Lords Sitting of 14 December 1993

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

CAP: Rules Enforcement
Lord Stanley of Alderley Lord Stanley of Alderley asked Her Majesty's Government:
Whether they are satisfied that member states operate the rules of the common agricultural policy in such a way as to ensure a "level playing field", and what steps they have taken and will take to ensure that the Commission enforces such rules.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, the Government are satisfied that, in general, member states implement and enforce their EC obligations properly. In those cases where other member states do not play by the rules, the Government are always ready to take up the matter with the Commission, which is responsible for ensuring that Community rules are observed, and with the member states concerned.
Lord Stanley of Alderley: My Lords, I thank my noble friend for that Answer. However, how does the first part of that Answer square with the fact that 10 years after the introduction of milk quotas Italy still has not put them into force? It is now blackmailing the Community saying that it will put them into operation only if it receives further quota. Can the Government take any future steps to make sure that Commission rulings are obeyed quickly?
Earl Howe: My Lords, Italy and Spain have been provisionally allocated additional quota provided that the quota system is implemented properly and that production is reduced. The additional quota will be confirmed for the 1994–95 quota year and beyond only if the Council of Ministers is satisfied that the obligation to reduce production and implement the system has been met. The reduction in production in Italy and Spain was a major factor in the decision not to implement a 1 per cent. across-the-board quota cut at this year's price fixing. I stress that, in return for the extra quota, Italy must reduce its milk production by 14 per cent. of its total.
With regard to the second part of my noble friend's question, the UK is committed to the proper and rigorous implementation of Community law. We lose no opportunity, when well substantiated allegations arise, to make the facts known to the Commission.
Lord Bruce of Donington: My Lords, the noble Earl said that the Government are always ready to take action when alleged infringements come to their attention. Can he give me the date of the last intervention by the Government on such a matter? Can he indicate what the
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intervention was for and whether the Government ever intend to raise the question of the outrageous tobacco payments made out of the European budget, many of which are fraudulently misapplied?
Earl Howe: My Lords, it is difficult to know where to begin to answer the noble Lord. I cannot give him the last instance where we did so, although there have been a number of instances this year where we referred well substantiated allegations to the Commission and to the member states concerned. The noble Lord will recall an example that we debated the other day; that is, the standards in Spanish slaughterhouses. With regard to the tobacco regime, the noble Lord will be aware that tobacco is high on the UK's list of priorities when ensuring that the measures which were recently agreed are implemented and therefore that the cost is contained.
Lord Middleton: My Lords, can the Minister say whether the concessions reported to have been made to French farmers in the current GATT negotiations are to be at the expense of the other member states and their farmers?
Earl Howe: My Lords, the Government agree with the Commission's assessment that CAP reform is compatible with the obligations on agriculture which a GATT agreement is likely to contain. We therefore see no need for special measures to compensate EC farmers for the effect of that agreement. Even if they were to become necessary, the cost would have to be within the agriculture expenditure guideline agreed at the Edinburgh European Council. The Brussels European Council meeting on 10th and 11th December issued a declaration making it clear that the financial decisions of Edinburgh must be respected.
Lord Mackie of Benshie: My Lords, is the noble Earl aware of the situation in Scotland where this year the arable farmers are facing a 5.4 per cent. reduction in their compensatory arable payments? Even worse, next year they face a 5.4 per cent. increase in the land they set aside, making 20 per cent., and that is enough to break. an arable farmer's heart. Furthermore, the 5 per cent. will not be paid for at any time. The German Government faced the same result in part of Germany. They negotiated with the Commission, used their influence and reduced the penalty to 10 per cent. of what it should be on paper. The Government believe in a level playing field. Can the noble Earl say what representations they are making to the Commission or to the Council to correct that heavy burden?
Earl Howe: My Lords, I think that we must all sympathise with those farmers in Scotland who find themselves in a position of incurring penalties as a result of the overshoot mentioned by the noble Lord, Lord Mackie. However, it has to be said that the Scottish overshoot of 5.4 per cent. was not the result of any exceptional event, as was certainly the case in Germany, but of a simple increase in the area of cereals sown. So it is difficult to see what grounds we have for seeking an exemption from penalties whose very existence arises directly from the policy, to which I believe your

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Lordships all subscribe, of keeping the CAP cost to a minimum and ensuring a level playing field among the member states.
Lord Mackie of Benshie: My Lords, on my second question—
The Lord Privy Seal (Lord Wakeham): My Lords, I think it is the turn of my noble friend Lord Harmar-Nicholls.
Lord Harmar-Nicholls: My Lords, is not this talk of a level playing field nonsense? It is quite clear that there are no recognisable sanctions which can be applied against anyone who is in breach of any of the agreements. Does that not mean that all this talk about being a one-unit Europe is based upon a fraud? Should we not all proceed on the basis that it is up to every nation to see that its own concerns are properly applied and accepted?
Earl Howe: My Lords, I would remind my noble friend that the Maastricht Treaty on European Union includes, at our instigation, a provision to impose financial sanctions on member states which persistently fail to meet their Community obligations. The European Court of Justice has also stressed that member states should regard adherence to Community law with the same seriousness as adherence to national law.
Lord Carter: My Lords, how can there possibly be equity in cereal production, for example, when nearly all the reduction in the 1993 cereal harvest resulting from set-aside has come from one member state—the United Kingdom?
Earl Howe: My Lords, the area of land set aside in each member state will vary depending on the total arable area and the number of growers claiming payments under the arable area payments scheme. Firm figures for 1992–93 are not yet available for other member states. However, as the noble Lord will realise, the percentage of land set aside in the United Kingdom and in France is not all that dissimilar. Area payments are tied to average historic production levels and the effect of that is that other member states will not be able to increase their production at the UK's expense.
Lord Carter: My Lords, can the Minister confirm that our cereal production is down by 11 per cent. while the average in the Community is 1 per cent.?
Earl Howe: My Lords, as I said, we do not yet have the final figures. It would not be surprising if there were a disparity. I cannot confirm the figures that the noble Lord has mentioned because, as he knows very well, the number of larger farms in the United Kingdom greatly exceeds on average the number in other member states.

London Underground: Power Failure
2.47 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
What action they are taking to prevent similar failures by London Underground to that which occurred on 25th November, and whether compensation will be paid to passengers who suffered hardship as a result of that failure.
Viscount Goschen: My Lords, my honourable friend the Minister for Transport in London has asked London Transport for a full report on the power failure on the Central Line on 24th November. Until we have seen this it would not be appropriate for me to comment further. Customers affected by the problems on the Central Line can make claims under the terms of London Underground's Customer Charter; claims outside the terms of the charter are being considered by London Underground on their individual merits.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that reply. Is not part of the problem that London Underground has recently been spending a larger proportion of its resources on extending the system and a rather smaller amount on maintaining the existing set-up in an efficient condition?
Viscount Goschen: My Lords, London Underground is targeting existing services. Core investment over the next three years should be in the region of £1.75 billion. This includes the £750 million modernisation of the Central Line which is providing 85 brand new trains, new signalling and up-rated power supplies.
Lord Ezra: My Lords, I am very pleased that the noble Lord, Lord Boyd-Carpenter, should have asked this Question, which is very similar to the one that I asked last week. Does this not demonstrate that on all sides of the House we are extremely concerned about these developments? Can we be assured that the inquiry which the Government have asked London Underground to undertake will be completed as soon as possible, and that we shall be advised of urgent action taken to avoid a repetition of this unfortunate event?
Viscount Goschen: My Lords, I can assure the noble Lord that London Transport will deliver the full report on the power failure as soon as possible, and that we shall take action on it.
Lord Hailsham of Saint Marylebone: My Lords, do I understand the report will be published?
Viscount Goschen: My Lords, London Transport will be reporting to the Government and to the Minister for Transport. In the light of what the report says, we shall decide what action should be taken. It is not appropriate to pre-empt the report before we have received it.
Lord Clinton-Davis: My Lords, is it not absolutely necessary that the London Underground should both be extended and proper maintenance undertaken? Is it not

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a fact that there is in existence 80 year-old cabling; underground signals which are 40 years old; breakdowns; runaway trains; and that commuters are desperately inconvenienced? Does the Minister agree that compensation cannot begin to answer those problems? Does the Minister agree with his colleague, Mr. Steven Norris, who said that the system obviously needed more money than is being spent at present? In those circumstances, is it not absolutely wrong that the support from the Government for London Underground has been substantially cut?
Viscount Goschen: My Lords, the projected investment figure on the existing core services of £1.75 billion is more in real terms than for any three-year period during the 1970s and 1980s. The London Transport core business has been protected at a time of severe pressure on public spending.
Lord Clinton-Davis: My Lords, does the Minister agree with his colleague, Mr. Steven Norris, who said that what is being spent at the present time—we have listened to what the Minister has said—is inadequate having regard to the current emergency situation affecting London Underground?
Viscount Goschen: My Lords, the money being spent in investment on London Transport core business is not inadequate. There is always a case for more money to be spent. The point is that the core business investment has been protected in the light of the very severe public spending round.
Baroness Gardner of Parkes: My Lords, is it not the fact that, despite all the criticism which we have heard this afternoon about London Transport, the general public in London are very grateful for the service, which is usually run most efficiently? Does my noble friend agree that during the emergency, which was totally unforeseen, London Underground coped very well at the time? Will he confirm that new money is going into the extension of the Jubilee Line, whereas an earlier question led the House to believe that that was money at the expense of the ordinary services?
Viscount Goschen: My Lords, I quite agree with my noble friend. The fact that the incident occurred was obviously very unfortunate. But the evacuation of 20,000 people from the Underground system was accomplished without serious incident. Public perceptions of the service provided are also improving, which is an important measure of its success.
Lord Bonham-Carter: My Lords, does the Minister agree that to have to evacuate 20,000 people is a serious incident or does he regard it as trivial? Has he or his noble friend ever travelled on the London Underground? If so, then their satisfaction must be unique.
Viscount Goschen: My Lords, we regard the evacuation as extremely serious; but we also see that completing this exercise without serious incident was a great feat and very well undertaken.
Baroness Platt of Writtle: My Lords, can my noble friend tell us when the CrossRail link will be completed, which will take pressure off the Central London line?
Viscount Goschen: My Lords, I believe that that point is beyond the scope of this Question.

Beer and Cigarettes: UK Duties
2.53 p.m.
Viscount Hanworth Viscount Hanworth asked Her Majesty' s Government:
Whether the imposition of lower rates of duty by other European countries, particularly on beer and cigarettes, has a detrimental effect on the competitive position of British industries which produce these goods and whether in the long term the high rates of duty in the United Kingdom are in the interest of either the Treasury or the public.
Viscount St. Davids: My Lords, the duty charged on beer and cigarettes imported commercially from other EC member states or elsewhere is the same as that charged on beer and cigarettes produced in this country. The level of UK duty alone, therefore, has no detrimental effect on the competitive position of the British brewing and cigarette industries in relation to commercial sales within this country. In setting duty rates the Chancellor takes into account a number of factors, including the competitive position of the industries.
Viscount Hanworth: My Lords, I thank the noble Viscount for that reply, but I cannot accept what he says. In France, apparently, the duty on beer is one-seventh in many cases of what applies here. Therefore, a large number of cheap beers are being brought over here and the same applies to cigarettes. Surely that cannot be in the interests of the industry or the Treasury?
Viscount St. Davids: My Lords, the fact that the rate of duty was not increased in the November Budget should be of some help to UK brewers competing with personal imports of beer. However, the decision by private individuals to shop in another EC member state does not depend solely on the duty differential. The total price is usually the governing factor.
Lord Astor of Hever: My Lords, is my noble friend concerned when Customs fear that over 50 per cent. of beer imported through Kent goes straight to street markets, boot sales and small shops for resale, all avoiding UK tax?
Viscount St. Davids: My Lords, estimating the effects of cross-border shopping is complex and surveys differ widely in their forecasts. After making allowances for pre-existing levels of cross-border shopping, the element which represents new business, and the difficulties in obtaining properly representative samples, it is not clear that the effects are anything like as significant as the media and lobbyists make out. The position is being closely monitored in the interests of government revenue and UK trade.
Lord Mason of Barnsley: My Lords, the Minister must be aware (must he not?) that cheap foreign beer and cigarette imports are bound to be detrimental to our competitive position? Is it not also the case that Norwegian salmon is being dumped in western Europe, threatening jobs in the salmon fish farming industry? Given that imports of cheap coal lead to the closure of British coal mines and that imports of cheap tobacco from Europe will inevitably close British tobacco factories, does the Minister not agree that the answer to the first part of the original Question is "Yes" and that such factors are detrimental to our trade and economic position?
Viscount St. Davids: My Lords, as I said to the noble Viscount, Lord Hanworth, the total price of beer is usually the governing factor. In the case of tobacco products, the greater part of personal imports into the United Kingdom is of tobacco products made in the United Kingdom. Therefore, there is no loss to the UK tobacco industry.
Lord Clark of Kempston: My Lords, does my noble friend agree that a level playing field within the Community means that there should be harmonisation of Customs and Excise duty? When does my noble friend think that that will come about so that we do not have the position whereby it is cheaper to go over in a lorry and pick up at a much cheaper price beer that has been produced here and exported to France?
Viscount St. Davids: My Lords, the Government do not consider that harmonisation is necessary. Member states must be free to set the most appropriate rates which they think necessary for their own particular circumstances.
Lord Stoddart of Swindon: My Lords, is the noble Viscount aware that his statement that it does not hurt the British competitive position has met with some incredulity throughout the House? Has he consulted the cigarette and beer manufacturers to find out their view? Is it not a fact that as a result of our policy the British Treasury is losing revenue while the French are gaining and that French retailers are making profits that are lost to our own?
Viscount St. Davids: My Lords, it is for my right honourable friend the Chancellor of the Exchequer to set the rates of duty he considers appropriate.
Lord Peston: My Lords, if the noble Viscount is right that the price differential is not due to our very high excise duties and taxes, then must it not be the case that he is also arguing that our producers are ripping off the consumer by having high margins? Is that what the Minister is saying? Is he denying what was said by the noble Lord, Lord Clark: that a country such as ours operating on the basis of free trade cannot have indirect taxes very different from those of our competitors? Does the Minister agree that that is a question of market economics and not what the Chancellor believes? It is the way markets work.
Viscount St. Davids: My Lords, as I said, the Government do not consider that harmonisation is necessary.
Lord Brabazon of Tara: My Lords, when my noble friend Lord Caithness answered a Question on similar lines on 25th November, at col. 341 of Hansard, he said that it was estimated that there would be a full year revenue loss of £250 million from increased cross-border shopping. Can my noble friend confirm that that revenue loss includes the loss of direct taxation from the British brewing industry (in corporation tax, and income tax from their employees) and from the retail trade, particularly in the south of England?
Viscount St. Davids: My Lords, I can confirm that the revenue losses expected for 1993–94 are the projected £250 million. I cannot give my noble friend any further information on the loss of taxes from such companies.
Lord Ennals: My Lords, can the Minister give some information in relation to cigarettes; first, about the extent of the import and export of cigarettes between ourselves and other countries, and secondly, what effect the tax measures actually have upon sales here and abroad?
Viscount St. Davids: My Lords, this is an extremely complex subject. I do not have the figures to hand, but I shall write to the noble Lord.

Infant Feeding Formulae: EC Directives
3.1 p.m.
Baroness Oppenheim-Barnes Baroness Oppenheim-Barnes asked Her Majesty's Government:
What consultations they carried out before implementing EC Directive 91/321 on infant feeding formula.
Earl Howe: My Lords, Council Directive 91/321 on infant formula and follow-up formulae has not yet been implemented in the UK. Draft proposals for GB regulations implementing that directive and Council Directive 92/52 on infant formulae and follow-on formulae intended for export to third countries have been prepared and were issued for consultation in the normal way on Friday 3rd December 1993. The Government will consider the comments received before finalising the regulations next year.
Baroness Oppenheim-Barnes: My Lords, I thank my noble friend for that courteous and helpful Answer. But does he not agree that this is a petty, meddlesome, irrelevant and costly measure, which tries to prevent mothers seeing that wicked thing, children's formula, being advertised because it is better for babies if their mothers feed them? Can my noble friend say how long it will be before, for example, car advertising is not allowed because it is healthier to walk? Surely this is an outrage that we should be resisting.
Earl Howe: My Lords, I find myself in disagreement with my noble friend. The directive has been welcomed

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widely both by the industry and by groups representing professional and voluntary interests. The measures are important because they provide safeguards for young infants for whom in many cases these products provide the main or even the sole source of nourishment from birth.
Lord Carter: My Lords, in view of the first Question this afternoon, can the Minister assure the House that there will be a level playing field as far as breast-feeding is concerned? What action are other member states taking to implement the European directive?
Earl Howe: My Lords, after a question like that, it is transparently clear that the noble Lord was a breast-fed baby! We are going out to consultation on the basis of there being a directive. We shall take account of all comments received arising out of that consultation, the deadline for which is Friday 4th March 1994. We shall then introduce our national laws not later than 1st June. I stress that this is a consultation and that we shall take account of all comments received.
Lord Finsberg: My Lords, will my noble friend expand a little on the answer in which he said that the measure had been welcomed by the industry? I seem to recall that when I was a health Minister and this first arose, much of it was a very vicious campaign against Nestle. I wonder whether this is a continuation of that.
Earl Howe: My Lords, the draft regulations give statutory force to existing voluntary measures which were agreed with the industry generally in line with World Health Organisation guidelines to protect breast-feeding. In addition, they require guidelines to be issued on the presentation and content of information and on educational material about infant feeding with the aim primarily of avoiding any bias against breast-feeding.
Lord Stoddart of Swindon: My Lords, but why on earth does the European Community have to interfere in this regard? Is it not a matter for national decision? Does not this sort of directive interfere with every nook and cranny in our national life, which the Foreign Secretary said would not happen once the Maastricht Treaty was ratified?
Earl Howe: My Lords, the noble Lord will of course be aware that aspects of competition law come into all this. In the single market in which we now operate, I think that it is right that all member states should play by the same rules in terms of the composition of products and their labelling and advertising. As I have stressed before, this is a sensitive area because the products are marketed and manufactured for the benefit of a very vulnerable group of individuals.

