject being assessed; for instance, the number of books purchased by the library or the bench space per student in the laboratories.
Oh, I quite forgot—the university is also asked to provide subject information for each student and a monitoring report on teaching for the past three years. Oh yes, and it must provide timetables and the prospectus. Perhaps I should add that one of the statistical indicators is a demand to calculate what expenditure per student is incurred in central and administrative costs. Perhaps the noble Baroness can tell us what light those figures will shed on the quality of the teaching.
And what of the wretched assessors? They are presented with five supplements telling them in minute detail how to do their job, how to make notes when examining a class, what questions to put to students, how to meet teachers, how to produce, first, the feedback report and then how to write the assessment report. They are told,
"Do not use descriptions such as good or very pax, as these words have no clear meaning on the HEFC three point scale.
After 11 supplements the document ends with three appendices. In one appendix it is stated that the specialist assessors must be acknowledged experts in one of the four subject areas to be assessed and have sufficient authority to command the respect of the institutions. Perhaps the noble Baroness can explain why one of the assessors of law at the London School of Economics was a member of Bradford University's peace studies department.
Your Lordships will be wondering how such a torrent of bureaucracy came to drench the universities. Let me hazard a guess. Put Professor Graeme Davies, the chief HEFC executive, into a room with a dozen able and industrious colleagues, all skilled in examining, and present them with a draft. Thal draft will be amplified, refined, altered; it will grow in volume as more sagacious observations and more sapient proposals are made. From the first those adroit men and women will be on their guard. Have they satisfied the council that they have created a system of assessment that no body of critics in or outside the universities can fault? They

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can guard their reputation only if their report is so thorough that no one will be able to accuse them of overlooking some item of information, however remote, that might be thought relevant.
Next, the HEFC itself will cover up in case the civil servants in the department give them a jab and a left hook. Those are the civil servants in the department who for years have been gloating in anticipation of getting their hands on the universities. In fact, the department itself is apprehensive that the Treasury will say that the audit is inadequate and therefore the case for the funds the department is asking for has not been made out.
Why has this inquiry and the three others been forced on the universities? I am sure the Government will reply that since student numbers have risen so dramatically universities need to develop new techniques for teaching. That is true. Universities have been forced financially to take far more students, with fewer staff to teach them and no money for extra buildings or ancillary resources. Meanwhile, the extra productivity of the dons—if I may use that word—has been rewarded by their income declining in real terms.
Of course, there is no perfect correlation between money and academic quality, but there must be some connection between the two. If laboratories are so overcrowded that students cannot get into practicals, if libraries are so destitute of basic books for courses, what kind of education can students get? The point I am trying to make is this: it may well be that universities should now revise their teaching methods to take account of the fact that we are moving to mass higher education in this country. But are the Government and the HEFC going about it in the right way?
I have here a folder which simply vibrates with wails of woe. I shall select the most comprehensive statement to show how unbelievably cumbersome these inquiries are. The statement was drawn up by the University of Edinburgh, which was visited by three auditors. The university had to submit documents weighing well over a hundredweight. Two hundred people prepared them at a total cost of eight man years in staff time and the photocopies required cost £3,500.
Teaching in every department in every university is to be assessed every five years. That will mean 500 man hours spent in staff time within the universities and 400 man hours spent by staff assessing other universities. Edinburgh estimates that photocopying will cost £3,000 per year.
Research is no different. The research of every department in every university is to be assessed for quality every three years. To cope with that demand, 20,000 sheets of paper had to be submitted by the university—staff time, eight man years.
Finally, the funding of research has been transferred to the five research councils. Each separate individual item has to be accounted for in the several hundred different research grants which the university receives. The cost in time is five man years per year—and for this the departments get not one molecule of extra research or of better quality research. The university simply loses vast amounts of time in research output each year. I may add that a study of how a university should account for
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its use of research funds was proposed by a firm of accountants and business consultants, not one of whom was in academic life. And what do these research councils get?—simply an illusion of greater precision.
Is this just propaganda from Scotland's most famous university? Ask Professor Charles Townsend at Keele. His department has just been assessed. He calculates that 200 man hours were spent and the assessors seemed to be distinguishing between teaching and learning analytically. That is quite a hard thing to do analytically. Ask the vice-chancellor of the new university of Plymouth. He says that his university is being turned into a mechanical production factory, dominated by ideology. But it is not the ideology of the class struggle. It is the ideology of consumerism and accountability. The truth is that, at the very moment when the universities have been screwed financially and need every penny to keep teachers in post and research on the boil, a vast new administrative burden has been put on their shoulders that removes what money they can cobble together for teaching and forces the teachers to become low grade administrators.
But there is a larger and more tragic reason why the Government have imposed these new burdens. During the past five years the Government have shown that they do not trust universities to teach or to research; and yet these were the institutions which throughout Europe and Asia, and even in North America where funds are vastly superior, were envied and praised for the dedication of their teachers and the overall quality of their research. They were not like some, at any rate, of the LEA maintained schools. The Government, rightly in my opinion, determined to tackle the low ambitions, the low level of attainment and the disgraceful lack of concern for the children by the interest groups in so many of our schools. But did the department ever receive bulging postbags of complaints from parents and students about neglect and skiving by university teachers? They know they did not. Of course there were cases of teachers who did not turn up at classes, who failed to comment on written work or who were drunk or offensive—but they were very few and when one unearthed a case of that kind, one dealt with it.