Local Government (Wales) Bill [H.L.]
3.6 p.m.
The Lord Advocate (Lord Rodger of Earlsferry): My Lords, I beg to move that this Bill be now read a second time.
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When my noble friend Lord Ferrers introduced the Welsh Language Bill to your Lordships he craved your Lordships' indulgence for his lack of mastery of the Welsh tongue. It is my earnest hope that a similar indulgence may be extended to me. Your Lordships may already have noted that I am not a Welshman but my noble friend Lord St. Davids will repair that deficiency and will doubtless be able to contribute a more local perspective than I can to the more detailed debates which we shall have in due course.
I am sure that we all look forward to listening to the maiden speech of my noble friend Lord Kenyon later in today's debate.
This is the third Bill relating specifically to Wales which your Lordships have been asked to consider in the present Parliament. The Cardiff Bay Barrage Act lays the foundations for a modern capital city for Wales. The Welsh Language Act promotes the ancient language of the Principality and requires provision to be made for its use by public bodies and the courts in Wales. The Bill before your Lordships today is intended to modernise the structure and operation of local government in Wales.
In considering why local government stands in need of modernisation, the first thing that we should recognise is that there is much that is good about local government in Wales in 1993. As stated at the beginning of chapter 2 of the Government's White Paper:
"Local Government is government for local people by local people".
Elected councillors give up their time to serve their fellow citizens and, overwhelmingly, they serve them well. The 45 local authorities in Wales at present are staffed by dedicated men and women who provide a high standard of service to their local communities. Local government as an institution has served the country well. It is a vital part of our constitution and way of life in all parts of the United Kingdom.
Nonetheless, there are powerful reasons for reforming the system. The reorganisation of local government in 1974 rationalised a structure that had grown up over many centuries. It made local government fit for the 20th century. But our task now is to equip local government to meet the challenges of a new century. For while there is much that is worth keeping in local government, there is also much that stands in need of reform.
Few people would deny that the changes of the 1970s cost Wales some of its cultural cohesion. Pembrokeshire, Cardiganshire and Carmarthenshire still retain quite distinct identities and have not sat, and do not sit, comfortably together in Dyfed. Local people do not identify with the new county but with the historic shires. The Bill will go a long way towards restoring that cultural cohesion and that sense of belonging.
It has become a truism to say that the present system of local government is not widely understood by local people, but although it is a truism, it is a truism that bears repeating. I am sure that it will not often be clear to the inhabitants of Cardiff whether a particular service comes to them by courtesy of Cardiff City Council or from South Glamorgan County Council. That may sound a trivial point, but it strikes at the very roots of

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good local government. If the man or woman in the street does not know where responsibility lies how can they hold authorities to account? And where there is no accountability there can be no proper sense of responsibility and no genuine response to local concern. In the long run, what sanction then is provided by the ballot box?
The problem is not simply one of there being two tiers of local government. It is compounded by the fact that the two tiers share responsibility for certain functions; for example, planning and economic development. Is it surprising that local people become confused?
Another consequence of those overlapping functions can be friction between authorities at different levels as when, for example, a district council is required in its planning function to implement the structure plan policies of the upper tier county authority.
Nor should we forget that all of those authorities have to support a central administration headed by a chief executive supported by finance, personnel and legal departments. Those are necessary attributes of a public authority, but the existence of them at both levels is a burden on the taxpayer, and one that can, and should, be avoided.
Having diagnosed the ailment, the Government have had to seek a cure. The Government have sought that cure partly through consultation. The product of that consultation is the Bill we have before us today. That has been shaped, in part, by the enormous volume of correspondence that has been generated since the review process began in 1991, copies of which have been placed in the Library of your Lordships' House. I have also placed maps of the proposed structure in the Library to assist your Lordships' debate. Those are also available from the Printed Paper Office.
Before I move on to consider the Bill itself I should say just a brief word about the Secretary of State's decision to defer implementation of the reform until 1st April 1996. That was a subject which exercised your Lordships during the debate on the gracious Speech and I think that it might be helpful if I explain once again the background to the decision.
Due to the late start to the present Session and the crowded programme facing both Houses, it became obvious that we could attain the Government's original objective of implementation in 1995 only by unduly curtailing debate in Parliament so as to permit elections next spring or by deferring the elections until the autumn and leaving little time for the new authorities to prepare for their task. Delaying implementation until 1996 will allow proper debate both in your Lordships' House and in another place. My right honourable friend the Secretary of State is still considering the precise timing of elections to the new authorities but those are likely to be in April 1995, allowing a full year for planning and preparation.
With your Lordships' permission I shall turn now to the Bill itself and to the solutions that the Government are proposing to resolve the difficulties to which I alluded earlier.
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Your Lordships will see that we begin to tackle the problems of the two-tier structure at the very outset of the Bill. Clause 1 provides for the present counties and districts to be swept away and replaced by a single tier. The establishment of unitary authorities is the first of the two core principles underlying the whole Bill. The Government believe that local people, wherever they may be, should be served by a single authority. A one-stop shop—where they know they can go for all their local services—with no confusion about where responsibility lies.
In passing, I draw your Lordships' attention to the titles proposed for the new authorities. Your Lordships will find in Schedule 1 that some are to be counties and some to be county boroughs. I trust that your Lordships will not be confused by those two styles. Where we have resurrected the names of the historic counties—Anglesey and Monmouthshire, for instance—we have given them the style of county council. We have also used "county council" for the Mid-Wales authority, because it covers a rural area, and for Cardiff and Swansea so that, with Her Majesty's permission, they may be known as "the City and County of Cardiff' and "the City and County of Swansea". Elsewhere we believe that the old title of "county borough" would be more appropriate given the essentially urban character of those unitary authorities. Your Lordships will also wish to note the provision in Schedule 1 and in Clause 2 for all those authorities to be named and titled in both English and Welsh, in keeping with the important principle established by the Welsh Language Act.
In constructing the new structure of unitary authorities the Government have had to keep in view two important but not always complementary considerations. The first is that, so far as possible, the new authorities should relate to recognisable communities that command the loyalties of local people. The second is that they should be sufficiently robust as units to be able to manage and, where appropriate, deliver services effectively and provide local people with value for money. The pursuit of those two objectives has resulted in a varied pattern of authorities across Wales; as your Lordships will see, varied both in terms of their territorial extent and of their population. The details of the proposals are to be found in Schedule 1.
Of course, in some areas in reconciling those objectives the Government have had to lean more towards one of the objectives than to the other. At this stage I simply ask your Lordships to remember that one cannot just put down a template on the map of Wales and draw some arbitrary lines. Nor can one respond to every demand of community identity. If we did that we might well return to the days before 1974 when there were 181 local authorities in Wales.
I referred a little while ago to the two core principles underlying the Bill. The first, as we saw, is the establishment of unitary authorities. The second is the concept of the enabling authority. I apologise if I descend into jargon at this point. What is meant by that concept is that the individual authority should be responsible for setting objectives and standards and for planning how services are to be delivered to local people. It will be responsible for securing the delivery of

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services, but, unlike the traditional local authority, it need not be responsible for delivering all those services itself. It may co-operate with another local authority. It may buy the service from the private sector or from another authority. It may choose to involve the voluntary sector. It may still choose to deliver the service directly. In that context I refer your Lordships to Clause 24 of the Bill which establishes a new framework in which authorities will operate when providing services to one other.
It is the Government's belief that by creating a structure of unitary authorities, close to local people and with clear responsibility for managing the provision of services, they are creating an accountable and responsive structure suited to the demands of the next century.
Part I provides for the establishment of a new unitary structure for local government in Wales, with Clause 1 and Schedules 1 and 2 setting out the new authorities. I also draw your Lordships' attention to Clauses 3 and 4 and to Schedule 3 which provide for the first elections to the new authorities. Also in this part of the Bill are provisions relating to community councils—the "third tier" of the existing so-called two-tier structure. These build upon the results of the consultation exercise to which I referred earlier. They establish new arrangements governing the establishment and dissolution of community councils and enable my right honourable friend the Secretary of State to make provision, by order, for the new authorities to consult the community councils on matters relating to their functions.
Part II and Schedules 4 to 9 transfer the functions of the existing counties and districts to the new authorities. Clause 17 deals with the general transfer of functions. Otherwise the Bill refers to specific functions only where there are particular circumstances that need to be dealt with. For instance, your Lordships will note that Clause 19 and Schedule 6 will enable the Government to redesignate the national parks as joint or special boards not affecting their membership or functions but protecting their funding. I have already referred to Clause 24, which would enable the new councils to trade with one another. Clause 25, with its requirement for the new authorities to produce plans describing their arrangements for service delivery, is a transitional provision which applies to the first year only.
Part III covers the new authorities' arrangements for decentralised management, the Secretary of State's reserve powers and, in Clauses 31 and 32, enabling provisions that would permit the new authorities to experiment with and, if appropriate, to adopt alternative forms of political management. Clauses 26 and 27 provide for decentralisation schemes. This provision has been included in recognition of the fact that our attempts to meet objectives of community identity and effective service delivery have, particularly in the rural heartlands of Wales, had to lean towards the latter objective. The Secretary of State hopes to have published a draft of the guidance referred to in Clause 26(10) before the Bill reaches its next stage. This will make clear that area committees could, if that is what is wanted locally, have significant powers devolved to them, including most district council functions, such as housing management
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and environmental health, as well as some county council functions, such as locally delivered social services. They would not have financial autonomy. Most of their financial provision would come from the unitary authority in the same way as any other local authority committees. As for Clauses 28 to 30 on reserve powers in connection with joint working, I should emphasise that these are transitional arrangements designed as a safeguard against any breakdown of service delivery in the first years of the new authorities. Thereafter any imperfections in local arrangements will be judged at the ballot box.
Part IV and Schedule 10 simply adapt the existing local government finance legislation to the new unitary structure.
Part V and Schedules 11 and 12 establish the Residuary Body for Wales and the Staff Commission for Wales. The residuary body will oversee the transfer of assets and liabilities to the new authorities and, where appropriate, will dispose of any surplus assets. The staff commission will be charged with advising the Secretary of State on the steps needed to protect the interests of staff being transferred to the new authorities or being made redundant as a result of re-organisation. An advisory committee on staffing matters has already been established.
Part VI makes a number of transitional provisions arising from the change to a new structure. Most of the provisions, like much else in the Bill, are firmly rooted in the precedent of the Local Government Act 1972 and build on the experience of re-organisation in 1974. I draw your Lordships' attention, in particular, to Clause 45 which requires existing counties and districts to form transition committees to prepare the way for the new authorities. This is a vital and important task which the decision to defer implementation will greatly facilitate.
In Part VII your Lordships will wish to note Clauses 57 and 58, which will permit Her Majesty, by Order in Council, to revise lieutenancy and shrievalty areas where re-organisation makes that appear appropriate.
I apologise for detaining your Lordships for so long. This is a major piece of legislation affecting the lives of every man and woman in Wales. It puts local government on a firm footing and is a new structure that will be ready to meet the challenges of the next century. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Rodger of Earlyferry.)
3.27 p.m.
Lord Prys-Davies: My Lords, I too look forward to the maiden speech of the noble Lord, Lord Kenyon, who is one of Wales's newly-appointed representatives to the European Committee of the Regions. I also welcome the noble and learned Lord the Lord Advocate of Scotland and thank him for the way in which he explained to the House the principal provisions of the Bill. He need not have apologised for spending 20 minutes introducing a Bill which is so complicated and important. We on this side of the House can never be sure who on the Government Benches will introduce a major Welsh Bill. The absence of a Welsh Office Minister in introducing

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a major Bill and partaking in the examination of its provisions in the revising Chamber highlights a major weakness in constitutional arrangements.
The Bill before us introduces radical changes in the structure of Welsh local government. We heard from the noble and learned Lord that it purports to strengthen local democracy, to strengthen the distinctive community identity and to delivery quality services. Of course, those aims are right. But we believe that in general the Bill is unlikely to achieve any of them. Indeed, it may well lead to reduced services in many parts of Wales.
The responses to the 1992 White Paper, which are to be found in two boxes in our Library, confirm that its proposals caused criticism and anger in communities up and down Wales. Furthermore, if it matters to the Government, the proposals caused deep anxiety to the professional bodies whose members serve the local authorities to the best of their abilities. Of the many professional organisations which wrote to the department, perhaps I may cite the Institute of Trading Standards Administration, which described the Bill as appalling from its point of view.
Despite the weight of the criticism from the communities and professional bodies, the Welsh Office has ploughed on with the Bill. With respect or without, that is arrogance. I live in Wales but I am not aware of any upsurge of demand for the reorganisation of local government. I was extremely pleased to hear the noble and learned Lord the Lord Advocate pay tribute to the members and staff of the Welsh local authorities, who over the past 13 to 14 years have been subjected to snide remarks from government Ministers in Wales.
We have lived with a system which was set up in 1972 by the noble Lord, Lord Thomas of Gwydir, who is in his place, assisted by the noble Lord, Lord Gibson-Watt, who is also in is place. I am not aware of a widespread criticism of that piece of legislation. There are no malpractices on the part of Welsh local authorities, as there have recently been in the Welsh Development Agency and the Welsh Development Board for Rural Wales.
Therefore, notwithstanding what the Minister said, I am bound to tell the House that the impression has been created in Wales that the true explanation of the Bill is that Welsh Office Ministers decided to produce a weaker local government structure, whose leaders would be less able to stand up to the Welsh Office; and at the same time to increase further the power and patronage of the Secretary of State, which are already formidable in Wales. To the extent that that is so, it is idle to pretend that the Bill is other than mischievous.
Perhaps I may use the insensitive phrase of the noble and learned Lord the Lord Advocate, who said that, if enacted, the Bill would sweep away the eight county councils and 37 district councils. They will be replaced by 21 unitary authorities. The noble and learned Lord is a very skilled lawyer, but I did not hear from him an explanation of the basis of the choice of 21 such authorities rather than, for example, a dozen or two dozen. The reason for that is that it is highly unlikely that any objective criteria have been used. It seems to
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the people in Wales that the number of authorities and their boundaries have been determined by the political judgment of the Government and all that that implies.
Again, the noble and learned Lord omitted to inform the House that the Bill would also reduce the number of elected councillors by one-third—down to 1,250—whereas the number of people appointed by the Secretary of State to manage nominated bodies in Wales has reached 1,450. The Bill does not address that problem, which in our experience in Wales—and this was confirmed in the recently published research document of the Department of Regional Planning of the University of Wales College Cardiff—lies at the heart of the matter of the governance of Wales today.
If there is to be local government reorganisation, we accept that, for many of the reasons advanced by the noble and learned Lord, there is a strong case for setting up unitary authorities. We accept that. But the Labour Party has always made it plain that that is conditioned on setting up at the same time, or as a condition precedent, an elected Welsh assembly which has specific responsibilities for strategic services such as highways, fair trading standards, economic development and certain key aspects of social services and education.
However, in this Bill the Government have gone for 21 unitary authorities without such an assembly. That results in inevitable flaws in structure. It is flawed fundamentally because the weaker authorities will not be strong enough to discharge some of the main specialised functions of local government such as those that I have just mentioned.
The Welsh Office commissioned the accountants Touche Ross to advise on the financial implications of the reorganisations. Touche Ross made it abundantly clear in its report of 12th March that:
"There is a consensus that, in small authorities, direct provision of all aspects of key services such as education and highway management will not be feasible".
It goes on to draw attention to some of the difficulties. We are told that the weaker authorities are unlikely to have the capital resources to justify new provision for special needs education—a matter which greatly concerns your Lordships' House. We are told that the provision of Welsh medium education is also at risk.
Touche Ross reported to the civil servants that it had been suggested that:
"education could be linked to sports and leisure under a single directorate resulting in administrative savings".
That is quite outrageous.
I see that the noble Baroness, Lady Faithfull, is in her place listening to the debate. It emerges also from the report that there is huge uncertainty as to how the social services will be delivered. I should mention to your Lordships that, sadly, Wales has been left with a heavy dependency on social services and we need to be mightily careful that the lives of the needy and handicapped will not be blighted because of the imposition of a wrong structure of local government.
Therefore, the fundamental flaw in the new structure is that it leads inevitably to joint arrangements on a vast scale. The noble and learned Lord the Lord Advocate dealt with that. It may be that Clause 30 is only a transitional clause, but it is important because, if your

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Lordships examine it, it will be seen that the Secretary of State has taken power to himself, subject to the affirmative resolution of Parliament, to set up a range of statutory boards to which he can hive off many functions specified in the Bill. As a layman, without much difficulty I can think of at least 20 situations in which the Secretary of State might exercise those powers. That number may be too high of course, but the fact is that it is possible for the Secretary of State to create a new generation of quangos by 1999 on such a scale subject only to affirmative order.
I see that the noble and learned Lord, Lord Simon of Glaisdale, is in his place. I should mention to your Lordships that the hybridity of the orders is to be ignored under Clause 59(4). We believe that that is constitutionally objectionable.
If the noble and learned Lord the Lord Advocate had had time to read the avalanche of responses received by the Welsh Office, he would have seen that there is heavy criticism of joint arrangements. In the words of one correspondent they are:
"A recipe for friction, conflict and consequential inefficiencies".
The case is worsened as the Bill also empowers the Secretary of State at his sole discretion to set up joint planning boards under Clause 19 and to set up combined fire services schemes under Clause 22. That means that local responsibility for those services will be at two remove. It would be helpful if the noble and learned Lord the Lord Advocate could tell the House how many such boards and combined schemes there will be under the two clauses. How far down that road do the Welsh Office mandarins intend to go? But, of course, it will be for the House in Committee to ask itself whether to give the Secretary of State the power which Clauses 19, 22 and 30 would confer upon him.
Interestingly, paragraph 1.2 of the White Paper is critical of the,
"complex set of arrangements which emerged during the previous century".
I should mention to the noble and learned Lord the Lord Advocate—and, indeed, to his right honourable friend the Secretary of State who knows no more about Wales than the noble and learned Lord—that a major feature, if not the main feature, of the government of Wales in the 19th century was the heavy reliance upon special boards for specific services, such as the incomprehensible boards of guardian, school boards and highway boards which were not responsive to public opinion. Therefore, it is not surprising that we read paragraph 1.2 of the White Paper with a great deal of cynicism. By setting up an admixture of joint boards and combined schemes for specified services accountable to no one but the Secretary of State and senior civil servants of the Welsh Office, the Bill is repeating the mistakes that were made in the 19th century. The Bill is returning us to the situation which prevailed at that time.
It has been argued—and the noble and learned Lord the Lord Advocate spent some time on the matter—that the new councils should see themselves as enabling authorities, buying the services from the private sector. If the noble and learned Lord was familiar with the report of Touche Ross, he would know that there is an immediate question. The immediate practical question
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is: where will the services come from in rural Wales? As Touche Ross warned on page 22 of its report, the solution
"depends crucially on the availability of suitable providers of the services sought".
So there we have it. The skills and the expertise may not be there, but that is not the end of it. The danger is that we may therefore see semi-qualified outfits setting up to offer a contract of service if they believe that they can make money out of it.
I now move on, almost naturally, to consider another fundamental flaw in the Bill. The noble and learned Lord talked about the first clause sweeping away community authorities. It will destroy historic community identities that have been the source of tradition and civic pride, having developed since 1888 in some instances, and which in many cases have existed for several centuries. Yet paragraph 1.2 of the White Paper concludes with the significant statement:
"A structure of local government without such support"—
in other words, traditional loyalties
"cannot be as effective as it must be to meet the challenges of the next century".
I should like to ask a few questions to see whether those words have any meaning when used by Welsh Office officials, or whether they are beautiful terms about nothing. For example, why are the Government so determined to disband Montgomery, which has been a unit of government since 1542 and has an efficient district council? Again, why should the former country borough of Merthyr Tydfil—a recognisable community if ever there was one with its distinctive history, sense of common purpose and efficient district council; and which is at the heart of the sub-region—lose its independent existence? Why is there this inconsistency between word and deed?
The noble Lord, Lord Hooson, will marshal his arguments for Montgomeryshire with his usual competency. I hope that the Government will listen to him and think again. I also know that there are other noble Lords present who will press the claims of other communities such as Meirionnydd, which was created in 1284. Although I do not go back to 1284, I owe Meirionnydd a huge debt of gratitude. It has an efficient district council. Other speakers will argue the merits of boroughs such as Port Talbot, Neath and Cynon Valley. Therefore, it would be helpful and constructive if the noble and learned Lord the Lord Advocate could give an indication as to whether Welsh Office Ministers are prepared to consider further argument, or are their minds finally made up that this is the way that reorganisation is to go in 1994? I invite the noble and learned Lord to make a specific reference to that point in his reply.
The recognition by the Government of the widespread anger felt in the communities throughout Wales about their proposals has come a little late, and totally inadequately. The recognition may be there in Clause 26 with the so-called "Powys model", to which the noble and learned Lord gave some attention. However, that concept is far less attractive than it may appear at first sight. The clause is 'very loosely worded—a point that must be apparent to the noble and learned Lord—and it is not clear how the area

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committee will relate to the principal council, or to another committee, if two or more are set up. It is also unclear what the principal council and the area committee can do and what discretion will be left to either council. We are asking whether the clause is an attempt to preserve in Powys the two-tier structure which is so roundly condemned in the White Paper. Moreover, we are puzzled at reconciling the so-called "decentralisation principle" of Clause 26 with the joint-arrangement principle of Clauses 29 and 30. They seem to be extraordinarily inconsistent. All that is evidence that Clause 26 has not been deeply thought through.
We believe that the Bill contains the seeds of instability. It is a recipe for trouble and does not offer stability. But, of course, there is an alternative. What would make for better government would be the setting up of unitary authorities for certain functions while transferring strategic functions—such as, trading standards, economic development, highways and aspects of social services and education—to an elected Welsh assembly. That would achieve three aims: first, it would preserve and enhance existing standards of service; secondly, it would preserve existing loyalties; and thirdly, it would bring a new democratic impetus to Welsh life. Although that solution has the enormous corroborative support of the Assembly of Welsh Counties, the Council of Welsh Districts Councils and the local government union, Unison, it has been dismissed by the Government; indeed, nowhere in the White Paper is it discussed. That again, to our mind, suggests arrogance on the part of the Welsh Office.
My noble friend Lord Morris of Castle Morris in his winding-up speech will deal with question of how much the new structure will cost. Your Lordships have, as always, been patient. Perhaps I may now conclude by repeating, as I have tried to show, that in the White Paper the Government have made overwhelming use of rhetoric in paving the way for the Bill. The misuse of words by civil servants in drawing up the White Paper is deeply worrying. The authors have paid lip service to old and well accepted concepts and principles which are deeply cherished in Wales, and they have done so in order to lead people to believe they were being offered a quality of local government that they were not. Therefore, one begins to feel that a confidence trick is being played on the Welsh public—and that will not be forgotten.
3.50 p.m.
Lord Hooson: My Lords, I join with the two previous speakers in expressing our sense of anticipation at the maiden speech of the noble Lord, Lord Kenyon. I knew his father when I was deputy chairman of the Flintshire court sessions where he was a frequent attender—in a magisterial capacity, I might add. We all remember his services to education through the University College, Bangor, and we look forward with eagerness to hearing his speech.
I welcome the participation of the noble and learned Lord the Lord Advocate in the debate for I feel that the Scottish experience is much more relevant than English
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experience in the context of our discussion, for reasons that I shall come to presently. Local government, by its very nature, is so different from national government and, to most people in Wales, is more important. Although I have no direct participatory experience of local government, my wife has a good deal. When we compare notes I sometimes feel that she is very much the worker at the coal face while I am looking at the same problems from the remoteness of the coal board area manager's office. Local government is much closer to the people and their concern about immediate problems such as the education of their children, the state of the roads leading to their farms and houses, the finding of a place to live, and the provision of social services for their grandmothers and similar matters.
People want immediate access to their local councillors and officials. They want to attend meetings at civic centres, to hear debate in the town or county hall, and to make sure that their view is heard. Local government is far more than merely the delivery or the provision of services; its role is far more than that of simply fulfilling statutory duties from on high. It is concerned with accountability, democracy, local responsibility, local pride and local priorities.
We have been inundated with literature, advice and special pleading on this Bill's subject matter. Some of that pleading has been merely the repetition of shibboleths concerning English local government. It ignores the fact that in Wales we have what England does not have—an additional tier of government, call it national or call it regional! We have a Secretary of State for Wales; we have a Minister of State for Wales; we have an Under-Secretary of State for Wales; and we have thousands of civil servants in Cardiff and in other parts of Wales, administered from Cardiff. Those civil servants are concerned with our education, our health, our highways and other matters. There is no comparable regional provision in any part of England, although some metropolitan areas have much larger populations than the whole of Wales.
The argument that some services are best provided over a large area or on a regional basis, whatever its merits—I shall not go into them now—has to be put in the Welsh context of an already existing regional tier of government. Indeed, when I first read of the lunatic scheme to have only eight unitary authorities of local government in Wales based on the eight existing counties, my reaction was to think, "Well, if the Welsh Office officials back that one, they will be paving the way to their own eventual redundancy." You cannot have local government on a regional basis and also have a regional tier of government. One would have had to go.
Scotland has had its own Secretary of State and Scottish Office for a century. If that has been the case for longer than a century, perhaps the noble and learned Lord the Lord Advocate will tell me. The unique position of Scotland and of Wales is justified by their respective nationhoods. In a British context this has led to a different approach and to an appreciation of different values. As the Minister of State for Scotland informed the House during the debate on the gracious Speech, there have been unitary authorities operating

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successfully in Scotland for years with no expressed wish from areas with much smaller populations than any proposed for Wales that they should be changed. The noble and learned Lord the Lord Advocate knows that.
There is no comparable experience in England. Therefore, I appreciate the participation of the noble and learned Lord the Lord Advocate in the debate. I hope that he will advise the Secretary of State for Wales to forget his experience of English conditions of local government and take heed of Scottish experience which is so much more relevant.
Furthermore, I believe that if there is to be economic and administrative justification for our regional tier of government—there has to be—then the very least it should be able to provide are units of local government much more in accord with the wishes of the vast majority of local inhabitants in Wales. It is important to have acceptability. We have talked about responsibility and accountability, but acceptability is all-important.
There is no need for a Secretary of State for Wales who has courage, discretion and sensitivity to follow rules of thumb on population laid down for him in England either by the Treasury or the Department of the Environment. The Bill has been necessitated by the disaster of the local government reform Act of 1972. I repeat the word "disaster". This reform comes 20 years after that Bill became law. The pressures for change in Wales and in England at the time were considerable. The Bi11 was bulldozed through both Houses of Parliament with little or scant attention paid to criticism. No distinction at all was drawn between England and Wales. The Bill was a prime example of the refusal of the responsible Minister to listen to, or to heed, the warnings given to him. There was plenty of advice, including that of Mr. Nicholas Edwards, the then Member of Parliament for Pembroke and now the noble Lord, Lord Crickhowell. I am sorry the noble Lord is not present today. He opposed the idea that Pembrokeshire should be replaced by and absorbed into the county of Dyfed. I remind noble Lords that the county of Dyfed, however large, was smaller than Powys. The noble Lord used much the same arguments that I did in objecting to Montgomeryshire being made part of Powys. When addressing the argument that all the new counties should have roughly the same population, he said that a minimum population is a concept,
"that even in terms of efficiency has no meaning at all in isolation from the other factors, social, geographic and economic".—[Official Report, Commons, 17/11/71; col. 533.]
Powys, covering an area of 507,000 hectares—a quarter of the total area of Wales—I warned was completely unacceptable, not only as a unitary authority but also as a county authority. The huge size of the county undermined the principles of democratic accountability and efficiency of service.
I wonder whether the Secretary of State for Wales has taken the trouble to obtain figures for the past few years of the mileage claims of councillors and officials of the Powys County Council for travel undertaken legitimately in the discharge of their duties. Has he considered how much greater they will be for a unitary authority? I remind him of the time spent in motor cars in an authority whose length, some of your Lordships may
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not realise, is the equivalent of the distance from the Severn Bridge to the Hammersmith flyover in London. Alternatively, it is the equivalent of the distance which I travel every week coming to London from Birmingham. All that time spent in cars is dead time, however efficient the official or conscientious the councillor. It is paid for in salaries or allowances, but it is not productive time.
The basis of the unacceptability of Powys as a local authority is that it provided regional services. It was not a local authority at all. Breconshire and Radnorshire did not like it either. Likewise, Gwynedd Was unacceptable to the people of Ynys Mon and Merionethshire. I see that the noble Lord, Lord Cledwyn, is in his place. Reference was made earlier to education. My county of Montgomery was the first county in Wales to fulfil the duties imposed on education authorities to conform with the Education Act 1944. Its only rivals were Anglesey and Ynys Mon. Two of the smallest county authorities in Wales were the first to fulfil their obligations. They had no trouble in providing services of the quality required of their councillors and directors of education.
Dyfed was unacceptable, particularly to the people of Pembrokeshire and Cardiganshire. It was ridiculous that our capital city, Cardiff, should be part of South Glamorgan county authority. There was no sense in that at all. One could continue with examples of the disastrous mistakes of the 1972 Act.
Suffice it to say that most people welcomed the principles of the 1991 consultation paper when it was issued. Local government reform was in the air. The principles adumbrated were acceptable. There was a new optimism as the local authorities concerned reacted to the Government's proposals. In Chapter 4 of the consultation paper the Secretary of State stated:
"The Secretary of State is persuaded that the best structure for a single tier of Unitary Authorities in Wales will be found between [the] extremes",
of eight unitary authorities based on the existing counties and 37 based on the district councils. He continued:
"Maps 3, 4 and 5 show three possible patterns of local government in Wales".
They were structures consisting of 13, 20 and 24 unitary authorities respectively. He went on to say that he considered that the structure of 20 unitary authorities had significant attractions arid appeared to offer the best basis for further discussion. My preference was for the 24 authorities, or more.
According to the consultation paper prepared by the Welsh Office, the unitary authorities—whether 20 or 24—included Llanelli, Brecon, Radnor, Montgomery and Merioneth. Montgomery was included in both options. The map showing 20 unitary authorities showed Montgomery as one unitary authority and Brecon and Radnor combined as another. That was preferable to the present proposals.
It is of great interest that, as the noble Lord, Lord Prys-Davies, pointed out, the Welsh Office asked its appointed consultants, Touche Ross, and a finance sub-group, formed to report to the 'Welsh Office's appointed structures sub-group, to work out costings on a model of 23 unitary authorities, which is yet another variation. One was Montgomery; Merioneth was

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another. I do not know which was omitted because there was a dotted line between Brecon and Radnor, but it may well have been one of them. It could have been the Cynon Valley. Both reports concluded that all of those authorities would have been able to provide affordable services.
The noble Lord, Lord Prys-Davies, quoted earlier parts of the report, but it is the conclusion which matters. The Touche Ross report states:
"However, following detailed consultation through the Welsh Local Authority Associations, an alternative map involving 23 Unitary Authorities has been under consideration and, at the Welsh Office's request, a final financial assessment has concentrated on this option … We conclude that, based on the associations' assumptions and costings, the 23 authority option should allow services to be delivered at broadly no extra cost to the present structure".
It was therefore no surprise when the Secretary of State for Wales, the right honourable David Hunt, announced in another place in early March 1992 that he intended to base his unitary authorities on the old county allegiances. He specifically named Montgomeryshire as one of them. It was the second one that he mentioned after Pembrokeshire. His exact words were that,
"in the rural areas I want to see local government based on the traditional counties".—[Official Report, Commons, 3/3/92; col. 171].
All that was said after proper consultation processes, national assessments and so on. Furthermore, in Montgomeryshire itself, at the village of Llanfechain, in 1992, addressing a Conservative meeting, Mr. Hunt promised that there would be a Montgomeryshire unitary authority. Perhaps the noble and learned Lord the Lord Advocate will convey to the Secretary of State our concern in Montgomeryshire that such a promise should be taken very seriously. No one has been more vigorous in the defence of Montgomeryshire than the local Conservative Association, which has actively supported the group of which I am chairman.
I have given my own county as an example. I am sure that that experience has been repeated elsewhere, although perhaps not in exactly the same way. What on earth happened between the spring of 1992 and the spring of 1993? We had a general election. The Welsh Office was subjected to tremendous pressure from, among others, Powys County Council, which has virtually no real friends apart from its own councillors and officials. It delivers services reasonably, but it is not local government and never will be. It is small wonder that an NOP poll taken in Montgomeryshire in July disclosed that 71 per cent. of the people wanted Montgomeryshire as their unitary authority and only 16 per cent. wanted Powys. We are all aware of the opinion polls taken by the commission in England, but they did not return figures like that.
The same can be said for Merionethshire, Llanelli, the Cynon Valley and, as the noble Lord, Lord Prys-Davies, said, Merthyr. I trust that the Secretary of State will keep an open mind and listen. There was precious little listening during the 1971 debate. We do not want a repeat of some of the disasters which followed.
I can support the aims and principles set out in the Government's White Paper of March 1993. I agree with
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the reasons for reorganisation and that local government does not sufficiently reflect people's identification with their own communities and localities. I accept that the Government are committed to the creation of good local government which is close to the communities it serves and that local government is government for local people by local people. However, I say that in some areas the Government are failing to achieve what they set out to achieve. That is why there must be serious reconsideration.
I come now to those parts of the Bill which have been referred to as the Powys model. They result from a recognition by the Secretary of State of the depth of local identification and outrage in Montgomeryshire, Brecon, Radnorshire and elsewhere and seek to deal with the matter by allowing local area committees. I consider that model totally unacceptable. It is contained in Clauses 26 and 27. I hope to deal in detail with the matter in Committee. Suffice it to say that if it were to be effective in providing truly local government for those areas it would be reintroducing on a less efficient basis a two-tier system of government which the Bill aims to abolish.
Frankly, the status quo is preferable, however unacceptable Powys has been as a county council area. In saying that, I disparage in no way the efforts of its officials and councillors. Geography, history and habit were all against it. On the other hand, I believe that the decentralisation schemes depend much on the views of any particular Secretary of State. One asks immediately: who would service those committees? What would be the cost of area committees as well as the county council committee? The Secretary of State's own disclosures about the growth of bureaucracy in the National Health Service trusts in Wales should be ever present in his mind when he makes a cool assessment of the possibilities of development under Clauses 26 and 27 of the Bill. It would be much better if he reconsidered the whole thing, going back to the principles that run through the White Paper and the consultation documents. They provide a basis for acceptable local government in Wales that will not need further change and division.
I have the transcript of an interview which the present Secretary of State, Mr. Redwood, gave on the Vincent Kane programme in December this year. Mr. Kane asked the Secretary of State, "Why didn't you go back to where we were 20 years ago?" In the course of his reply, the Secretary of State said:
"What I think went wrong in 1973 was that at that time they chose county areas that were very large"—
the largest was Powys
"and in many cases they didn't draw the loyalty in people in the way in which the historic counties have done, and so we see that there have been problems in getting the right sense of identity and participation in some of the big new counties of Wales and in some of the big new artificial counties in England. So our reform that I'm proposing now does restore the old counties, where that is possible, where they are a community and where they're a sensible size".
He went on to say that he could not reintroduce Radnorshire. I disagree. Scotland's experience is that a historic unit of that kind can be run efficiently. Be that as it may, if that concept is not acceptable to him, Brecon and Radnorshire, with a combined population of