It would have been perfectly reasonable for government to have said to the universities, "We can't expand on the old lines. Mass higher education is going to give you a lot of problems and what is more we can't give you much money. In fact, owing to the needs of schools and further education, we're going to give you very much less money. But we can give you some advice. Will you have a look at these suggestions for monitoring your teaching and scrutinising your research? And would you bear in mind that we must get a lot of graduates who are employable in industry, commerce and the professions as well as graduates who will adorn the world of culture and the intellect? Please tell us how you are going to do this and help us to change the system. We trust you".
But no. No such message reached universities. The Secretary of State will not tell the universities what his policy is and how they can help him to achieve it. Instead, ever since the noble Lord, Lord Joseph, became Secretary of State, universities have been told that they

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are backward, self-serving and responsible for the poor record in British trade and industry. They have been told that they are incapable of reforming themselves. The HEFC was set up, not like the UGC as a buffer between government and the universities, but as an arm of government under direction of the Department for Education.
Let me not mince words. The Government treat universities like so many piles of dung. The Government no longer trust universities to assess their own activities. They intend to reshape higher education, taking business as their model, giving universities a bottom line as low as possible and adding a few increments to some to take account of special excellence in teaching or research. The excellence is to be judged by quangos set up to push the universities around.
What is the result of the Government trying to manage the universities? Universities were first told that their grant depended on the excellence of their departments in research —although the polys, which have now been upgraded to universities, were never prepared or intended to do research. No one knows whether a department is graded on the performance of its stars in the department or the aggregate of research in the department. No one knows whether long-term research is put on a par with short-term research. Both are very important. Now that teaching is under review enormous energy is spent by the dons in manipulating the formulae to generate the highest possible grant. They call that creative accounting. That is what happens when government are perceived as an enemy.
I am afraid that the noble Baroness will have up her sleeve a list of the occasions when universities were slow to respond to government. The noble Baroness will recall that I am something of a blackleg among former vice-chancellors. I spent much of my time as an active vice-chancellor trying to persuade universities to bring down costs instead of howling for more money. I backed Sir Kenneth Berrill's proposals when he was chairman of the UGC to curb student unions—proposals not unlike those the Government are bringing forward—at a time when the then Master of Birkbeck, with whom I clashed, and other vice-chancellors and principals opposed them. I shall be interested to hear what the present Master of Birkbeck has to say on these proposals when we consider the matter in committee next year.
As regards overseas student fees, student loans, even on tenure and differential payments, I consider that the Government were right and the universities were wrong. I recollect how often universities missed opportunities to respond, but with the exception of the University College of Cardiff where a misguided and stubborn principal decided to run his institution into deficit rather than retrench to meet the cuts of 1981. With that one exception universities were not scandalous in wasting resources. They operated with a tiny administrative staff. Nearly every penny went into teaching and research with the result that they cannot, at the drop of a hat, provide the kind of documented reassurance that government are now demanding. I do not believe that they deserve to be bullied and kicked around with contempt as is happening today.
Baroness White: My Lords, perhaps I may interrupt the noble Lord, because he mentioned one particular university. Perhaps I may point out that we did get rid of the person in question.
Lord Annan: My Lords, a little late perhaps, but nevertheless I take the point. The Government have announced a programme of massive de-regu]lation. Why not start with a little de-regulation of the universities? The Home Secretary has said that the police are hampered in fighting crime by excessive paperwork. The universities are hampered by exactly the same thing at the moment.
One of the paradoxes of Conservative Governments has been that they want to privatise services and reduce the number of civil servants, but they multiply bureaucrats. As the well-known journalist, Mr. Lunchtime O'Booze, used to say, "Surely, shorne mishstake".
So I appeal to the noble Baroness to put these matters to rights and I look with some hope of success for two reasons. She did so in the schools this summer. When her right honourable friend fell ill she sorted out what had become an administrative scandal and reduced the vast bureaucratic burden of testing performance in the schools. Could she do the same in the universities?
The second reason is this, and it is more serious: very few Ministers—and certainly not the present Secretary of State—have served in the Armed Forces. But the noble Baroness has. She was in the WAAF and she will know that the first duty of an officer is to gain the confidence of the men and women under him or her. If she can do that they will follow and face discomfort and dangers that they would never have believed that they would have been able to do. Trust is everything. Can she now (and I am sure she can) give us some leadership? Can she stop using the HEFC as a sewage disposal plant and treat the universities not as ordure but as the rich soil in which the generations to come will grow to maturity? She would restore trust if she could tell the universities that it is up to them to monitor their teaching and research. If she cannot, I fear that what will happen in the universities will be what happened in the schools—there will be a boycott. I await her answer with lively expectation.
5.53 p.m.
Lord Beloff: My Lords, I would share the "lively expectation" of the noble Lord, Lord Annan, were it not for the fact that I believe that the malady is even deeper than the one which he has diagnosed. What we have seen in relation to the universities is not merely the imposition of the absurd and nonsensical regulations, assessments, audits and all that rubbish which the noble Lord, Lord Annan, spoke about but, going back even earlier, a general unwillingness to accept what is accepted in other walks of life and in other aspects of government; namely, that there is a cost to bureaucracy; that it is possible to do the right thing and yet to do it in the wrong way. It is a curious thought that the present Chancellor of the Exchequer—since he adopted his latest guise, he keeps telling us of the importance of not overspending on administration and doing everything in

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the most economical way—seems to have thought nothing at all about this during his tenure of the secretaryship of state at the Department for Education.
Some of the examples are glaring. Perhaps I may give some which have been put to me by one of the newest universities. As noble Lords know, at the moment students have fees which are paid by the local authorities. Eventually they are reimbursed from central government. But while that goes on the individual student and the individual university has endless trouble dealing with the variety and large number of local authorities from which the students may be drawn, in chasing up payments which have gone astray or which have failed to arrive on time. No doubt at the end of it the local authorities have some communication with the department in order to recover the money which they have paid out. One would have thought that, as the local authority awards are simply an historical result of the fact that many years ago when there was very little public support for students such awards were given, that is hardly a reason for them to retain the function. They have no discretion in the matter as regards mandatory awards. They retain that function when it could be done more simply.