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68,000, is larger than Cardiganshire, which will have a unitary authority. They constitute a much larger area. Why should that area not have a unitary authority? Why should not Montgomeryshire be a unitary authority? It has a huge area but no normal close affiliations with Brecon and Radnor. It is the one county in mid Wales where the population is steadily growing and estimated to be 60,000 by 1998.
Having been promised unitary status after proper consultations, one is bound to point out that the Secretary of State has a great deal to answer for in the Bill. Wales, as that fine novelist Emyr Humphreys, pointed out, is, "a little kingdom". As Secretary of State, Mr. Redwood comes to the little kingdom afresh. He inherited a situation not of his own making. But he will be judged in the future, in Wales and elsewhere, by the way in which he deals with it and how he reacts. If the Bill goes through Parliament in its present form, its provisions are unlikely to last even the paltry 20 years of its predecessor.
4.14 p.m.
Viscount Tonypandy: My Lords, the noble and learned Lord the Lord Advocate has my sympathy. In this season of peace on earth and good will towards men, I feel sorry that he has to suffer for other people's sins. The Bill is not his product. He had to study it after it was produced. He knew little more about it than I did, I suppose, when he started on his brief. However, by now he will have realised that in Wales local government is taken very seriously indeed.
My good and noble friends (if I may so call them) Lord Thomas of Gwydir and Lord Cledwyn of Penrhos had the same responsibility that I once carried of being Secretary of State for Wales. We could have warned the Secretary of State that he was playing with fire when he decided to tear up the promises already made by his predecessor to the Welsh people.
We have listened to two powerful speeches from the noble Lords, Lord Prys-Davies and Lord Hooson, who are very close to the people in the Principality. The decisions of the Bill will have far-reaching effects for generations now unborn. Perhaps I may say this to the noble Lord, Lord Hooson, and to the House. I fear that once the Bill is enacted, with the tearing up of local government, as we seem to have been doing, with the breaking up of people's careers and the changing of people's loyalties, those provisions will last because there will be resistance against pulling up the roots again later. That is why we need to give especial care to the proposals before us.
Last week I visited my home valley, the Rhondda Valley. Perhaps I may say the kind words at the beginning. Dear Rhondda, my Lords. Over the world people consider it as Wales—at least the Rhondda people believe that they consider it as Wales. I spoke to the mayor of Rhondda in a hospital for the elderly. The mayor told me how grateful he and the community are that the name of our beloved valley has at least been preserved. Mrs. Cerys Pugh, a little householder in the Rhondda, might not sound important in this House, but she counts in her valley. She is the voice of the people. She began a petition when it was clear that Rhondda was
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in danger. The petition was signed by almost everyone in the Valley. Therefore I say to the Secretary of State for Wales that I am glad that he has kept the name of the Rhondda.
I feel sorry for those in the Cynon Valley, a name which was rather new; it came in under the last local government reform. But Aberdare is something special. I am glad that the noble Lord will follow me in the debate. However, like Rhondda, Aberdare has a fierce civic pride.
I have heard many good things about the Secretary of State for Wales—about his keen intellect and driving ambition. For people in another place those factors are not an offence. If he does well, we do well. But I fear that with a cold, clear intellect such as his, he needs also a warm heart, as that enables a leader to feel sensitive to the emotions of those whose destiny he is deciding.
I think that the Secretary of State is in danger of underestimating the fierce loyalty of people to their own communities in Wales. It is not without significance that we have a national anthem of our own which sings of the land of our fathers being dear to us. The House and the Government especially need to bear in mind that if it will upset, as I believe it is upsetting, the deep-seated loyalties of communities in Wales, that is something for which they will not easily be forgiven.
I do not wish to use nasty language, but I am dealing with some nasty proposals. I just cross another mountain to look at Merthyr Tydfil, which gave shelter to Keir Hardie, as no doubt the noble and learned Lord the Lord Advocate will know. When Scotland would not give Keir Hardie shelter, Merthyr Tydfil did. He became the Member for Merthyr Tydfil and Aberdare, so there were links. His name is honoured and revered on the Labour Benches and I honour and revere his name. He was a Christian gentleman who served his generation and was the founder of the Labour Party. Merthyr has a particular place in the affections of the Welsh people and in the history of the Welsh people, and I think it is almost insulting to suggest that Merthyr is not capable of being a unitary authority. The people are proud of their representatives; those who served in the Welsh Office know that some of the ablest people in Wales are in our local government and in Merthyr. It is quite capable of being an authority on its own, or linked with Rhymni, which is one of the proposals.
The same applies over the next mountain, when we come to Blaenau Gwent. Blaenau Gwent is entirely capable, quite as capable as Monmouthshire, of being a unitary authority. When the noble Lord, Lord Prys-Davies, spoke about political motives, I thought, "It can't be, can't be". But I look at how Monmouthshire is being treated and then how Blaenau Gwent is being treated and Merthyr Tydfil, and I find a grave disparity. The last two have all the qualifications that Monmouthshire has, except that they are Labour authorities. That is disturbing. I hope that the Secretary of State for Wales will be prepared to look again at his proposal there.
I leave that part of my speech by quoting from a document I have received which states that Merthyr Tydfil is still the fifth largest town in Wales. I hope that that will be borne in mind when, as I trust will happen,

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we are taken seriously in the Committee stage and amendments will be accepted by the Government, if they really seek to express the will of the people of Wales in local government.
It was my privilege, along with the noble Lord, Lord Callaghan of Cardiff, to represent part of the City of Cardiff for nearly 40 years in another place. I live in the City of Cardiff. It is a beautiful city, a worthy capital city for Wales.
I have often thought how ridiculous it was that the South Glamorgan County Council consisted 80 per cent. of the citizens of Cardiff and 20 per cent. of Barry, St. Mellons and a few places around. We had to pay for two lots of bureaucrats. However, at least that is being put right. We will now have one. I am sorry for those who are going to lose their jobs, but I believe that the City of Cardiff, which is one of the most attractive in Europe, and is expanding, is worthy of the status which the Government propose to give it in the Bill. I say of Cardiff, again quoting from a document, that it is larger than 19 of the 36 metropolitan districts and 28 of the 32 London boroughs which have unitary status, so we are fully entitled to that status.
I wish to refer now to Port Talbot. I have the honour to be an honorary freeman of that town, as has the noble and learned Lord, Lord Howe of Aberavon. We were both given that high honour because we were born there; our parents should have had it, but it fell to us. I know how hard the noble and learned Lord has fought for Port Talbot to be a unitary authority. You have got to know these places. That is the trouble. There will be people up here making decisions who do not even know what those places look like. Port Talbot has been giving outstanding service to the people who live there and they want to be a unitary authority.
However, the Secretary of State is doing worse than that: he is linking Neath and Port Talbot. I was going to say that they are like salt and sugar, but I do not wish to offend one side or the other. Those two have a fierce rivalry, and perhaps the Government Front Bench do not realise that the great event of the year in Wales is on Boxing Day, with the match between Aberavon and Port Talbot. With these proposals which are supposed to be interpreting the minds of the people, I am afraid that the Government could not be making a bigger mistake.
Before I resume my seat, perhaps I may refer to two other parts of Wales. I had intended to say a few words in support of Montgomeryshire, but a masterly brief in which every possible point has been made was delivered to us by the noble Lord, Lord Hooson. I wish to say only that when many years ago I represented Wales on the executive of the National Union of Teachers, I knew that the county of Montgomeryshire had a leading place for its high standards in education. Like Ynys MÔn, which had our first comprehensive school in Wales, Montgomeryshire was an authority which put great emphasis upon its educational services. I therefore support the noble Lord, Lord Hooson, in what he said.
I find it difficult to understand how the Secretary of State for Wales can go back on the promise of Mr. David Hunt at the general election meeting in 1992 in Montgomeryshire, which could well have affected the
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election, that there would be a unitary authority. That information has come to me from Montgomeryshire. If it is not correct, I shall owe the present Secretary of State an apology, but that is the information that I have received.
Reference was made to Merionethshire. It is hilly; it is large; it is typically Welsh. Welsh is the first language, and in many parts it is the only language that is used. Merionethshire is part of the huge area of Gwynedd in North Wales. It is so unfair to working people. If they want to reach their councillors it is a problem. I shall not go further, but I hope that the Government will look again at that matter.
In conclusion, the Government decided to introduce this major measure in your Lordships' House, which puts an enormous responsibility upon us. I hope that supporters of Her Majesty's Government in this House will realise that the question of local government ought not to be a party issue. Local government is older than national government. There was a Lord Mayor of London 200 years before there was a Speaker of the House of Commons. Local government touches the life of people at almost every point. It is because I am anxious about the matters that I have raised that I ask the noble and learned Lord the Lord Advocate whether he will convey to his right honourable friend the Secretary of State for Wales gratitude for what is good but a warning of trouble for what is bad in this Bill.
4.32 p.m.
Lord Aberdare: My Lords, I am delighted to follow the noble Viscount. He comes, as he told us, from the Rhondda Valley, and my family background is in the neighbouring Cynon Valley. I believe that the interests of both our valleys are the same; but there are fundamental differences in the way that they should be treated and I hope that the noble Viscount will find that he agrees with what I am about to put forward.
He spoke about the tearing up of local government in Wales. It is perfectly true that an enormous number of various proposals have been put forward over the past 30 years. There were draft proposals in 1961, which were revised in 1963. There followed a White Paper in 1967, with further modifications in 1968. Another White Paper was produced by the Labour Party in 1970; and that was followed by the Conservative consultative document of 1971 which culminated in the Local Government Act of 1972. That Act applied to England and Wales. Perhaps it is indicative of the added care that is taken in dealing with Welsh affairs that on this occasion we have a Bill of our own.
The 1972 Act brings back many memories to me. I was the Government Minister in charge of that Bill in this House. When I was told by the noble Lord, Lord Hooson, that the Bill had been "bulldozed" through Parliament, I wondered whether I had been part of that bulldozing process. I think that I was. Looking back on the debates that we had, there was one very important amendment, which I believe the noble Lord mentioned, to exclude Pembrokeshire from Dyfed. I remember that it received the very warm support of the noble Baroness, Lady White. I said at the time that I was very reluctant to oppose such an amendment, but I had to do so and I

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am afraid that the amendment fell by 55 votes to 46. Now we have come to realise the weaknesses of the two-tier system, and the present Bill is based on a system of unitary authorities, which I fully support.
It is worth remembering that in the case of England the 1972 Act was preceded by a Royal Commission chaired by Lord Redcliffe-Maud. That was a very convincing report, which in the case of England only—that was the only area that it considered—advocated 58 unitary authorities out of a total of 61. The case was very convincing. However, at the time, for political reasons the then Conservative Government did not feel able to preside over the destruction of the county councils, and the two-tier system prevailed, both in England and in Wales.
However, times have changed. The lesson has been learnt that effective local government must be truly local and founded on well-established and easily identified communities. I believe that that is exactly what was meant by the noble Viscount, Lord Tonypandy, and I totally agree. The present two-tier system has led to friction between authorities, duplication of administration and a lack of understanding and identification from the general public. I should like to pick out particularly what I consider to be the key words in the Welsh Office White Paper A Charter for the Future, published this year:
"Its aims are to establish authorities which, so far as possible, are based on that strong sense of community identity that is such an important feature of Welsh life; which are clearly accountable to local people … The proposals … in this White Paper will achieve those aims; they will establish new and innovative local authorities, firmly-rooted in their communities and enjoying strong local support".
I fully support those sentiments, and I support the Bill in principle, but I want to urge the Government to make one important change to their proposals which I believe would lead them nearer to fulfilling the policy which I have just quoted. That change is to their proposal for a new unitary authority to be known as Rhondda Cynon Taff, amalgamating the present boroughs of Rhondda, Cynon Valley and most of Taff-Ely.
It is of very great importance, as has already been said, to realise that for topographical reasons the mining valleys of South Wales form quite separate communities. I hope that my noble and learned friend the Lord Advocate, if he is not familiar with the mining valleys, will talk to some of those in the Welsh Office, or even the Scottish Office, who are familiar with them. They are quite separate entities.
Rhondda and Cynon Valley are separated by a mountain range, precipitous in places, and there is practically no communication between them. Roads, railways, buses and rivers all run north and south along the valley down to Pontypridd, where the two valleys meet, and on to Cardiff. People on shopping expeditions or leisure pursuits outside their own district travel those routes—that is, they travel north and south, not east and west. Therefore, although those two boroughs share a similar history, there is very little feeling of community between them. To amalgamate them, as is proposed in this Bill, will, in my view, lead to friction rather than harmony. It would be to ignore the basic policy of the Bill, to which I have already referred.
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A combined authority would not be based on a strong sense of community identity and would not, therefore, enjoy strong local support. The Rhondda, being the larger in population terms, would presumably have more councillors than Cynon Valley, which would feel itself to be very much the junior partner, although its problems as a former mining area are similar and just as urgent.
However, the pairing of Rhondda and most of Taff-Ely is logical on geographical grounds. There are natural linkages between them, both in economic and in travel terms. Indeed, the affinity of those two districts increases the likelihood of friction with Cynon Valley if they are to be amalgamated into one new unitary authority. That is not simply my opinion; it is based on thorough research carried out by the present council of Cynon Valley to ascertain the views of local people in the borough. Its case to become a separate unity authority reflects the wishes of the overwhelming majority of the inhabitants. A whole host of letters support its case. Furthermore, the borough council commissioned a report from the School for Advanced Urban Studies at the University of Bristol. In accepting the commission the school emphasised that the aim of the study could not simply be to provide ammunition to the council for it to fight a predetermined position. The school set out to provide an independent assessment of the strengths and weaknesses of the council's case. I shall quote just two of its nine main conclusions. The first stated:
"Analysis of the functional working of the valleys reinforces the view that the main linkages are north/south rather than east/west, and that solutions which seek to combine separate valleys have little basis in economic geography, local community and culture, or the reality of local politics".
The second stated:
"Unitary options based upon the amalgamation of two or three Valley Authorities fail on the grounds that they lack local responsiveness and do not generate any scale of specialisation advantages in service planning and provision. Such Authorities would be characterised by divided rather than locally united civic leadership".
Only last year—1992—the Secretary of State for Wales agreed with the Cynon Valley argument that it should be a separate unitary authority. Perhaps I may remind the House of the sequence of events over the three years—1991, 1992 and 1993. The present proposals stem from the Welsh Office's consultation paper of June 1991 entitled The Structure of Local Government in Wales. There followed an intensive consultation period with the Welsh Local Authority Associations and others. As a result of that intensive consultation, the Secretary of State announced his proposals in another place on 3rd March 1992.
On that occasion he proposed that there should be separate unitary authorities for Rhondda and Cynon Valley, and that decision was, as may be imagined, enthusiastically welcomed by Cynon Valley borough council. But imagine the disappointment when, in the next Welsh Office paper of March 1993—A Charter for the Future—the Secretary of State went back on his decision and suggested an amalgamated authority covering the Rhondda, Cynon Valley and most of Taff-Ely. Why? We have never been given any reason for that change of mind on the part of the Secretary of

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State. I should be interested if my noble and learned friend, when winding up, can explain the reason for that complete reversal of policy after one year.
At first sight it looks as though the Welsh Office had been trying to reduce the number of unitary authorities in Wales and, seeing two convenient neighbouring valleys with similar past histories, decided to wrap them up in one authority. It looks good on paper. But as I have sought to explain, it does not take account of the realities of local life in the valleys. Nor can it be argued that there is any optimum population figure desirable for the new authorities. As proposed in the Bill, they vary from 52,000 to 285,000. In that range the proposed authority—Rhondda, Cynon and Taff —would be 238,000, right up the top. That compares with Cardiff and Swansea although it is different in nature and particularly in financial resources. Without Cynon Valley it would reduce to approximately 173,000 and come about the middle of the range of populations. Cynon Valley on its own, with something like 65,000 inhabitants, would still be comparable with other authorities proposed in the Bill such as Anglesey, Cardiganshire and Monmouthshire. If the noble Lord, Lord Hooson, had his way, there would be one or two other authorities as well.
In any case, there is no relationship between size and efficiency. There are efficient small authorities and inefficient small authorities; there are efficient large authorities and inefficient large authorities. But one advantage that the smaller authority has is being more likely to relate to local needs and to enjoy the confidence of local people.
The borough of Cynon Valley has shown itself to be well able to tackle the problems that face a local authority in the former mining valleys of South Wales. They entered into a joint venture with the Welsh Development Agency to stimulate economic regeneration and to attract new investment, with great success. Only a few days ago it was announced that the Royal Opera House, Covent Garden, had decided to build its new £4 million scenery store in Aberaman. It negotiated grants of considerable size through the Welsh Office urban programme and from the EEC. It has removed virtually all the scars left by the coal mining industry and made considerable progress with the implementation of other environmental and infrastructure improvements to regenerate the valley. That successful strategy is, I suggest, in danger of being adversely affected by the proposed merger.
My case is based on one of the fundamental principles contained in the consultation paper of June 1991, which states:
"Local Authority boundaries should as far as possible reflect and strengthen existing community loyalties".
Those loyalties do not exist between Rhondda and Cynon Valley, nor between Taff-Ely and Cynon Valley. To combine those boroughs into one authority will lead to disagreement and dissension in the newly-formed unitary authority. It will perpetuate the lack of close community ties which characterises the present system and which the Bill seeks to reform. I beg the Secretary
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of State to look again at this specific provision in the Bill and revert to the decision made by his predecessor and announced in another place on 3rd March 1992.
4.48 p.m.
Lord Cledwyn of Penrhos: My Lords, I am grateful to the noble and learned Lord the Lord Advocate for his opening speech in which he sought to explain the Bill to us. However, he must understand that the Bill, which is of obvious importance to the future development of local government in Wales, was received with dismay and disappointment by a wide section of public opinion throughout the Principality. I am not unduly surprised, simply because the record of successive Conservative governments in the field of local government has not been a good one.
The thrust of government policy for 15 years has been to increase the power of Ministers and officials at the expense of elected local authorities and to create a large number of powerful non-elected bodies—the so-called quangos—whose tentacles reach into every home in the land. It is in many ways a sinister development, and I should like to give some examples.
Since assuming office in 1979 the party opposite has introduced more than 144 local government Acts. There have been more than 4,000 pages of local government legislation and at least 12 major changes in local government financing. A substantial part of local government revenue has passed from the councils into the hands of central government officials. That applies not only in Wales but in England and Scotland as well.
I say this to the noble and learned Lord and his colleagues on the Front Bench opposite. The Government have succeeded in undermining the confidence of men and women of all political parties, who have served their communities faithfully as members of local authorities. The Government's policies have a particular significance in Wales, not least because membership of the quangos bears no relationship to the political map of Wales. The Government's slogan is, "If we can't get them elected, we will appoint them—and we will pay them handsomely as well". That is nothing less than a national disgrace. This Bill points in that same direction and it is no wonder therefore that the opposition to it is widespread. Let me tell the noble and learned Lord the Lord Advocate that the critics include the CBI, the Association of European Regions, which said that the Bill is,
"a serious threat to the democratic process at the local and regional level".
the Welsh TUC, and, in particular, NALGO who said that the Bill is,
"bad for the people of Wales".
A number of professional bodies have also expressed deep concern. We, in this House, and those in another place have received well argued representations from a range of organisations—more than I can recall about any Bill in recent years.
The fact is that the Government—the Welsh Office in this case—made a major mistake at the very outset when they decided not to appoint a commission as was done in England. The Secretary of State and his advisers

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would decide what should be done in Wales. They thought they knew best what Montgomery, Pembroke, Merioneth, Glamorgan and the other regions wanted without bothering to have proper consultations. I was surprised when the noble and learned Lord referred to consultation. He thought that it was satisfactory. Obviously he has been misinformed. There was no comprehensive consultation.
I have been impressed and moved by the representations made by experienced councillors from various parts of Wales whom I have met in recent days. Other noble Lords will, I know, support me. The noble Lord, Lord Hooson, has powerfully argued the case for Montgomery. The present Powys has not been a success and my noble friend gave adequate reasons for that. There was no understanding of the views of the people or of the problems which exist over so large a territory as Powys. It is also unacceptable, as a number of noble Lords have pointed out, that while one Secretary of State in 1992 gave a pledge that Montgomery should remain a unitary authority his successor reversed the pledge and the policy. That is not acceptable to this House or to Wales.
The representatives of neighbouring Brecon and Radnor support that view. Had there been proper consultation, discord and confusion would not have arisen, as my noble friend Lord Tonypandy pointed out in his moving speech. The same problem has arisen in Merthyr Tydfil, in the Rhymney Valley and in Blaenau Gwent. Here again, the case for revision is overwhelming, as it is in the case of Merioneth, Neath, the Cynon Valley and other parts of Wales. I strongly advise the noble and learned Lord to take account of the arguments advanced in the debate. Failure to do so will result in a running sore in Wales for many years to come.
Wales is also concerned with the nature of appointments to the Secretaryship of State for Wales. I think I can say without fear of contradiction that Scotland would not have tolerated three non-Scottish Secretaries of State in succession. We in Wales have had three non-Welsh Secretaries of State. I respect their abilities but they were appointed to the office for the wrong reasons—for political reasons. They are quasi-colonial appointments, and in Wales we deeply resent that.
As my friend Lord Prys-Davies said in his powerful speech, we on this side take the view that the starting point for the reform of government in Wales must be the establishment of a Welsh assembly. I have held that view for very many years, as my colleagues in the House know. At the last general election more than 70 per cent. of Welsh voters supported a democratically elected Welsh tier of government. Both the Assembly of Welsh Counties and the Council of Welsh Districts support that aim, but the Government refuse even to discuss the proposal. Wales has not even had the dubious benefit of a "taking stock" exercise with which the Prime Minister has tried to placate the supporters of devolution in Scotland. The noble and learned Lord will know that well.
If anyone refers to the 1979 referendum, let me say that things and opinions have changed since then. The
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Welsh Office has grown in terms of budget and responsibility. As one noble Lord said, it now has a staff of 2,400 and a budget of £6.2 billion. I referred to quangos. The number in Wales which come under, the patronage of the Secretary of State has doubled in 14 years. In 1991 there were 80 Welsh quangos with a budget of £1.8 billion and a staff of 57,000. I ask noble Lords to note that it is estimated that this year the. quango budget will make up a third of Welsh spending, broadly comparable to the Welsh local authority budget. This is not the Wales I knew or the Wales I want to see. It is the argument for a democratic assembly. An elected assembly is urgently needed to subject the functions and actions of the Welsh Office to proper public scrutiny and to bring the multitude of quangos under democratic control.
The recent activities of two large quangos in Wales have highlighted a lack of accountability and of openness at the highest level of Welsh public life. That is intolerable and Wales deserves better. Let us face the facts. Britain is the only member of the European Union which does not have any intermediate tier of elected regional government. If the Government are going to abolish the two-tier system with this Bill, then we must have an assembly which would enable the unitary authorities to operate effectively. If the Bill goes through as it is, I foresee huge problems developing in Wales.
I think it is generally accepted that not all unitary authorities would have the resources to provide the whole range of education support and advisory services such as special needs teachers, music teachers and so on. What do the Government say to that? "Oh", they say, "they will have to buy these services from the private sector or obtain them from a neighbouring authority." I have believed over a long period that these services should be provided from regional centres under the guidance and scrutiny of an elected Welsh assembly. Our size and population as a country makes that the only sensible and practical solution to what is a real problem.
The question we have to ask is whether the proposals in the Bill provide the necessary framework to take local government in Wales into the 21st century. Having studied the Bill as well as I could, with all its complexity, the clear answer is that they do not. I repeat that over nearly 15 years the Government have launched a concerted and sustained attack on the powers and financing of local government. They have deliberately restricted, by a series of Acts, the ability of councils to build sorely-needed houses, to take part in local economic development and to plan educational provision. The great fear is that this Bill further restricts the role of local government. The White Paper included the significant words:
"The task of local authorities lies in identifying the requirements, setting priorities, determining standards of service and finding the best way of ensuring these standards are met".
I am bound to say that that is a narrow vision of local democracy.
The product of the philosophy which permeates this Bill, as my noble friend Lord Prys-Davies said, will be the emergence of many authorities which are too weak to sustain services such as education, the social services

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and highways. It seems inevitable that some areas will suffer from a poor provision of vital services and also from a lack of accountability to the public. The question that must be asked and that must be answered adequately by Ministers is: will the new authorities set up by this Bill be strong enough to carry out their functions without outside assistance?
I must tell the noble and learned Lord who is to reply, that I read Part III of the Bill with foreboding. Clauses 28 to 30 give the Secretary of State for Wales the power to determine the pattern of local authority arrangements and effective structures without any reference whatever to Parliament. The provisions in the Bill are a very real threat to democracy in Wales. They represent a huge growth in central government executive power through the use of statutory instruments and circulars and the power to appoint members to the boards of quangos. The Secretary of State will be able to rule Wales like a governor-general supported by extensive and unchecked powers of patronage. What a prospect for Wales! The influence of central government over locally-elected councils will be further increased. That is offensive and insulting to the people of Wales, given that the party in government has very little support at local level.
I ask the House to consider the ruthless thrust of the Bill side by side with the fact that at the last local government elections in May of this year, just 31 of the 506 county councillors elected were Conservatives compared with 270 Labour councillors. That is the reality of the political situation in Wales, is it not? I can think of some presidents in South America and elsewhere who would regard this as a very attractive strategy.
For many years I argued and fought with my colleagues for a Welsh Secretary of State and for a Welsh Office. I wanted devolution to a more democratic system because that is what the people of Wales have wanted for centuries. We have made more progress since the last war than at any time, I believe, since the Act of Union. This reactionary Bill is a step backwards. Let us change it while we have the opportunity.
5.5 p.m.
Lord Kenyon: My Lords, when I first entered your Lordships' House a few months ago and sat on the Cross Benches waiting to take the Oath, I was reminded of my first day at school when I was left alone in a totally new world where everyone knew everything except for me, and I knew nothing. Today I am reminded of the colours test, when I have to show that at least I have learnt a little. But I hope that your Lordships will bear with me when you discover how much I have still to learn.
I understand that I have to declare an interest in the subject of this Bill as I am an elected councillor of Wrexham Maelor Borough Council in North Wales. If I were in the council chamber today I should now be obliged by law to sit down, say nothing and even leave the chamber if my colleagues did not ask me to stay. But the enlightened procedures of your Lordships' House allow me to continue speaking on this important matter which is going to provide for a much simplified structure of local government in the Principality.
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Many noble Lords will have had first-hand experience of the two-tier structure of local government established under the Local Government Act 1972. Those of us who are still serving councillors have encountered difficulties with the structure, and we believe that it does little to enhance popular understanding of local democracy. In fact, it often appears to be a way of lowering public accountability. Furthermore, the separation of housing from social services, to name but one example, has prevented the better co-ordination of a range of interrelated local authority services and resulted in greater costs to the community.
Despite what has been said this afternoon, I do not believe that it is an exaggeration to claim that at the grass roots the political parties in Wales largely support the establishment of unitary authorities, although I recognise that for some this is within the context of an elected Welsh assembly or parliament. That of course I do not support. To me, that is just introducing yet another layer of democracy, which we were trying to remove.
So while the principle of creating unitary authorities seems to have received widespread support, its application will no doubt occasion often heated debate. In opening the fourth day's debate on the loyal Address on 24th November, my noble and learned friend Lord Fraser of Carmyllie said,
"A structure of local government that cannot command the loyalties of local people cannot be as effective as it must be if it is to meet the challenges of the coming century".—[Official Report, 24/11/93; col. 265.]
That hits on the dilemma which is going to have to be resolved in any new pattern of unitary authorities; namely, to what extent do we look to secure economies of scale by creating large unitary authorities, while at the same time continuing to make local government more meaningful and accountable by bringing it closer to the people whom it is there to serve.
Ten of the proposed 21 new unitary authorities cover large areas, most of which embrace many localities and communities. Indeed, one unitary authority, Mid Wales, will become one of the largest in the country, covering nearly 2,000 square miles. I recognise that the Government are seeking to address this problem by proposing de-centralisation schemes or area committees. But it is unfortunate that we have not yet seen the draft guidance from the Secretary of State in respect of the preparation and content of these de-centralisation schemes.
I have some anxiety that the creation of such statutory area committees may re-create some of the inefficiency, confusion and inflexibility of the current two-tier system that this Bill proposes to do away with. It seems to me that if the Bill were to include two more Mid Wales unitary authorities, Clauses 26 and 27 could in effect be deleted.
I strongly support the Government's objective of keeping complex joint arrangements to an absolute minimum. The best way of avoiding too many of these joint arrangements, without jeopardising the standard of provision of public service by the unitary authority, would be to allow, and indeed encourage, the new authorities to trade freely in their specialist expertise

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and resources. As a Conservative councillor, I fully endorse the concept and growth of the enabling council and welcome the provision in Clause 24 for unitary authorities to enter into agreements with each other for the provision of services. I hope that the Secretary of State will seek to encourage such innovation in the interests of avoiding joint arrangements wherever possible.
Turning briefly to the proposed timetable for the reforms, which has already been the subject of considerable discussion in your Lordships' House, although I understand that the Government are now suggesting that the elections to the new shadow authorities should take place on 6th April 1995, I urge the Minister to consider bringing that date forward if at all possible, because there will be a tremendous workload in preparing the new councillors for their new responsibilities in April 1996 and we need all the time that we can get if we are to be fully prepared. In particular, I foresee considerable difficulties for schools in preparing their LMS budgets in time for the start of the new unitary authorities if those authorities have not had the maximum amount of time to prepare their own budgets.
The proposals in the Bill are to be warmly welcomed. I look forward to participating in our deliberations on this important measure when we resume in Committee next year.
5.10 p.m.
Lord Moran: My Lords, to me falls the very pleasant duty of congratulating the noble Lord, Lord Kenyon, on behalf of the House on his most interesting maiden speech. He comes from a notable family in North Wales. Many of us had the privilege of knowing his father, who was involved in North Wales in education, museums, health, libraries, agriculture, ancient monuments and of course with Welsh ponies and cobs. I hope that the noble Lord will have as broad a range of interests. I am delighted that he is a local councillor in Wrexham and can therefore speak in this debate with more authority than most of us and that he is to be one of the three representatives on the European Committee of the Regions. This debate will perhaps give him some useful briefing for that role. I hope that he will speak often in this House, and am delighted that he will be taking part in the later stages of this Bill.
I see that the noble Lord, Lord Norrie, is to speak later in the debate. I believe that he has up his sleeve some proposals which will affect the national parks in Wales, and I hope that he will disclose them when he speaks. I believe that they may set up independent authorities to run all the national parks in England and Wales. I would warmly welcome that because, together with the clauses on the national parks in this Bill, it would constitute what I would call a belt-and-braces strategy to assure the future of the Welsh national parks. I do not believe that there is likely to be any conflict between the two and I hope that that will go through smoothly.
I should also mention that like, I am sure, other noble Lords, I have received some briefing from the Society of County Trading Standards Officers, which is extremely
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concerned about the provisions in the Bill. It believes that the fragmentation of its members' work among 21 authorities will leave the departments too small to function effectively, and in particular will result in a loss of essential expertise. Its client groups, which include many important businesses, believe that such fragmentation would substantially increase the burdens on business, reduce the service's effectiveness and substantially increase costs. I know that in its White Paper the Welsh Office said that it was important that the professional competence and specialist expertise of the trading standards departments should be safeguarded. I am glad that the Welsh Office said that, but I hope that it will consider carefully the anxieties of the trading standards officers, and that between now and later stages of the Bill it will consider whether it can go some way to meeting them. I should be glad to hear from the Minister whether he thinks that that might be possible.
I do not intend to talk about the broad aspects of the Bill as it will affect Wales as a whole, but should like to say something about Mid Wales, which is where I live. I listened with great care to the powerful case for three separate authorities in Mid Wales which was put forward by the noble Lord, Lord Hooson, in the debate on the Address on 24th November and again today. He was critical of Powys County Council. I cannot speak about Montgomeryshire because I live in the south of Radnorshire, but I have not detected any feeling of outrage in my part of Wales about Powys County Council. In my part of Wales, people think highly of the services that they receive from both Powys County Council and Radnorshire District Council. That gives us a difficult problem, because we know that one of them has to go. I think that most people take the view that it is sensible and would be cheaper, more effective and better if we were to have single-tier authorities.
I have dealt mainly with the officers rather than the councillors in Powys in matters relating to roads, lighting, drains and the problem that has been created by the impact on the area of the travellers who come to stay with us, and I have found them to be extremely helpful. People in my part of Wales have pointed out to me that in the old days when we were simply Radnorshire, children in my part of Radnorshire could not go to school in Builth, although it was the nearest town of any size, because that was in Breconshire, which was separate. However, they can now do so and can choose between going to Builth or Llandrindod, arid they welcome that. Altogether I do not think that the position in the southern part of Powys is as black as the noble Lord, Lord Hooson, suggested.
When I first saw the proposals and that the counties of Pembrokeshire, Caernarvonshire and Monmouthshire were to be restored, my natural and first reaction was to hope that Radnorshire would also be restored. When I first came to Wales over 30 years ago, the county was Radnorshire and I always think of myself as living in Radnorshire. My first and immediate reaction was that I should like there to be a single authority for Radnorshire—as there used to be. However, I accept that there is a serious argument that we have too small a population to sustain a single council. We are a very sparsely populated county.

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Indeed, one of our prides used to be that, despite our fairly large geographical area, there was not a single traffic light in Radnorshire. I am not sure whether that is still the case, but it shows how small and essentially rural the county is.
There is also the argument that very small councils have problems recruiting staff. Obviously, it is difficult to attract high calibre staff to a very small council. Some may come because they like the countryside and living there, but the able and ambitious will, in the natural course of events, want to apply to larger authorities. Therefore, it may be difficult to retain high quality staff.
There is also the key question of planning. When we used to have two-tier authorities, I was very much of the view that the planning functions should remain essentially with the county councils because they had the professional staff who could deal with such matters efficiently. Such functions now lie with the district councils. Areas such as Radnorshire are increasingly subject to tremendous pressure from developers—both British and foreign. Some of the developments may be good and some less good, but it is essential that they are looked at carefully. I wonder whether a small authority such as Radnorshire can stand up to those pressures.
There was a case the other day near Rhayader where there was an application for a wind farm at Bryn Titli. The advice from the planning officer was that the application should be rejected, mainly on environmental grounds. The council also had advice from the Countryside Council for Wales that it should reject the application. Initially it did, but then after intense pressure, organised by the developers, it changed its mind and agreed. That is the type of thing that can happen easily. It can happen more easily with a small authority than with a larger, more powerful one.
In Clause 19, the Government have proposed that there should be joint planning boards. I am not sure how that would apply to Mid Wales. Perhaps the Minister will explain that point. I am concerned that a planning authority in our part of the world should have enough power to deal effectively with planning applications. As I understand it, the proposal is that if Powys is retained, or retained as Mid Wales, it would apply to the Secretary of State under the decentralisation arrangements provided in the Bill to set up shire counties—as they will be called—for the three constituent parts; that is, the old counties of Montgomeryshire, Radnorshire, and Breconshire. More detailed local planning matters, such as an extension to one's house, erecting a new greenhouse, or something of that sort, would be devolved to the shire counties, but major strategic questions—those which have a far greater impact on the area than any others—would be retained by the main council. That seems to me to be essentially right.
Although my heart is with Radnorshire, I feel, on the whole, that what the Government propose for Mid Wales is right, and I support it.
5.23 p.m.
Lord Gibson-Watt: My Lords, I too, should like to congratulate the noble Lord, Lord Kenyon, on his maiden speech. I have known his family, his father in particular, for many years, and I, too, wish him well not just in this House but in his local government activities.
The noble Lords, Lord Prys-Davies and Lord Cledwyn, referred to a possible elected assembly in Wales. Whatever our views about that issue, it is not in the Bill. I remind them that, as recently as 1979 the Welsh people, on a referendum, refused by over three-and-a-half votes to one to have an assembly. That is not long ago. The noble Lord, Lord Cledwyn, may say that conditions have altered. Indeed, things change, but the fact remains that we must think carefully before we introduce another tier of government into Wales.
The pattern of local government in Wales has been a matter for argument over a number of years. Because of the spread, and in some places the scarcity, of its population, reform has always been approached with diffidence by successive governments. I remember well the Labour Government, when the noble Viscount, Lord Tonypandy, was Secretary of State and the noble Baroness, Lady White, was Minister of State. They toyed with the idea for a long time. They brought forward White Papers. We tried to bully them as much as we could in the Welsh Grand Committee to come forward with propositions and legislation, but the noble Viscount was far too skilful to be taken in by that, and it was left to us in the Government of 1970 to 1974 to tackle the question of local government.
I remember it well. I was the unfortunate Minister of State who had to take the Bill through committee. The noble Viscount enjoyed himself greatly at my expense. I look back at it with some enjoyment. I shall not pretend that we got everything right in 1972—we did not—and it is possible that this time the Government do not have it all right, but we live in an imperfect world. The four major areas of dispute in the 1970s were Dyfed, Gwynedd, Powys and Glamorgan. In Dyfed, Pembrokeshire was quick to point out that because of an influx of tourists its summer population was twice the size of its winter one. I am glad that the Bill corrects our mistake and lets Pembrokeshire return to its pre-1972 autonomy.
In Gwynedd, Anglesey pointed out that it was an island—indeed it is—so Ynys MÔn regains its position as a unitary authority. From the amount of paper that has come through the post, it is clear that Powys is still an area of varying views. On the smaller issues, I am glad to see that Ystradgynlais is to remain in Powys. I call it Powys because I believe that it should continue to be called Powys and not Mid Wales. The Government should think again on that point. It is right that Ystradgynlais remain in Powys. I well remember talking to its councillors in the 1970s about what they wanted. They wanted that; they still want it; and the Government are right to give it to them. The same applies to the decision taken over Gilwern and Llanelly Hill. Again, I readily accept that we were wrong in 1972.