It has been suggested that the Government are now looking at ways for students themselves to pay fees. That is not a topic on which we need enlarge. But my impression is that, were that to happen, we shall have a situation where the students are required to pay their fees in drachmas and at a bank in Lapland. That is the normal procedure of the Department for Education.
We know that to be the situation because of the experience of student loans. Noble Lords may remember—at least some noble Lords will remember—that when the student loans scheme was presented to this House, several of us pointed out that if you wanted the students to pay a proportion of their educational costs—and this is not something with which I disagree—there are simple ways in which it can be done. There is the Australian way of a graduate tax or any other automatic recovery. Instead of that we have this business set-up at vast expense in Scotland and the students have to borrow from it in ways which again add enormously not only to calls on their time and their purses, but also to calls on the time of the university. The university has to interview for at least 15 minutes every student who asks for a student loan.
There are endless forms to fill in. We have heard a lot about forms and there will be a lot more. So whenever there is something that could or should be done, for some reason this particular department of state goes about it in the most clumsy and expensive way which increases the burden on university institutions. I shall give another example. As part of the business culture to which the noble Lord, Lord Annan, referred, we now have performance-related pay increases whereby universities are asked to rate or to account for those who might be given a rise because of their performance. The universities create records of achievement for that purpose. They put it all on computer. That is the modern way. Then, at the last minute, they receive pages and pages of forms—I have some here—which they have to
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fill in about each individual member of staff, the questions not being identical to those as regards their own records. Again, a huge administrative burden is thus placed on the universities.
I sometimes wonder whether there is any understanding at all in the department about what it means to take people away from their proper business of teaching and research to fill in forms and to carry out interviews that are not strictly necessary and whether, when we talk about expanding the budget for higher education, enough attention is paid to the fact that so much of that expenditure is wholly and necessarily unproductive.
Of course, there are even more grotesque things happening when it comes to universities the reputation of which, as the noble Lord said, might be thought to be impeccable. I believe that the noble Baroness, Lady Park of Monmouth, will give some examples of the unnecessary expenditure that is being imposed on the University of Oxford, so I should like to take one or two different points. Universities are now obliged to inform the higher education funding council of their strategic plans, including their aims and objectives. It has not so far been possible to discover from the council the difference between an "aim" and an "objective", but we can take it broadly that we know what is meant. But why do we need to ask this question at all? In the case of the University of Oxford, its aims or objectives have been set down for 600 years and are,
"that there might never be wanting a succession of persons duly qualified for the service of God in Church and State".
Do we need any other statement of a university's objectives? Is it necessary that they should be entered on forms, computerised and homogenised? And goodness knows what happens to that information when it gets to the department.
Then there is the question of assets, which is very much at the heart of the business culture. Universities are required to state their physical assets. They are to value them, at both market and replacement prices, and they are instructed, in the course of so doing, to consult the local valuation officer of the local planning office about what might be an alternative use for those buildings supposing that it was necessary to find one. There has been some reflection given—I cannot say that there has been serious study—in Oxford about an alternative use for the Radcliffe Camera. A swimming pool? What could be an alternative use for the Sheldonian Theatre? No one seems to have thought of one. What could be an alternative use for the Bodleian Library? Could it be an outpost for the bureaucrats of the Department for Education, who are bound to need more and more buildings if only to store the hundredweight of documents which they insist on receiving?
Then there is the question to which the noble Lord, Lord Annan, rightly drew our attention in relation to the whole apparatus of assessment and control, the so-called "assessment of quality". It is necessary that students and those who support them (perhaps their parents) should be assured that they are getting roughly what they or the

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state is paying for. One cannot simply establish an institution, award a degree and say, "You have now got what you came for".
Unlike any other noble Lord I have had personal experience of that problem in setting up what is now the University of Buckingham. There were two possible models. There was the model of the Council for National Academic Awards—that late and unlamented body—which was to measure inputs, which are very like the kind of stuff, alas, that we are now getting from the department, but more modest in their demands. That proved to be a dead end. There was the other model, which proved to be the right course, which was that where degrees were in subjects which were to lead to a practical occupation—to some occupation in the real world —the people to judge them were the professional bodies concerned in the law and accountancy in the case of Buckingham, and in other areas. We decided that only courses which they approved should be offered. On the more academic side, the system of external examiners, which has become harder to deal with because of the enormous growth in the number of universities and departments, had always and rightly been held to be itself a guarantee of quality.
On the first of these, I agree that the Government have one or two reasons to worry. They have moved too rapidly—not in abolishing the binary line because I think that the former polytechnics are doing well enough—but in suddenly giving university status to a number of colleges with no real or first-hand experience in the area of higher education. One such case has come to my notice—as legal proceedings are not unlikely I cannot reveal more—in which a university, newly created from a college, advertised a course in a professional subject as having been approved by the professional body concerned when, as it turned out when some suspicious parent inquired, the course had not even been submitted to that professional body.
Therefore, I concede that some precautions are desirable when there is such breakneck expansion. However, it does not seem in the least necessary that the universities of Oxford and Cambridge or the former distinguished polytechnics which are now universities should suddenly need to be inquired into as to the quality of their teaching or research.
All of it means a diversion of resources. Some noble Lords may think that the humanities are not all that important and may ask why I do not talk about the sciences. I recently met a professor of chemistry at a major polytechnic, which is now a university, who said that he was quite desperate because the amount of information, assessment and bumf that he was required to furnish was costing a relatively small department money that it really could not afford because, in the noble Lord's phrase, it took away man hours from his proper job.