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The major issue for Powys is whether Montgomery should be in it or out on its own. There has been a major campaign, led by the noble Lord, Lord Hooson, and his friends, and others in Montgomery, for Montgomery to go it alone. Montgomery people are naturally proud people, but so are the Brecon people and the Radnorians, of which I am one, as is the noble Lord, Lord Moran. We are not as well off as the other two parts of Powys. Radnor is a small county, with a population of only 23,500. I remember the old doggerel about Radnor:
"Radnorshire, poor Radnorshire, never a park and never a deer and never a man worth £500 a year except Richard Fowler of Abbeycymhir".
We must remember that it is at Abbeycymhir that Prince Llewellyn is buried, but that is by the way.
I support the noble Lord, Lord Moran, when he says the present county council has worked well over the past 20 years. The services are good, and the headquarters at Llandrindod Wells (which cost several million pounds) is about equidistant from south Brecon and north Montgomery, although I admit, as the noble Lord, Lord Hooson, said, that both are a long way from the headquarters.
When the then Secretary of State for Wales, Mr. Hunt, made his first announcement, I warned him that anyone who attempts local government reorganisation is on a hiding to nothing. One cannot please everyone. Indeed, the Bill does not please everyone. But on reading the Bill now I believe that the present Secretary of State has got it about right, with 21 unitary authorities with their area committees. There have been a great many consultations throughout the Principality during recent months and years.
It is never possible to satisfy everyone, and no doubt we shall have some interesting and controversial debates on the Bill. I congratulate the Secretary of State on producing what I believe to be a workable Bill. I entreat this and future governments to leave the new set-up for at least 50 years. Changing local government patterns is a pretty expensive exercise.
5.30 p.m.
Lord Elton: My Lords, I too congratulate the noble Lord, Lord Kenyon, whose speech was lucid and admirable in every respect. He respected the tradition that one does not make controversial statements in a maiden speech, except in one respect. I believe that he inadvertently said that our object was to reduce democracy to a minimum. I suspect that he meant bureaucracy and your Lordships should take his remark in that sense.
I wish to address only a narrow area of the Bill. I declare an interest as a vice president of the Institute of Trading Standards Administrators. Its interests have been referred to on three occasions tonight but, as it were, en passant. I wish to make them the focus of my questions to the Minister.
Your Lordships may be aware of the scope and extent of the work of trading standards officers. They enforce 70 Acts of Parliament and more than 1,000 subordinate instruments. They also enforce 2,000 British standards
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and about 200 patent approvals, which are detailed engineering specifications for weighing arid measuring equipment.
The control of responsibilities of that size requires a range of disciplines and expertise which cannot be gathered together in a body consisting of only a few people. Therefore, the question of size, which was addressed by my noble friend Lord Gibson-Watt and referred to throughout the debate, is of crucial interest to them. Not only do trading standards officers operate under all those statutory and subordinate instruments, they have to give advice on a wide range of subjects, which is of crucial importance to those who receive it. For instance, a finance house may be about to embark on a campaign to promote hire-purchase under which many millions of pounds will change hands. If it consults the trading standards officers on that issue and their answer is wrong the consequences will be considerable for both the consumers and the providers.
Trading standards officers stand between consumers and providers and must be impartial. It is interesting that both the CBI and the National Consumer Council have expressed anxiety about what they term the fragmentation of the trading standards service. It is not surprising, therefore, that the 1980 report of the Institute of Government Studies suggested that from its point of view the minimum size of an administrative unit should be—I hesitate because I cannot read my figures and I do not have the originals: I do not know whether the figure is 750,000 or 150,000 and the difference is enormous. However, Schedule 1 to the Bill provides that the smallest unit will be 52,000, which lets me out of the difficulty of specifying. The fact is that an individual authority will be unable to provide the service and the question arises of how it is to be presented.
Will the service be provided under schemes of voluntary co-operation, which my noble and learned friend mentioned may arise under Clause 26 or, failing that, Clause 29? If the arrangements are to be voluntary, I hope that the Government will look at the history of the many voluntary joint agreements which were entered into after the abolition of the metropolitan county authorities. I invite them to consider how many proved to be successful and, apart from West Yorkshire, how many actually survived.
If the service is to be voluntary, it will be necessary in Committee to ask how the chain of enforcement will work. Like police authorities, these authorities are required to enforce the law. For that purpose their officers have powers of entry, of examination and even of seizure. If the body by which they are governed is not a statutory body, to whom will they be responsible for the discharge of those functions? If it is a statutory body, will my noble friend point to that provision in the Bill?
I ask those questions now rather than in Committee in order to save time. It may well be that there are simple answers which can be elicited by asking simple questions rather than by tabling a series of amendments. I have one further question to ask my noble and learned friend and I apologise for not having given him notice. There is a similar Bill in respect of Scotland and I wish to know where it stands in the machinery. Is it to

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proceed in the opposite direction from this Bill; that is, from the House of Commons to the House of Lords? If so, how can we ensure that our efforts to improve the one sit properly with the other? I see my noble and learned friend nodding in answer to my first question, so I shall not ask a reciprocal question because I know that the answer will be no. This is as long a debate as we want and I have no reason to continue it further. I look forward to hearing the answers to my questions.
5.36 p.m.
Lord Brooks of Tremorfa: My Lords, it may not have escaped your Lordships' notice that the only in-depth reference to the capital city of Wales, Cardiff, came from the noble Viscount, Lord Tonypandy. That does not surprise me in the least because capital cities throughout the world are rarely well thought of by the rest of the population. I do not believe that the affairs of London greatly concern the people north of Watford. I know that London is not too well regarded in Wales. Indeed, I have heard Americans make scathing comments about their capital city of Washington. However, as one who was born and bred in Cardiff and has a deep love of the city, as does the noble Viscount, Lord Tonypandy, I shall make more in-depth comments about its future as I see it.
We are embarking on yet another re-organisation of local government in Wales. Clearly, the pattern of local government imposed on us by the Local Government Act 1972 has proved to have failed. I fear that the present Bill does not provide an acceptable local government system and that in the not-too-distant future we must try yet again to get it right.
There is general agreement in Wales that we need a unitary system of local government. However, I am afraid that this Bill does not give us such a system. It provides for extensive joint arrangements with dominant lead authorities, unclear staff loyalties and blurred member responsibilities. Furthermore, the Secretary of State is asking for powers to enforce voluntary joint arrangements. So much for unitary authorities. The Bill makes no mention of an elected regional authority for Wales—but I never expected that it would. Every political party in Wales supports such a concept except the Conservative Party. If Wales had had a local government commission, as England has, we should have seen a dramatically different set of proposals. I am absolutely certain of that.
However, we are faced with this Bill and we must do our best to improve it where we can. Quite frankly, the proposals for Mid Wales are a mess and I have nothing at all to add to what the noble Lord, Lord Hooson, said in his powerful speech except to say that I agree with every word of that speech.
Whatever possessed the Government to consider merging Merthyr with Blaenau Gwent? They have nothing in common whatever. I have many friends in Merthyr and I have not found one single person who supports that proposal. I know that the Member of Parliament for Merthyr, Mr. Ted Rowlands, has had a
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similar experience. He knows his area better than anyone and he cannot find anyone who supports that proposal.
Just before the last reorganisation 22 years ago, I was elected a member of the Cardiff City Council, which at that time was a model unitary authority. It was responsible for the whole range of local government services—housing, education, social services, and public transport among its many other responsibilities. The 1972 Act made Cardiff a mere district council. That was a disgrace. Most of its important services were hived off to South Glamorgan County Council, which was a new authority. It was said at the time, and the feeling still exists, that South Glamorgan was created in order that the Conservative Party could control at least one important council in South Wales. If that was the intention, that plan went badly wrong.
I was elected to the new South Glamorgan County Council in its shadow year, 1973, and I became its first leader. I was a member of that authority until May of this year and I was its leader for 10 years. There have been six elections during the life of South Glamorgan and the Conservative Party have taken control just once. At other times, the Labour Party has won control and has increased its majority at every county council election. Against all expectations, South Glamorgan has become one of the most successful authorities in the United Kingdom, as I am sure successive Secretaries of State would testify. In terms of economic development, it has had great success. It has secured major inward investment including the Ford engine plant, the British Airways Airframe Maintenance Centre, Bosch, and prestigious firms in financial and related services which have brought thousands of new jobs.
The most imaginative move of the county council was to open up for development a large area of derelict docklands in partnership with the private sector. Following that decision, the Secretary of State, now the noble Lord, Lord Crickhowell, set up the Cardiff Bay Development Corporation. He very wisely did not follow the English formula and the development corporation took no powers from the local authorities. All its planning proposals must be approved by the district councils. The county council has retained its control as a highway authority and elected members of the three authorities—the Vale of Glamorgan, South Glamorgan County Council and Cardiff City Council—nominate members to the board of the development corporation.
The Government can have no complaints about the way in which we have worked together in partnership with the local authorities, and as the deputy chairman of the development corporation I can testify to the good work done by local authority members of the development corporation.
The corporation does not take a collective view on this Bill, but I am aware that individual board members of all political opinions have written or expressed the opinion to Secretaries of State that the boundaries of Cardiff should extend into the Vale of Glamorgan to create a greater Cardiff authority.

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The mission statement of the Secretary of State in setting up the Cardiff Bay Development Corporation said:
"The objective of the Cardiff Bay Development Council is to put Cardiff on the map as a superlative maritime city which will stand comparison with any such city in the world, thereby enhancing the image and economic well-being of Cardiff and Wales as a whole".
That objective cannot be achieved if our capital city is to remain within its present boundaries.
Your Lordships will have gathered that I am proud of the achievements of the South Glamorgan County Council and its role as a strategic authority. Despite my aversion to quangos, I am not at all ashamed of the work that I am doing as deputy chairman of the Cardiff Bay Development Corporation. It is because of my experiences both in local government and as a member of the development corporation that I beg the Government to think again about the future of our capital city.
I do not propose anything which has not been suggested before. Indeed, I was pleasantly surprised only a few days ago to be handed a photocopy of the Western Mail of, I believe, June 1919, just after the First World War. The city fathers of the time proposed a Bill to extend the boundaries of the city into the Vale of Glamorgan. It seems uncanny to me that that proposal, put some 70 years ago and for whatever reason never achieved, should now be a proposal that I support. I am happy to let the noble and learned Lord the Lord Advocate have a copy of that because I believe that he will find that to be extremely interesting. On 3rd November the South Wales Echo headlined the local government proposals by saying:
"Our big chance to make Cardiff world class".
It too believes that Cardiff should be extended.
Many tens of thousands of people come regularly to Cardiff to watch international soccer and rugby. Many thousands travel long distances to see those events. Indeed, only recently we had people from thousands of miles away—from the United States of America—to see the two British boxers fighting for the world heavyweight championship. That is the first time this century that that has happened in the United Kingdom and it was Cardiff that was chosen as the venue for it.
Many thousands of people travel long distances to shop in Cardiff. It has a shopping precinct which is regularly in the top three or four in the United Kingdom and can compare with anything that the rest of the United Kingdom has to offer. Many thousands of people come to listen to the wonderful music of the Welsh National Opera, which plays regularly in Cardiff. Many thousands of people come to Cardiff to listen to the BBC Welsh Symphony Orchestra. Many tens of thousands of young people come regularly to the Arms Park to listen to pop music. Cardiff has everything to offer as a capital city except space. I beg the Secretary of State and the noble and learned Lord seriously to consider whether the objectives that the Welsh Office and successive Secretaries of State have charged the development corporation with can possibly be achieved if Cardiff is constrained within its present boundaries.
I said earlier that I am quite happy to let the noble and learned Lord have a copy of the Western Mail, which I
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have with me. However, I should like to give him one final piece of advice. Marty speakers today have said that in many respects the Bill is seriously flawed. But I believe that the noble and learned Lord will also have recognised the fact that the passion has really been about where the boundaries should be drawn. Therefore, if he and the Secretary of State want an easy life we are quite happy to offer it to them provided that, they accept our suggestions.
5.50 p.m.
Lord Dixon-Smith: My Lords, once again I rise to speak in this Chamber with some fear. However, on this occasion I rise as a mere Englishman to intervene in what has been a particularly Welsh debate. That is perhaps a very good reason for a discreet man to sit down again with some speed. However, having put my hand to the hoe, I intend to continue.
I begin by inviting your Lordships to consider two generalisations which I am afraid I accept—dangerous though that may be. The first is that there is no ideal and Utopian structure for local government. If you look around the world you find a multitude of organisations, a multitude of sizes of authority, and a multitude of different managerial structures, which all work. Therefore, we do not have a straightforward answer.
My second generalisation is that there are no proposals that might be brought before this House—or, I suspect, any other House—that would not be immediately highly controversial, even when suggested by a Welsh Secretary of State. I can say that with absolute certainty because any proposals for change would immediately affect all existing authorities which would suddenly become protagonists of a case for continuing as they are or for being adjusted in a different way.
With that background, we have a little difficulty. However, if the Bill does represent—as I hope it does—the end of a long and weary road, then we should not only welcome it but also support it. If, in the process, we see some old names coming back on to the local government map, then, again, we should welcome it.
I invite the House to consider a somewhat different aspect of the Bill. The preamble under the heading "Financial effects of the Bill" in the Explanatory and Financial Memorandum says:
"The measures in this Bill will result in transitional costs estimated on the basis of a report prepared by consultants to be between £65 million and £150 million over 15 years. These will be offset from April 1996 by continuing savings in public expenditure. The precise level of these will depend on decisions to be taken by the new councils on such matters as staffing levels and management structures".
The Bill clearly puts great responsibility where it should properly lie; that is, in the hands of locally elected representatives. I strongly welcome that fact, but I have become cynical in my old age. Moreover, in this House, where perhaps we might have to take a somewhat wider view, while we should undoubtedly welcome the principle we may also feel some concern for the council tax payer in the Principality.
The Bill proposes the replacement of the existing structure of eight counties and 37 districts with a new structure of 21 unitary authorities. The process of

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change will be complex and difficult. In the changes, which I welcome, housing and social services will come back under one authority rather than being operated by separate administrations as at present. The number of planning authorities will also be reduced which should make for the more efficient use of resources. Such factors give one hope that the economies mentioned in the preamble may come on stream.
However, behind the good points there are more shadowy and difficult areas to consider. I make no apology for raising the issue of trading standards officers once again. I do so because it highlights the dilemma. Your Lordships may recall a Question tabled last Tuesday by the noble Lord, Lord Campbell of Croy, concerning the future of trading standards officers in the reorganisation of local government. The noble Lord asked the Question in the context of the whole of the United Kingdom. At present, there are eight trading standards offices in Wales. Professional opinion, supported, I understand, by business and commerce, has it that if there is to be change, the service will be strengthened by reducing the number of offices, not increasing them.
During discussion on the noble Lord's Question, the noble Lord, Lord Jacques, understandably advanced the cause for the city of Portsmouth to run its own office. Here we have the crux of a dilemma that will face those newly elected members in 1995 or early 1996. On the one hand, they will have the opportunity to create their own trading standards office which, one might think, would go easily alongside that of environmental health inspectors. However, as we have heard, those disciplines are separate and small offices would only provide limited career structures as well as requiring expensive investment. On the other hand, those same new councillors could decide on a scheme of co-operation which maintained the existing structure or something like it. Alternatively, they could decide upon an even more streamlined structure. However, they might consider that that would be to belittle their own efficiency and effectiveness.
The case of trading standards offices illustrates clearly the problems that the new members will face. However, there are other similar issues. For example, the new councils, as highway authorities, will serve communities of, say, an average 125,000 people. In those circumstances, highways offices are likely to be limited in size and scope and so small that they can only concentrate on essential maintenance, minor improvements and complaints. They will not be resourced to develop high levels of engineering skills and expertise. And, again, there will be limited career opportunities.
A related problem is that the Welsh Office, with its own responsibilities for trunk roads, has in the past been able to make use of the highways offices in the Principality as its agent. I find myself wondering how far that historic arrangement will be able to continue in the new circumstances. But, again, perhaps schemes of co-operation will come to the rescue.
I could continue giving such examples for a long time. The specialist facilities provided for the education service and social services can neither be divided easily
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nor can they be duplicated without great expense. We have not yet touched today on two vital services—the fire service and the police service. I accept that a Bill to deal with the police force will appear this Session. I do not doubt that in the case of both services the Home Office is already in deep discussion with the Welsh Office. We do not know what the results might be. In any event, before there are any conclusions, I hope we will be told that there is to be consultation with local authorities in Wales. Not to have that consultation would endanger, if not absolutely break, the strong democratic link which at present exists between those services and the communities they serve.
The new councillors in 1995 or 1996 will bear a heavy responsibility. The use of the expenditure methodology employed in England, and accepted by the Department of the Environment and the Local Government Commission, would suggest a wider range of transitional costs than are mentioned in the preamble to the Bill, with a higher upper limit. Whether those costs are ever recovered will depend on a multitude of small decisions taken in a large number of authorities. I wish the new councillors the very best of success and good fortune but I say to the people of Wales let the buyer beware—caveat emptor!
6.1 p.m.
Lord Norrie: My Lords, apart from congratulating the noble Lord, Lord Kenyon, on his excellent maiden speech, I also congratulate the noble Lord, Lord Moran, on some fairly astute guesswork. Yes, he is absolutely right. My sole contribution to the debate today concerns the well-being of the three national parks in Wales. I am able to speak as a vice-president of the Council for National Parks and in this respect I share a common interest with another vice-president, the noble Lord, Lord Morris of Castle Morris, on the Opposition Front Bench.
The three parks, the Brecon Beacons, Snowdonia and the Pembrokeshire Coast, are administered by county council committees. After local government reform in Wales has taken place, we need to consider carefully how they can be best administered in the future. I therefore support the relevant clauses in this Bill to which the noble and learned Lord the Lord Advocate referred in his opening remarks. These clauses upgrade these three parks from committee parks to planning boards, thus putting them on a par with the Lake District and the Peak District in England today.
However, what your Lordships will not yet know is that early next year I intend introducing a Private Member's Bill which will set up independent authorities to run national parks in England and Wales. The debate today gives me a chance to make clearer the relationship between the Local Government (Wales) Bill and my own Private Member's Bill.
There has been much concern that in implementing the reform of local government in England and Wales the future of the national parks would be left in uncertainty. In 1991 the influential National Parks Review Panel recommended that all the national parks in England and Wales should be run by independent

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authorities. These would be free-standing and accountable within local government. The Government supported this and promised to introduce legislation. However, this was not included in the Queen's Speech this year, as had been hoped.
The timetable of local government reorganisation means that there is an urgent need for legislation to be introduced now so that we can assure the future of national parks. The clauses in the Local Government (Wales) Bill and my Private Member's Bill seek to address this problem. There is no conflict between the two. Both ensure that disruption to the parks during local government reorganisation is minimised and that the authorities will be better able to concentrate on the administration of the parks themselves.
The two Bills are not seeking to do the same thing. My Bill will set up independent authorities, while I understand that the national park clauses in the Local Government (Wales) Bill are an interim measure to set up planning boards. Today's Bill sets out to do only what is necessary to secure the reorganisation of local government in Wales. A more comprehensive approach to the problems of national parks is not possible within its framework. However, to provide reassurance for the national parks in Wales, the provisions to allow the creation of national park boards will for the present remain in the Bill before your Lordships today. Should my Private Member's Bill be successful, I understand that the Welsh Office proposes to adopt my joint Wales and England solution, establishing common administrative arrangements for both Welsh and English national parks. As the noble Lord, Lord Moran, observed earlier, the two Bills together represent a belt-and-braces strategy.
6.5 p.m
Lord Geraint: My Lords, I am sure that everyone will agree that we have had an interesting debate in that we have heard excellent speeches from noble Lords on both sides of this House. I, too, wish to congratulate the noble Lord, Lord Kenyon, on his wonderful and constructive speech. I am sure we shall hear a great deal from him in the years to come. I hope on this occasion that the noble and learned Lord the Lord Advocate will have listened to the noble Lord's comments and to his proposals for Mid Wales.
For better or for worse, I began my political career as a county councillor—as a mere boy—on Cardiganshire County Council, winning, if I remember rightly, by just nine votes. What a wonderful achievement that seemed to me then. Little did I think at that time that about 40 years later I would have the privilege of addressing your Lordships in this House on the subject of local government. But here I am having served 21 years as a county councillor and 18 years as a Member of the other place. Therefore I have some qualifications, but not many.
First, I wish to congratulate the Government on at last recognising the dreadful mistake they made in 1973 by creating monster authorities and unnecessary confusion and bureaucracy in multi-tier local government in Wales. We are all surely pleased that the principle of unitary authorities has now been accepted as
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the best way of sustaining local democracy. On behalf of my fellow "Cardis" I must also congratulate the Government on restoring the old and historic county of Cardiganshire, Sir Aberteifi, a close community that was never quite overwhelmed in the larger, artificial county of Dyfed but always felt uneasy in that context.
However, my praise for the Government can go no further, as the Bill, as has been pointed out so eloquently, fails on a number of counts. Having promised at the beginning of the consultation period to listen to the views of the local communities, why have the Government in so many cases defied strongly held convictions and trampled on local sensibilities? Is it ignorance or arrogance? We all know that the Secretary of State, despite his many talents, has little knowledge of Wales, but should he not have read the promises of his immediate predecessor? We were given to believe that the new unitary authorities were to be based on a community identity and not on cost-effectiveness, which seems, sadly, to be the only guideline for this Government.
We in Wales believe that there are more important considerations than cost-effectiveness. I can do no better at this stage than quote from the letter to the Secretary of State from the Chief Executive of the Ymgyrch Meirionnydd Campaign which states:
"failure to grant unitary status to Meirionnydd will have a disastrous effect on this district, marginalising a rural economy already devastated by the closure of the power station at Trawsfynydd".
He goes on to say:
"I make no apology for telling you that by destroying the cohesiveness and self-respect which their own local authority brings them, you threaten the communities themselves and endanger a distinctive way of life with which, sadly, you cannot be familiar".
That last sentence says it all. Its sentiment is echoed by other equally historic and cohesive communities in Wales which the Secretary of State has seen fit to destroy in his master plan.
My noble friend Lord Hooson has already made a convincing case for Montgomeryshire. I endorse his argument. I shall not comment further because he has made an excellent case.
The newly created unitary authority of Mid Wales is surely a clumsy beast, far too large for its purpose. It is an act of sheer vandalism to destroy the old communities of Montgomeryshire, Breconshire and Radnorshire. "Oh, but they are too small and sparsely populated", I hear some noble Lords say. I took the trouble to ask about unitary authorities in Scotland. Like my noble friend Lord Hooson, I discovered that there are three separate authorities which have smaller populations than Radnorshire, which is the smallest Welsh authority at present. They are Shetland, with a population of 22,163, Orkney with 19,228 and the Western Isles with a similar population. Radnorshire has a population of more than 23,000, while Montgomeryshire has a population of 55,000 and Breconshire 41,000.
If the Mid Wales authority is established, against the wishes of practically everyone, then we shall have an area covering a quarter of the whole of Wales, 100 miles from end to end, with a population of 120,000 and including vastly different communities. That cannot be

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called local government by any stretch of the imagination. Surely it is possible for three separate unitary authorities to coexist within that vast area. Is there no way they can arrange to provide certain services to each other within those unitary authorities?
On the other hand, if I cannot persuade your Lordships of the case for three separate authorities, why not have a wise compromise? A very good case has been made by Brecknock Borough Council for a unitary authority based on Brecon and Radnor, with Montgomeryshire as a separate authority. That I could just about accept as a second best solution. I cannot tolerate the Mid Wales solution, and neither can the people of Wales.
Again we come back to the lack of sensitivity to local and indeed Welsh aspirations in this matter. I do not see how the Government cannot be more pliable in their dealings. Why go out of their way to upset the people of Merthyr Tydfil, Merioneth, Blaenau Gwent, Brecon and Radnor? What can they gain from that? Having made similar decisions in the 1973 reorganisation, they should now take the opportunity to put matters right and not perpetuate their mistakes.
Alas, I do not believe that this Government are a listening government. That convinces me more than ever that the only real answer to the reorganisation of government within Wales —to bring government closer to the people—is to set up a Welsh Parliament and under it a single tier of local government conforming to local communities. I feel sure that that will come, and much sooner than many may imagine. As the noble Lord, Lord Cledwyn, said, let us hope that we shall have our Welsh Parliament by the turn of the century.
Finally, let us look once more at the four smallest counties in Wales—Merioneth, Montgomery, Brecon and Radnor. Radnor is the smallest. It is unique in more ways than one. Some 75 per cent. of its people are involved with agriculture. They have the best show in the world—the Royal Welsh Show. There is no doubt about that. We have mentioned those three unitary authorities in Scotland. Those islands are all surrounded by water. Radnorshire may be small, but it has been big enough for the past 50 years to extract water from its hills for the millions of people living in Birmingham, the Midlands and the South East of England. Many people gave up their farms; villages were given up. I believe that one good deed deserves another.
My message to the noble and learned Lord and our Secretary of State for Wales is: before we sit down at Committee stage think again and try to improve this Bill and give the people of Brecon, the people of Radnor and the people of Montgomery and Merioneth what they deserve, their own unitary authorities.
6.16 p.m.
Lord Morris of Castle Morris: My Lords, the House will be grateful to the noble and learned Lord the Lord Advocate for introducing the Bill; to my noble friend Lord Prys-Davies for telling him what is wrong with it; to the noble Lord, Lord Hooson, for explaining to him in detail what local government really needs, especially in Powys and Sir Drefaldwyn; to the noble
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Viscount, Lord Tonypandy, my teacher, who celebrated Mrs. Carys Pugh, the saviour of Rhondda's name; and the noble Lord, Lord Aberdare, for adding his voice on the importance of the South Wales valleys.
I should like to add my tribute to the maiden speech of the noble Lord, Lord Kenyon. He got the best laugh of the afternoon when he said that a Welsh assembly would add a level of democracy that—and I think I heard him correctly —"we were trying to abolish". I am sure that was a slip of the tongue. Those of us who knew and loved his father will recognise a chip off the old block.
Let us go back to basics and to the White Paper on which the Bill is built. In the very head and forefront of its text the White Paper offers us "The Reasons for Reorganisation". First:
"the present system of local government in Wales is not widely understood".
"By whom is it not understood?", we may ask. What examination of which people was undertaken in order to establish that truth? And who marked the examination papers?
Next, the White Paper states that the present system does not:
"sufficiently reflect people's identification with their own communities and localities".
How did the Government assemble the evidence which forced them to conclude that identification with their community was so important to all Welsh people that they simply must have more of it, and that this was the way to give it to them?
Thirdly, the Government find that:
"it is now clear that the replacement of the old counties … has not secured wholehearted public support".
Again, I ask, "How did they quantify the wholeheartedness of this support or the lack of it? Who asked the questions of whom? Who drew up the questionnaire?"
The White Paper presented no evidence whatsoever. Bold, bald assertion is all that it offers.
The White Paper was published in March 1993. Nine months later the Welsh Office was delivered of this fat, bouncing, baby Bill which, we are told, was preceded by no fewer than 30 months of discussions. Your Lordships might then expect proposals which had the broad support of the people and the organisations of Wales. There is no such consensus. The Bill has been received with dismay, as my noble friend Lord Cledwyn said. My noble friend Lord Brooks was equally unimpressed with it.
The truth is that the Government have managed to combine European business and professional opinion against the Bill's proposals. The Confederation of British Industry, the trade unions in Wales, the Association of European Regions, local authority associations and professional bodies have all, for various reasons, expressed concern about what is proposed. Let us put it this way: if you asked the people of Wales whether they would prefer to have local government reform or 3,000 more policemen or teachers, I think we know what the answer would be.
In Wales, this discussion has been mainly a matter of officials reporting confidentially to the Secretary of State and councillors. The Secretary of State's predecessor was asked to make those reports public. He

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refused. Why, my Lords, did he refuse? Is this the open government so beloved of the Prime Minister? Is this in conformity with the spirit of the Citizen's Charter? No, my Lords. He refused because he dared not do otherwise, knowing what those reports contained. The voice of local people on this expensive reform of local government has simply not been heard. So much for accountability to the people; so much for democracy.
And what will be the cost of this stately dance to the Government's music? No one seems to have much idea. The consultants engaged by the Secretary of State can only suggest costs in a range of £66 million to £153 million. The Association of District Councils naturally favours a figure at the lower end of the range. The Association of County Councils goes off the scale altogether, and calculates a cost of,
"at least £200 million, which is equivalent to some 10 per cent. of local government expenditure, in the current year".
Perhaps I may ask the Minister, "Who is right?" Can he give your Lordships' House six cogent, factual reasons to support this answer?
Again, we must consider not only how much but who pays? It looks less than likely that the Government will be able to provide the additional resources required in the light of their recently published expenditure plans. So does that mean that the whole of the transitional costs will have to be met by local government from within existing resources at the expense of service provision? That would be like requiring the condemned man to pay a contribution towards his gallows.
Yet even assuming the cost at a conservative £100 million, how can such expenditure be justified at a time like this when the public sector borrowing requirement has priorities which add to such a vast sum? A sum of £100 million would surely be a saving worth making when there is no urgent necessity to spend that money and no welcome for this pointless administrative reshuffle from the people of Wales.
Yet at the very heart and centre of what is here proposed, lie one flat contradiction and one deeply undemocratic intention on which several noble Lords have touched, although none more cogently than my noble friend Lord Prys-Davies. The Chief Executive of the Commission for England has stated in evidence that a unitary authority needs a population of 150,000 to 200,000 to be viable. But only eight of the proposed Welsh authorities come near this level. Are 13 of them then not viable; or is the Welsh voter a totally different animal from his English counterpart across the border? Alternatively, can those little authorities be made viable if they create a large network of indirectly accountable joint managements which would make a mockery of the unitary concept and reintroduce the two-tier system they were created to replace?
The Government cannot have it both ways. Either Cardiganshire, with a population of 66,700, is viable or it is not. If it is, then the Chief Executive of the Commission for England is wrong. If it is not, why is Cardiganshire afforded principal area status? The answer may be that it may be viable if it has a large number of the joint committees which the Bill proposes. My noble friend Lord Prys-Davies made that point. Such associations should, of course, be voluntary. But
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what if co-operation and collaboration are not volunteered—and the history of Wales from the medieval period on shows that we are not very good at it. What happens then? Clause 30 happens then. And Clause 30 gives the Secretary of State almost unlimited power, against which there is no appeal, to do almost anything he likes if he is not satisfied that a direction issued under Clause 29 is being obeyed. By his own mere motion he may establish a joint authority which will act for him until he is satisfied. That is a mockery of democracy. It is centralisation in excelsis, and it is not to be endured.
The same is true of the residuary body and the staff commission, every one of whose members will be personally selected and appointed by the Secretary of State without even the necessity of consulting anyone or anybody before he exercises his right. Those bodies are vital to us. But can we really feel confidence in the political impartiality of bodies appointed in this way by a Secretary of State—I say this gently—whose experience of Wales has been, to say the least, intermittent and tangential between birth and appointment?
I suppose those who value the Welsh language may extract a crumb of comfort from the statement that at least one member appointed to the staff commission shall be Welsh speaking, though is it not passing strange that the residuary body is deemed perfectly capable of carrying out its mandate without a single Welsh-speaking member?
What is very clear is that great damage will be done to the existing service providers if their service exceeds the boundary of one unitary authority. Let us take, for example, the library service. The Welsh Library Association believes that the present service works well, and it is at the coal face. Its fear is that much of the effectiveness and efficiency of the service will be lost if library services are operated by individual unitary authorities. The number of professional and specialist staff available to a unitary authority would be severely limited. Training would be a problem; promotion would be extremely difficult. The unified computer system for bibliographical control, circulation of materials and information retrieval, could not be divided up into new authority areas. County-based software programs would be lost. Book collections have been built up since 1972 and before on a county-wide basis. The new unitary authorities will be left with unbalanced collections which will not meet the users' needs. The same is true of buildings.
Such considerations lead the WLA to conclude that if unitary authorities are given the sole responsibility for library provision,
"there would be a serious, immediate and long term deterioration in services which could only be overcome in time with large scale expenditure".
Libraries are a statutory commitment. Museums and galleries are not. But they are just as important in the cultural structure, and the advice given by museum bodies to the Secretary of State is balanced and judicious. In March 1993, the Council of Museums in Wales said,
"We make no judgment on the number and pattern of LA, provision advanced in the White Paper other than in the context

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of museum provision and we reiterate that a meaningful and effective museum service across the Principality would benefit from greater, strategic management. This would be more readily achieved with a pattern of fewer, larger unitary authorities than one of many and smaller … CMW urges the Secretary of State to pay particular attention to safeguarding the integrity of existing countywide collections and of maintaining their specialist museum support services … so that current benefits are not lost."
One of the great opportunities that the Bill misses is the chance to lay down that all local authorities shall have a statutory duty to promote the provision of museums of high standards within their areas, and will be required to produce a strategic museums policy. If only the Government had had the courage to take this step, the entire museum service would have risen up and called them blessed. But the Government could not think that far or that deep.
Just as important is the position of the national parks. The noble Lord, Lord Moran, reminded us of this. The process of local government reorganisation could leave the administration of those valuable areas in most uncertain hands. Clauses 19 and 20 provide for the upgrading of the committee parks into boards, which is a good first step towards the legislation on national parks that the Government have promised, provided always that there is proper representation of local interests.
Another advance in that direction was outlined by the noble Lord, Lord Norrie, one of my fellow vice-presidents of the Council for National Parks. To his Private Member's Bill, which would set up independent authorities to run all the national parks in England and Wales, I wish to add my personal wholehearted support. Of course, the long-promised government legislation to implement the recommendations of the National Parks Review Panel would be the best strategy of all for us to consider now. Let us hope that it will not be too long delayed.
We have seen some silly Bills in the course of this Session. The Education Bill, execrated on all sides of your Lordships' House, was one; here is another. The best thing the Government could do would be to take it away, shred it and forget it until they have the leisure and the money to consult properly and legislate sensibly. Were it not for the convention of the House, we on these Benches would feel sorely tempted to move that the Bill be not read a second time. As it is, we shall certainly subject it to rigorous reappraisal at the Committee stage, when my noble friend Lord Williams of Elvel will join us on the Front Bench.
My Lords, this Bill is not democratic, not timely, not necessary and not wanted by the people of Wales. And, in all charity, that is the very best I can say for it.
6.30 p.m.
Lord Rodger of Earlsferry: My Lords, in the course of the debate many topics have been raised. Many noble Lords have spoken with great authority and voiced opinions which have differed widely. If anything, it proves the truth of what was said, that in matters of local government it is not possible to please everyone. Doubtless when we come to Committee many of the topics which have been raised this afternoon will be
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raised again in more detail. I hope that noble Lords will forgive me if in the short time available to me this afternoon I simply deal briefly with certain of the more general points and themes which have been mentioned in the course of the debate.
Before I begin, perhaps I may add my congratulations to those of other noble Lords to my noble friend Lord Kenyon on his maiden speech. In the course of it he mentioned the date for starting the new councils and asked whether the date of the elections was finally settled. I gave your Lordships what is at present thought to be the most desirable date, but my right honourable friend the Secretary of State has not finally made up his mind and will take into account the points made by my noble friend.
Of course, we on the Government Benches accept that local government is a serious matter and obviously local government in Wales touches people in Wales deeply. I think I am right in saying that it also appears that at least the principle of unitary authorities is accepted by all sides of the House. There is a slight tendency for people to wish that a particular local authority in their area was somewhat different from the one proposed, but I think the general principle of unitary authorities is accepted and we can proceed on that basis.
I understand that noble Lords on the Opposition Benches say that they accept the principle within the context of a wider reform of government for Wales, with the idea of an assembly. I fully understand that that is a deeply held view and it is an important issue. But perhaps noble Lords will forgive me if I do not go into the matter in great detail this evening because we are concerned with local government, not the wider question of an assembly. However, it seemed to me from time to time that what was being suggested was something which would in some respects take functions away from the local authorities envisaged in the Bill.
The noble Lord, Lord Cledwyn of Penrhos, and others drew attention to the quangos. I am well aware that that matter has exercised noble Lords and people more generally in Wales much over recent times. I do not think that there is any question of a blanket condemnation of quangos because I understood the noble Lord, Lord Brooks of Tremorfa, to praise the Cardiff Bay Development Corporation, of which he is a member. However, if I do not go into the matter of quangos in great detail, it is because the Bill does nothing to set up quangos, with two exceptions. They are the residuary body and the staff commission. These are very limited life quangos, if one likes to use the term. The residuary body is envisaged to last for five years, the staff commission for three. It is hard to see that any other kind of organisation would be suitable for either of those functions. For the rest, it is important to notice that the Bill takes no functions away from local authorities. On the contrary, it is designed simply to set up new unitary authorities and to transfer the existing functions of those authorities to the new ones.
In that respect, certain comments were made on joint arrangements. Perhaps I may simply say that there is no desire on the part of the Secretary of State to rush to use the powers in Clause 30 which are to set up joint authorities. It seemed to be suggested that that would be