In Oxford, the member co-ordinating the chemistry assessment exercise was occupied on it for two full weeks. What happened to his students during that period? Are we not in fact cheating students out of what they have the right to expect?—concentration upon their progress and the welfare of the teaching staff, not concentration upon filling in unnecessary forms from a
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department which seems, as the noble Lord, Lord Annan, said, to have no confidence in universities and, I would add, also no understanding of them.
We have been accustomed—again, it is a phrase more usually used in the world of science—to peer review. People submitting papers to learned journals often have their papers submitted to other authorities in the field. What we are having, alas, in the assessment exercises is not peer review, but what I can only describe as "underling review"; that is to say, the persons reviewing are not as well qualified as the persons whom they are assessing. I have had, from an eminent Cambridge historian, a poignant set of remarks about people who knew nothing about the subject, who knew nothing about Cambridge's method of teaching, erupting into tutorials and asking questions which had no relevance to what was being done.
I am aware that I have taken some of your Lordships' time, but the subject is important, and it is important to get some things on the record, because I do not want Ministers to be able to say, "Oh dear, we did not know any of this". So I propose, and I rarely do this in the House—I hope that noble Lords will forgive me—to read extracts from a letter from a distinguished historian, who is not from Oxford or Cambridge, but is a fellow of the Academy, who has taken part in one of the history assessment exercises. He writes:
"I think the whole exercise is deeply flawed because it is, like so much in this audit-obsessed world, concerned overwhelmingly with presentation and process. As an academic I rather expected the academic content and credibility of what was taught to figure prominently; it does not. I was sent all sorts of material on, admission statements, staff development, student facilities etc.; but virtually nothing on what the students were actually taught. When I asked to see bibliographies, seminar lists and hand-outs on essay titles, I was told that the Funding Council' s check lists did not require these. Nor would the assessors be normally in a position to assess them. On this occasion I was the only historian on a visiting team for assessors … I remarked in my report that the university in question might well be teaching nonsense excellently, but that would not make nonsense arty less nonsensical".
On the fundamental point about resources, he said:
"The dry-run exercise in which I was involved entailed four persons in at least 2½ days' preparatory work, 2½ days on the visit and at least ½ a day on the report. The Department lin question must have spent several days in man-hours in preparing the massive dossiers—two huge folders, whose postage alone costs £14 each, let alone typing, duplicating etc.".
It is no good, as in The Times this morning, the Secretary of State setting out noble objectives for the future of the universities unless he, his colleagues, and his officials are prepared to tackle the problem of folly, and waste of money and of time.
6.15 p.m.
Lord Dainton: My Lords, I cannot match the flights of oratory of my noble friend Lord Annan or the noble Lord, Lord Beloff, and I shall not attempt to do so. There have been so many Education Acts since I became a Member of your Lordships' House that it has been difficult for me to keep track of them. However, I have the clearest recollection that, at the time of the passage of the Education Reform Bill, it was then the stated intention of the Government that institutions of higher education should be freed from excessive bureaucratic control.

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At that time, my spirits rose a little, and should have risen more, at hearing such fine words, but life has not just taught me to be cautious, I am also a chemist, and chemists have a long tradition, dating forward from Robert Boyle, of being somewhat sceptical. In view of what has happened, that may be just as well.
Let me take a case. It is different from those already cited. It is a rather simple one compared with those mentioned by my noble friend Lord Annan. It relates to a small part of the federal universities of London which is limited in its subject range in that it has no science, no technology, no medicine, no agriculture and no veterinary studies—none of the complex units of a large civic university. Nevertheless, in common with other institutions, it continues to have many demands made upon it by the Government, the Department for Education and the funding councils.
This year alone, up until the beginning of November, Goldsmiths' College—that is the institution to which I am referring—had received nine consultation papers from the Higher Education Funding Council, each of which required formulation of an institutional view, and no fewer than 45 circulars. It had also to produce academic plans which take a great deal of time and effort to construct. It was also required to produce financial forecasts in great detail for similar five-year periods, although we all know that the funding of universities is not certain for more than one year ahead. All those responses take large amounts of time and effort to complete, and, in the light of funding uncertainties, can reflect only inspired guesses for future periods.
So we have a situation in which an increasing fraction of resources in each university is being devoted to such bureaucracy just at a time when the overall unit of resource —the amount of money provided by government per student year—is falling steadily, and the ratio of students to staff is rising. Those changes are called, bizarrely enough, "efficiency savings". The pace at which those savings are supposed to be achieved has been increasing over the past few years. That is not an isolated case. Every institution of higher education will tell a similar story. What, one may ask, are the beneficial results of all that frenetic bureaucratic activity?
One absolutely certain result is, of course, a depletion of the world's timber reserves as logs are fed into the paper mills, but of more immediate and significant importance is the erosion of the time for teaching, for preparation for teaching, and for research by academic staff; that is to say, erosion of the time to do the job that they were appointed to do. Others have spoken in strong terms of what that means. I entirely agree, as I am sure does every member of every university who has been subjected to this process.
So productivity is claimed to go up but merely in a numerical sense that more graduates are turned out per annum per full-time member of staff employed. But the arithmetic points to the fact that each graduate will have received less attention. In those circumstances quality can only diminish. If because of bureaucratic pressures of the kind that have been so evocatively described lectures are hastily prepared; if the lecturer is not master
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of his own subject and, more importantly, enthusiastic about it; and if the lecturer is less able to devote time to individual students, then he will not be able to issue an attractive invitation to his students to learn for themselves. This desire to learn, and knowing how to learn, are the most important gifts that any university teacher can give to his students, for they will stand the student in good stead throughout his life. This is, I submit, a rather more significant criterion of quality than all those cited by the noble Lord, Lord Annan, or referred to by the noble Lord, Lord Beloff.
The picture that I have painted is not exaggerated. I have used the cases simply to illustrate the fact that, far from being freed from excessive bureaucratic control, which one understands was the Government's intention, institutions of higher education in Britain today are beginning to sink under its burden. Something must be done to reverse this trend. Universities must be trusted as they once were and the burden of bureaucracy reduced so that the energies of able men and women can be directed to doing well those tasks for which they were appointed instead of having to provide answers to questions which in many cases seem to them to be ill-conceived, unrelated to the realities of the situation and likely to be negated by further inquiries or questionnaires, or a call for a new plan, or indeed for a new education Bill.
For years universities have been going through a period of crisis management necessitated by an incessant flow of government measures, orders, regulations, instructions and inquiries from funding councils and elsewhere. They show little sign of diminishing. Those who are responsible for that should remember the aphorism which relates to crisis management, the author of which I can never remember. It runs something like this:
"When we find the alligator snapping at our vital parts we don't have the time to contemplate how we are going to drain the swamp".
Will Her Majesty's Government at the very least call off some of these alligators so that the swamp can be drained and the others will then die, and, returning to the subject of the debate, so that universities and institutions of higher education can get on with the job which they are intended to do and want to do? They are now seriously inhibited by this wasteful use of time on profitless inquiries on instructions which contain much irrelevant information. If the trust can be restored—and it can be restored only by giving responsibility—the response of the academic staff will be one of enthusiastic collaboration even in the very demanding situation of increasing the size of the universities at the present rate. Every member of staff to whom I have talked believes that it is of the utmost importance to have more young people going through our universities. The academic staff are anxious to do their part but they are frustrated by this burden which they find has little to do with the the day-to-day issues with which they are faced when they are trying to do their job.
6.25 p.m.
Baroness Park of Monmouth: My Lords, I too cannot possibly match the splendid pyrotechnics of the first two speakers. In contributing to the debate I can do no better than to quote the words of the outgoing Vice-Chancellor of Oxford University, which is my university. He recognised the need for public accountability by universities for public funds, but he said:
"in practice, more and more detail is being demanded, and this inevitably leads to more centralised control, increased bureaucracy, and additional costs, to the point where we are surely justified in asking, 'When do such operations become subject to the law of diminishing returns? When will the degree of dirigisme become not merely Napoleonic but Soviet in its intensity?'".
There is deep concern in Oxford about the additional burden imposed both by audit and quality assessment and the overlap between them and in certain subjects between quality assessment by the HEFCE on the one hand and on the other the reviews of these subjects by professional institutions and similar bodies.
Perhaps I may give some examples. Let us take the first round of quality assessment, the assessment of the quality of teaching. In Oxford that has been carried out for three subjects; modern history, chemistry and law. The cost of preparation for this exercise in terms of staff hours spent (both academic and administrative) is estimated at £30,500 —the salary of one university lecturer for one year. There are between 51 and 62 subjects in which the quality assessment will be required, so Oxford alone can expect to spend more than £500.000 on the exercise. I leave it to your Lordships to do the national sum. It is an exercise due to be repeated at intervals in future years.
The cost of preparation for the Higher Education Quality Council's audit in February 1993, designed to check whether proper procedures were in place to check quality in teaching, has been £45,000 including overheads. But this exercise covers all subjects and is a one-off exercise. Even so, the national sum cannot be small. And again, one-and-a-half university lectureships could have been funded for a year for that money. I am confining my remarks chiefly to money, but there are many more important intangibles to which I wish to refer in a moment.
Then there is the cost in terms of the time of both academics and the all too few administrators of the research assessment exercise. That exercise takes place every four years arid includes the listing of all publications. It must be done by Nobel Prize winners, members of the British Academy and members of the Royal Society. There is then the ranking by independent panels. In Oxford alone the cost of this research assessment exercise in 1992 was £150,000. That includes £30,000 simply for the printing of the extensive internal circulars, questionnaires and so forth and photocopying. It required the university, whose core administration is minute and permanently overworked, to take on staff especially for the six months that the exercise lasted. That exercise at least has the merit of determining the level of money received for research. As Oxford ranks high in virtually all subjects, it at least justifies the expense to some extent. But again, similar
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expenditure has been incurred by all our universities all over the country. Of course we must be sure that good research is being done, but there have for years been equally effective and infinitely less bureaucratically cumbersome ways of establishing which are the institutions that most deserve support.
Reverting, however, to the demonstrably time-wasting bureaucratic procedures of, for instance, the assessment of the quality of teaching, it must never be forgotten that every hour spent on such exercises by academics who enjoy virtually no administrative infrastructure in their faculty means an hour less spent on research, and the whole sorry business is likely to prove completely self-defeating. It is difficult to avoid the conclusion that the spate of legislation and central regulation, with all the bureaucratic processes that are spawned, can lead only to a greater expansion of administration, at the expense of academic creative scholarship, simply to deal with the flood of consultative documents, usually with a deadline of three weeks for reply, which I well remember we were beginning to suffer when I sat on a Hebdomedal Council in the late 1980s.
While the academics involved would be the first to admit that there is always something to be learned from any new look at existing practices, that is a deeply wasteful way of doing it. It cannot be right that, for instance, the chairman of the board of one of the faculties involved in the first round of the quality assessment exercise and the chairman of that faculty did no academic work whatever other than basic lecturing and teaching for nearly four weeks, during which time they worked through all weekends and late every night. They had and have virtually no secretarial infrastructure other than some basic typing. In the past two years in particular there has been an enormous increase in the purely administrative work that the faculties are called upon to do, and that is all reactive—driven by the sheer pressure of central government bureaucracy.
The budget cuts in fees can only make it yet more impossible to take steps to increase administrative support, however minimal, and less and less time will be available for the academic work which the universities exist to do. I can only beg my noble friend the Minister, who is herself a mover and a shaker, to use all her influence on her colleagues, and not least the Secretary of State, to cut away the bureaucratic undergrowth which threatens both to stifle the exciting innovations which should be emerging from universities and to clog the steady mainstream of valuable and serious academic work.
6.31 p.m.
Lord Peston: My Lords, we are all indebted to the noble Lord, Lord Annan, for introducing the debate. I hope that he will forgive me if I do not follow him up the garden path of student unions on this occasion. My noble friend Lady Blackstone will demolish him on that subject when we deal with the Bill in due course.
I shall stick to the main theme. It is difficult not to take part in the debate and be an old fogey, but I shall risk that. In preparing for the debate, I thought back to the time when I started off as an assistant lecturer at this

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country's greatest university—the University of London. I asked myself what we did then. We certainly did not have meetings. Occasionally we went to the academic board but as junior staff, we only went there to annoy the professors. It never occurred to us that that played any role. Papers were not circulated. One reason for that, for which I cannot blame the Government, was that "Xerography" had not yet been invented. In this case, technological advance has been the cause of a great deal of our trouble. Therefore, one could not do at all what happens now.
Essentially we thought that we were there to study our subject and to do either scholarship or research. And I believe that I echo the words of the noble Lord, Lord Dainton—and I shall indicate how much I agreed with everything that he said—when I say that we believed we were there to encourage learning rather than to teach. Indeed, there was a sense in which I would claim that we did not teach anything at all. If we had a lecture outline, it never occurred to us that we had to complete it or anything like that. I say that because I have discovered recently that I continue not to end the whole lecture course that I am allegedly giving. Therefore, I am told that I am in breach of contract and can be in serious trouble. If I do what I have always done—that is, to teach whatever I fancy under the rubric of the course that I am giving—that is "a betrayal of the students". I find it astounding that we have come to that pass.
In particular, we should not have been able to answer the question as to how many hours we worked for the simple reason that we thought we had a job at which we worked all the time. I have pointed this out occasionally to one or two noble Lords who have intervened ignorantly on the subject of higher education—happily, they are not with us today—that while our friends were out on the golf course during the week and on Saturdays and Sundays, we worked at our subject. Had we been given a questionnaire asking how many hours we worked, it would have been meaningless.
That was the nature of academic life then. I agree with the noble Lord, Lord Annan, and others, that we did a rather good job. Whatever else we did, we did our job.
It has now all changed. In part I blame myself for that because over the years, I have written articles saying that universities should look at efficiency and costs and should find out what is required. However, I did not realise that I was in the process of creating a Frankenstein's monster; in other words, one puts forward what seems to be a sensible idea and it grows completely out of control.
At present, everything is structured. Students want to know exactly what they have to read. I gather that there are members of the academic community who tell students which page they must read which implies, "Please do not turn over the page as that is the not the page you have to read". Everything is structured. Students are told "Do these exercises", and so on.
Whatever are the consequences of that, as the noble Lord, Lord Dainton, said, it must be that the educational
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experience for students diminishes. Whatever else happens, they do not receive an education in the sense in which I believe they used to and they should.
There is less research and less scholarship. I must say to noble Lords—and I believe that this is what the noble Lord, Lord Dainton, was saying but if he did not, then I shall say it—that I believe there has been a fall in standards. Typically, the vice-chancellors make remarks like, "If this goes on, there will be a fall in standards". They have been saying that for some time; but my view is that there has already been a fall in standards. I am asked how I can say that because the ratio of firsts and upper seconds is the same. My response is to say that that is precisely why I am saying that there has been a fall in standards. I am happy to be on record as saying that. I am not weaseling in any way. That is the consequence of the deteriorating staff to student ratios.
In other words, in pursuing something which seemed good, we have produced something bad. That is a puzzle; and to those of us who are students of government, it is a particular puzzle because I believe that this Government have said honestly that they favour freedom and deregulation. I do not believe that they have ever not meant what they said in that regard. The problem is the use of the word "trust", to which the noble Lord, Lord Annan, and others, referred. The Government provide freedom and deregulation, but then do not trust us to do anything with it so that they then add not merely the original bureaucratic control but a great deal of extra bureaucratic control to offset the deregulation.
I have heard from at least one head of what was a polytechnic who has told me that the reason that they wanted to be free was that they wanted to be free of the local authorities. Again, we are back to the Frankenstein's monster analogy. However, they did not realise that the new bodies would be infinitely more bureaucratic and stultifying than ever the local authorities were. I believe that one or two of them might be willing to go back to local authority control if they had the opportunity to do so.
I was very taken with what the noble Lord, Lord Beloff, said about audit, and so on; and in particular his remark about the auditors being so much less qualified in every way than those whom they are auditing, assessing and judging. I heard of a case of a lawyer who has no published work in that field of law whatever but he is pronouncing on the activities of people who are major contributors to the subject.
I have seen a document on teaching. I am told that posture is of enormous importance, as is facial expression when judging teachers; and that stability at the lecture platform is fundamental. One must not show any sign of restlessness. In other words, Socrates would clearly be a totally unacceptable teacher because he walked up and down. I am told that one should be extremely careful about eye contact. Certainly one must never be dismissive of students. One must never be sarcastic and one must never put them down. In other words, Sam Johnson could never have been recruited as a member of staff. I am told that you must use every minute of the 55 minutes so that Wittgenstein, who we know would often stand there for a quarter of an hour

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saying nothing, add a cryptic remark and then walk out of the room, would be fired on the spot or least get a D or an E grade. In other words, via the audit and assessment, we are moving towards a desire for teachers without character. That is my anxiety.
Equally, we are moving towards universities as businesses. Despite my economics hat, I must say that I just do not believe that the analogy is correct. I have heard of an example of a student on one course who asked specifically to do a foreign language in addition because he had more time available and thought it would be a good thing. He was told, "Foreign languages are not a part of your course. However, if you care to pay extra, you can do a foreign language". The fact that what is called a university in this country is coming to such a state of affairs and has to say such things because it has been set financial targets—or, so it would claim—is, in my view, appalling.
As regards mission statements, I have never found out what they are. Being an emeritus professor now and only on a part-time basis, when I receive such documents I always write down for a mission statement, "I propose to go on teaching economics and trying (albeit now rather pathetically) to do a bit of research". I gather that that is riot acceptable; but at my time of life no one can do anything about it.
My worry is precisely that which was expressed by other speakers; namely, that all of it is counterproductive. As an economist, I want our universities to be efficient and effective. I want staff to use their time properly. But the real point is that all the external interferences—and, indeed, I believe that all speakers mentioned the point —actually occupy time which might be more usefully spent.
In conclusion, the reason behind it all is precisely that the bureaucrats do not trust us; in other words, they are not willing to judge us, if you like, by results. They simply want to ensure that we are shackled in every possible way. That does enormous harm to the forests of this world, and it certainly harms the education of our country. I hope that the noble Baroness can find a way of at least guiding some of those interfering bureaucrats to do other things: if they did nothing, they would be achieving more than they currently achieve.
6.41 p.m.
The Minister of State, Department for Education (Baroness Blatch): My Lords, I am grateful to the noble Lord, Lord Annan, for initiating tonight's debate on a very important subject for our universities.
The Government are committed to maintaining and strengthening the autonomy of our universities and colleges, and to freeing them as far as possible—as was mentioned by the noble Lord, Lord Dainton, who reminded us of words that were used in 1988—from bureaucratic constraints. We have no interest in imposing unnecessary rules and regulations on institutions. Far from it: what we want is to free them to concentrate on what they do best—the teaching and research for which our universities and colleges are rightly world renowned.
The framework that has been established for higher education reflects that fact. The Further and Higher
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Education Act 1992 enshrines an arm's length relationship between the Government and individual institutions—one which noble Lords have rightly defended. Under that framework, funding for individual universities and colleges is a matter for independent funding councils. The Government do not intervene in their day-to-day affairs. That is essential for the maintenance of academic freedom and institutional autonomy.
But the principle of academic autonomy does not remove the need for accountability for the substantial public funds provided for higher education for both teaching and research. We owe it to the taxpayer to ensure that value for money is secured for the £5 billion of public money which will be invested in higher education over the coming year. We have a responsibility too for ensuring that public funds are used for the purposes for which they were granted. That inevitably means that there must be effective systems for monitoring the spending of public money.
It does not just mean financial controls. There must be effective quality assessment of both teaching and research if we are to achieve meaningful accountability for the use of public funds. Potential students, employers and research funders need information about the quality of what is provided. That is consistent with the principle of greater openness underpinning the charter for higher education which we launched last September.
Assessment is not new. The Universities Funding Council operated a research assessment exercise to assess the quality of research in 1986. It was repeated in 1989 and, again, in 1992. Both the need tor such an exercise and its results have been widely accepted by universities. There is no reason why the same principles should not apply to teaching.
I have no doubt that universities and colleges recognise the importance of those principles. Equally, all those involved in financial accountabihty, quality assurance and the assessment of teaching and research are well aware of the administrative burdens that can result and are seeking ways of minimising them.
The funding council's recent research assessment exercise has been an impressive example of quality assessment. For such a massive exercise, it is remarkable how widely accepted the results have been. I do not believe that a less comprehensive exercise would have been so readily accepted by the universities themselves.
The results have been linked directly to funding: 95 per cent. of the research grant from the Higher Education Funding Council for England is related to assessments of quality. Better and more effective use will be made of taxpayers' money for research if more of it goes to the universities and colleges doing the best research. The assessment exercise is essential for that selective funding.
The funding council is presently consulting on the arrangements for the next research assessment exercise. It will seek to keep the administrative burdens on institutions to the lowest level possible consistent with the maintenance of a robust and credible system of assessment.

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Universities have expressed particular concern about the arrangements for quality assurance for teaching. It is important to set that in context.
All students are entitled to a high quality education wherever they are and whatever course they are taking. If the high standards and reputation of British higher education are to be maintained, the allocation of public funds must take account of the quality of teaching and learning in universities. That will help ensure that excellence in teaching is valued as much as excellence in research. We also owe it to potential students and employers to do that in a way which informs their own choices within higher education—a message at the heart of the higher education charter.
But we do not want a quality assurance system which involves examination by an external agency of every course at every institution in every year. The assurances that we seek can be met in large part by ensuring that proper quality control arrangements are in place at all institutions. The costs of those procedures are relatively small. As with the research assessment exercise, the cost appears to be 0.5 per cent. or less of the average public funding for the activity. That compares with total annual spending on higher education of more than £5 billion.
The Higher Education Quality Council is responsible for auditing quality assurance arrangements in higher education. It has been established by the universities and colleges themselves. It is they who determine its mode of operation and the frequency of audit visits. Therefore, to a significant extent, the scale of the administrative demands placed upon institutions is indeed in their own hands.
Much of the information required for audit will be readily available from responsible institutions concerned with the quality of provision. At least one vice-chancellor has said that no new information should be required for audit visits to his institution. When that becomes the norm, the burdens which are currently perceived will be very much reduced.
The assessment of the quality of education provided is the responsibility of the higher education funding councils. The assessment of teaching quality by the Higher Education Funding Council for England is designed to keep to a minimum the administrative burdens on institutions. A large role is accorded to self-assessment. External assessments of individual subjects are likely to take place on a four to five-year cycle. In many cases, there will be no visit from assessors, and nothing more onerous than self-assessment will be needed.
Both Ministers and the funding council recognise universities' concerns about the administrative burdens of audit and assessment, and about possible duplication between them. We have encouraged the funding council and the quality council to review the extent to which there is any duplication, and to co-operate in minimising the burdens of their procedures.
The two councils are drawing up a joint document on their procedures. That should help to minimise duplication and bureaucracy. Bureaucracy can also be reduced by combining professional accreditation and assessment; for example, discussions are under way
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with the major engineering bodies and the Royal Institute of Chartered Surveyors to examine whether accreditation and assessment can be completely combined.
Grant to the Higher Education Funding Council for England for recurrent and capital spending will amount to nearly £3.5 billion in 1994–95. Universities and colleges will receive another £1 billion in publicly funded tuition fees. That is a very large sum of money by any standards. It is only right that the funding council should be required to establish a management and financial framework which has sufficient rigour to account for and protect the use of public funds, without unduly tying the hands of higher education institutions in their day-to-day operation.
The council provides financial memoranda to each institution which specify the conditions on which its grant has been made. The council has taken steps to keep the volume of information it sends to and seeks from institutions to a minimum. Much of its framework for the operation of financial controls has been put together in consultation with the institutions. Those safeguards are no more than one would expect for any organisation managing a large budget, whether private or public. They are doubly important where large sums of public money are involved.
Finally, I am aware that the vice-chancellors have expressed some anxiety about the impact on them of health and safety and other statutory regulations. The new Deregulation Bill which the Government have brought forward will reduce the burden of unnecessary regulations throughout the economy. In addition, officials in my department are considering with the funding council the impact of specific regulations on higher education.
The noble Lord, Lord Annan, raised the issue of the amount of documentation and information which is required of institutions. I take the point, and I hope that the Higher Education Funding Council itself and the Higher Education Quality Council are as interested in this debate as I am. The noble Lord failed to point out that much of the documentation for HEFCE assessment is required only when there is an assessment visit, and an assessment visit takes place only when there is a possibility of an excellent report on the one hand or an unsatisfactory report on the other. In other words, if in the self-assessment process an institution says that it is the best in the kingdom it is important that there is some validation of that claim. Equally, assessors are sent in to check when a worrying report is produced.
My noble friend Lord Beloff said that parents should be assured about the quality of what they and others are paying for. That is true. Public accountability for the spending of £5 billion is important. I hope that we are not divided on the principle of accountability. We are really talking about a means to an end. I have taken that point on board and shall make sure that it is properly reported.
My noble friend was also concerned about the administration of the student loans system. It is my understanding that from the next financial year—1994–95—the Student Loan Company is planning to introduce a simplified form for repeat applications

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which should require only a couple of minutes of time on the part of the institutions. We shall make sure that that happens.
My noble friend Lord Beloff suggested that the qualifications of some of those undertaking the assessment and review are suspect. I regard that as a very serious statement. Again, the Higher Education Funding Council officers select the assessors and arrange training for them. They have included some extremely distinguished people, for example, on history, Professor Alderman, Pro Vice-Chancellor of London University. The Higher Education Funding Council for England seeks nominations for assessorship from the vice-chancellors themselves. Therefore it is the vice-chancellors who put forward names for consideration.
I have already made the point about funding. Some fairly discourteous comments have been made about the Government's view of the higher education sector. Having witnessed at first hand two years running the debates which take place prior to the public expenditure round, I can say that my department has fought the corner for higher education fairly vigorously. The results have been fruitful. It is true to say that this year higher education received more favourable treatment than other departments in Whitehall in what has generally been recognised as a difficult year economically.
It is for the Higher Education Quality Council and the higher education funding councils to decide what information they need to request for quality audits and assessments. The quality council requests existing documentation such as regulations, codes of practice and validation documents, together with a descriptive
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overview of systems and how they work. The provision of documentation is therefore largely at the discretion of the institutions themselves, as I said. The assessment process adopted by the Higher Education Funding Council relies to a large extent on self assessment by institutions. The council's quality assessment division has issued guidance to institutions on the type of information required for an assessment visit.
This debate has dealt with an important subject. The Government are wholly committed to the principle of academic autonomy and to freeing universities from bureaucratic constraints as far as possible. The substantial funds provided for higher education in the latest plans are evidence of our commitment to invest in higher education. However, as I have said, academic autonomy does not remove the need for accountability. The framework which we have put in place is designed to secure the minimum effort and cost to universities.
The message I take from this debate is that there should be the minimum amount of bureaucracy at the least possible cost necessary to address the principle of accountability. I shall, as I hope noble Lords have come to depend on me to do, report the debate to my right honourable friend faithfully. I shall communicate all of this to the key agents responsible for the systems which have been criticised so eloquently this evening and which have caused such anxieties—namely, the Higher Education Funding Council and the Higher Education Quality Council. No doubt the institutions themselves, which also have a part to play, will heed all that has been said tonight.
House adjourned at four minutes before seven o'clock.