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a way in which the Secretary of State would use his powers to scatter a whole lot of new joint authorities, some of them a kind of quango.
That there is no desire to rush into that is shown by the fact that Clause 30 is the culmination of a three-stage process, beginning with Clause 28, which is on the provision of information to the Secretary of State, and Clause 29, which is a power for the Secretary of State to give directions to the councils about arrangements. Only if that does not work, in the final analysis under Clause 30 does the Secretary of State have that power.
It is important to notice that those are transitional provisions only, all due to expire on 31st March 1999. Again, that is not something which suggests that this is a Bill under which the Secretary of State is trying to spread quangos throughout Wales. That is not the purpose. On the contrary, the purpose is to transfer the functions of local government.
Lord Brooks of Tremorfa: My Lords, perhaps I may intervene for a moment. Can the Minister assure the House that there is no basis for the suggestion in the Western Mail that the Secretary of State and the Welsh Office have in mind to merge a number of quangos, notably the Welsh Development Agency and the Land Authority for Wales, together with other quangos, in order to control the economic development of the whole of Wales?
Lord Rodger of Earlsferry: My Lords, if I may say so, that is rather wide of the debate. I do not know the answer on the report in the newspaper, but I shall write to the noble Lord on the matter.
Lord Prys-Davies: My Lords, perhaps I may ask the Minister this. In the event of the Secretary of State exercising the power in Clause 30 and establishing a joint board, that joint board will not be a temporary board; it will continue in perpetuity. Is that correct?
Lord Rodger of Earlsferry: My Lords, the power to create is time-limited, but thereafter the board exists. However, I have to add in clarification of what was said earlier in the debate that the power is exercisable only under the process of an affirmative resolution, as the noble Lord said in his speech. So, contrary to what was said, there is parliamentary control over the matter.
Play was made of costs. The noble Lord, Lord Morris of Castle Morris, seemed to wish to set a kind of examination paper on costs. The subject is dealt with in the Explanatory and Financial Memorandum to the Bill and it is put the way it is quite deliberately. The Government have never predicted precisely what the costs of the reform would be and they cannot do so. They cannot do so because the cost of this reform at the end of the day will depend on various factors which will be in the control of the new local authorities and not of the Government. In particular, it will depend on matters such as how many staff are transferred and how many staff are made redundant. Obviously, redundancy costs are a very important factor. That is a matter that we cannot predict. It will depend on decisions that are taken by the local authorities. Another matter will be, for example, what changes in accommodation are required.
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Again, we cannot predict those changes because they will depend on the way in which the new authorities choose to run themselves.
However, I do not believe that many of the figures that have been suggested will prove to be true. For example, it must be remembered that the vast majority of staff—from time to time there has been (I am not saying in the course of this debate) scaremongering on the matter—will transfer. For example, teachers will be required to go on teaching. The main redundancies will of course be in the higher grades of administration, and where one is merging various authorities, there will be some redundancies. But, equally, in certain cases there will be occasions when more officials are required because one will be transferring functions from a county level to the new authorities. It is for those reasons that we do not predict, and I cannot give a prediction on the precise cost of this reform beyond what is stated in the memorandum.
Perhaps the main theme of the debate, as was said, related to boundaries. I believe the noble Lord, Lord Brooks, said that if we wished to have a quiet life we should change the boundaries. Somebody else said that we had been trying to make it as difficult as possible. In the course of the debate many noble Lords spoke for many different areas. We heard from the noble Lord, Lord Hooson, about Montgomeryshire; the noble Viscount, Lord Tonypandy, referred to the Rhondda; the noble Lord, Lord Aberdare, referred to Cynon Valley; and the noble Lord, Lord Brooks, put in a word for some sort of greater Cardiff. Those are all issues which clearly arise and are deeply felt in those areas.
As I said in my opening remarks, we have gone a long way in this Bill towards reviving the old shires. Contrary to what has been suggested, I understand that the Bill has been very welcome in many parts of Wales precisely because it is to restore those old shires—for example, in Pembrokeshire and in Flintshire in the north east. But, understandably, there are examples where that is not being done and people say that the Secretary of State has proved insensitive.
In the light of the consultation—of which there has been a great deal—as we have heard, changes have been made between the time of the White Paper and what we have today in the Bill. Changes have been made, for example, in the area of Llanelly and in other areas. They have been made in response to representations. As the noble Viscount, Lord Tonypandy, said, the change in the name of Rhondda was brought in precisely to reflect the kind of representations that were made. So the Government have not overlooked local sentiment.
But neither is it possible—it never was thought to be possible at the time of the White Paper—to be guided purely by matters of local sentiment. The Government have had to balance the desirability of having a local area which is resonant with local feeling with what is needed to have a base for viable local government. As I said at the outset, it is not always easy to get those two factors into a balance which will please everybody. It is plain from listening to many noble Lords that some people think that we have got the balance wrong because the authorities are too small, and other people are saying that the balance is wrong because the

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authorities are too large. I cannot go into all the arguments on the various decisions. But I can say that they have certainly been taken only after very careful consideration and after considering the various representations which have been made.
The case which has been raised most often in the course of the debate is that of Montgomery, for which the noble Lord, Lord Hooson, put forward what is called a masterly brief. Noble Lords have heard that case put forward, and, indeed, it was put forward on an earlier occasion. I believe that it was indicated the last time that local government was reformed, when much the same issue arose. On that matter I should mention one particular point. Reference was made from time to time to a promise which it was said that the then Secretary of State made that Montgomery would indeed be a unitary authority. I was not present, but I have been told that the Secretary of State did not make any such promise. He certainly supported the idea, but he says that he did not make any such promise. What he did was in line with what had been done in the proposals which he had made just before the election, but, as I understand it, he did not go further. I understand that it may be that because of those proposals people feel disappointed—
Lord Hooson: My Lords, I am grateful to the noble and learned Lord for giving way. My information comes from the Conservative chairman of the association, who was there at the meeting. All the Conservative members were there. They have been very powerful supporters of the pro-Montgomeryshire view, having had an undertaking, as I understand it, from the Secretary of State on this matter.
Lord Rodger of Earlsferry: My Lords, I am of course aware of the great feeling that exists among Conservatives as well. But I have been informed that no undertaking was given and no promise was made, although strong support was expressed for the idea.
On this matter, I simply say that there is no a priori feeling, for example, against having a Montgomeryshire which is independent. The fact that it was contained in the earlier versions in 1992 shows that very possibility. Since that time, more consultation has gone on and consideration has been given to all the various factors, including the position of Breconshire and Radnorshire. The Government have concluded that the best solution is that we should have a larger authority, called in the Bill Mid Wales, though if noble Lords feel that Powys would be a preferable name, then that is not a matter with which the Government have difficulty.
It was asked at one point in the debate: have the Government finally made up their mind; will they not respond at all? The Government have obviously thought about the matter very carefully. The Secretary of State's proposals are in the Bill. The position is that the Secretary of State will of course listen to what is said in debate in this House and in the other place. But these are the proposals that have been put forward.
The decentralisation proposals in Clauses 26 and 27 have received perhaps a somewhat grudging welcome from noble Lords. They are in many ways a very useful proposal. They give places like
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Montgomeryshire—though not just Powys; Merionithshire as well as other areas might find them an attractive way of going forward—a way in which, in having the overall larger authority, local feeling can nonetheless be reflected and decisions in respect of such matters as planning, housing and so on can be taken by local councillors.
I have no doubt that in Committee we shall have to discuss exactly the way in which those proposals will be serviced, among other matters. But the intention of the proposals is that they should provide a way in which local feeling can be represented.
In closing, let me refer to two other matters. The issue of national parks was raised particularly by my noble friend Lord Norrie. Clauses in the Bill are in many ways an exercise in tidying up existing legislation on the matter; but, most importantly, in establishing the joint boards they also go some way to ensuring proper financing for the national parks boards. That is something which I am sure your Lordships will welcome. When the Bill of my noble friend Lord Norrie comes before the House, no doubt your Lordships will wish to consider the other proposals with regard to the development of national parks.
On the matter of trading standards, which was raised by a number of noble Lords and especially my noble friend Lord Elton, the Government are aware of the anxiety. But we consider that there is no reason why the trading standards officers should not be able to conduct their affairs in the context of the new unitary authorities. I accept that there are many technical matters to consider—legislation and so forth. In that respect they are not much different from environmental health officers, who work at present in the context of the districts. The Government would envisage that, where appropriate, the various authorities could co-operate in providing the services. It may be possible for me to write in more detail to my noble friend regarding the precise arrangements which will be used for dealing with those matters.
As I said, the debate threw up many issues. But to many of those we shall doubtless return in more detail in Committee. In the meantime, I commend this important Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Water and Sewerage Services (Amendment) (Northern Ireland) Order 1993
6.52 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (The Earl of Arran)The Parliamentary Under-Secretary of State, Northern Ireland Office (The Earl of Arran) rose to move, That the draft order laid before the House on 2nd November be approved.
The noble Earl said: My Lords, the order will amend the Water and Sewerage Services (Northern Ireland) Order 1973 and the Water Act (Northern Ireland) 1972. I would like to stress that it is not related to the

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Government's plans for the privatisation of water and sewerage services in Northern Ireland, or the reform of charging arrangements for those services.
Its principal objectives are to introduce national drinking water quality standards into Northern Ireland law; to assist with improving the quality of waterways and with the control of water pollution. In addition the order contains a number of provisions which revise, update and give greater consistency to water and sewerage law in Northern Ireland.
Article 4 will introduce national drinking water quality standards which incorporate those of the European Communities Drinking Water Directive into Northern Ireland law through regulations and will bring Northern Ireland into line with the rest of the United Kingdom. The Department of the Environment, which is the sole public water supplier in Northern Ireland, has been applying the current standards by administrative means in advance of the legislation. The directive is currently being reviewed by the European Commission and when the outcome of that is known the order will enable implementation of revised standards.
Drinking water quality in Northern Ireland is high and compares favourably with the rest of the United Kingdom. Results for 1992 showed that 99 per cent. of water quality tests in Northern Ireland complied with national standards. However, the order will provide greater protection to consumers in Northern Ireland by providing the necessary legislative framework for both public and private supplies. It will also apply the relevant standards to water supplied for domestic and food production purposes.
The department's environment service will monitor and publish information about the quality of both public and private water supplies. Consistent with the principles of the Citizen's Charter for Northern Ireland, a register containing detailed information about the quality of public water supplies throughout Northern Ireland has been established since July 1992 by the department and is available for inspection by the public free of charge.
For private supplies, the department will now have power under Article 4 to take remedial action where such a supply is either unwholesome or insufficient. It will be required to maintain a register of such supplies and prepare an action plan where a risk to public health has been identified.
Article 16 of the order will facilitate the introduction of a number of EC directives affecting the quality of waterways by conferring powers on the Department of the Environment to prescribe standards and set objectives for them. The directives involved relate to quality of surface water intended for drinking water supplies and quality of waters to support freshwater fish and shellfish.
I draw your Lordships' attention specifically to Article 17 which will increase the maximum fine on summary conviction for a water pollution offence from £2,000 to £20,000. That substantial increase in the fines for water pollution offences will assist the department in the control of water pollution and will fulfil a commitment to the House of Commons Select Committee on the Environment to bring in such a
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provision at an early opportunity. That will bring Northern Ireland into line with the rest of the United Kingdom. I beg to move.
Moved, That the draft order laid before the House on 2nd November be approved.—(The Earl of Arran.)
Lord Prys-Davies: My Lords, the order is welcomed on this side of the House and I thank the noble Earl for explaining its provisions. In particular, it will enhance the quality of water supply which is used in food and drink manufacture or intended for human consumption.
The Minister said that the order applies to possible European Community directives. Perhaps I can ask the Minister about that. In one of last Sunday's newspapers I read that the relevant directives had been either torn up or substantially amended after last Saturday's meetings in Brussels. I understand that that was because they were felt to be over-prescriptive and scientifically out of date.
The noble Earl did not refer specifically to that development. If those press reports are correct, perhaps he could inform the House precisely what happened in Brussels last Saturday in respect of the directives. If it is the case that the directives are being reviewed, as suggested by another report from Brussels, is it intended that they will be weakened as a result of that review?
The question therefore arises of where do we go from here. Can the Minister confirm that, irrespective of what emanates from Brussels, there will be a programme to upgrade the water treatment plants in Northern Ireland by 1995? Or is it to be at a later date? Will there be a programme to update the circulation system? If so, when will that be completed? Who will pay the costs? Will there be a contribution by the Northern Ireland Office or will the costs be born in their entirety by the water undertakers and consumers? I ask that question because of the rumblings about the cost of applying the EC directives.
It is unclear from the terms of the order what are the rights of appeal against a charge levied by the department in respect of the costs to be incurred by it in implementing the order. I would be grateful if the Minister could shed some light on that.
As the Minister confirmed, the order places a duty on the department to monitor the quality of private water supplies. Clearly that is right. I understand from the order that the procedures must be set out in regulations. Can the Minister tell us when the monitoring regulations will be ready for publication?
I note that the order specifically excludes the right of an individual who believes that he has suffered as a result of the application of the order to sue the department or a water undertaker for damages for breach of the statutory duty imposed on it. I am a little worried about that. It is a useful remedy which was developed over the past 50 years or so. What is the department's view on that?
Finally, I want to raise a general point regarding the application of the EC directives in Northern Ireland. It so happens that by virtue of my membership of the Joint Committee on Statutory Instruments I have noticed that it is usually the case that an EC directive is applied in Northern Ireland some time after—sometimes months

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after—it has been applied in the rest of the United Kingdom. Surely that is wrong in principle. It seems to me that no part of the United Kingdom should be denied the benefit of an EC directive which is made available to citizens of the rest of the United Kingdom. Such a denial goes against the spirit of the legislation. The question must therefore be asked: why cannot a directive be applied in Northern Ireland at the same time as it is applied in the rest of the United Kingdom? When we eventually see the Northern Ireland order it is almost verbatim with the GB legislation. If there is anything in my point, can the Minister offer, today or in writing, a satisfactory explanation of this state of affairs.
Apart from those few questions I have nothing further to say about the order except to repeat that we on these Benches approve it and welcome it.
7 p.m.
The Earl of Arran: My Lords, the noble Lord, Lord Prys-Davies, asked three or four questions, all of which I hope to be able to answer. First, he asked about the drinking water directive revision. As I think I implied, the order is necessary to provide a legislative base for the introduction of national drinking water quality standards, including those of the EC, into Northern Ireland law. Those are already applied administratively by the Department of the Environment for Northern Ireland, which is the sole public water supplier in Northern Ireland. Certainly, the Government will examine the revised directive when it becomes available from the European Commission. Any changes which result will apply throughout the United Kingdom, including Northern Ireland.
The noble Lord mentioned the right of appeal on costs or charges. Charges for the department's water and sewerage services are set under government guidelines to reflect the cost of providing the services and must be levied equitably. It is therefore inappropriate for the Water Appeals Commission to adjudicate on essentially economic transactions by the department. Those affected can appeal to the Minister for the Environment in Northern Ireland who is responsible for provision of water and sewerage services there.
The noble Lord referred to the impact of the EC compliance programme on future charges. The additional capital expenditure and increased running costs associated with improvements in quality occurring because of compliance with European Community directives is likely to lead to increased charges for water and sewerage services in Northern Ireland, but it is not possible to indicate the rate of increase. Charges are set annually to reflect the cost of providing water and sewerage services and increasing capital expenditure for EC compliance is only one element in the charge equation. The European Commission's current revision of the drinking water directive may have an impact on the level of capital expenditure.
The noble Lord intimated that there was a delay in introducing the order. Initially, the Government considered that legislation was not required to implement the 1980 drinking water directive standards as the United Kingdom considered that they could be
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attained by administrative action. The extent of the capital works programme necessary to achieve standards compliance was also not fully established until 1988 when technical definitions, critical for setting operational criteria, were clarified between the United Kingdom and the European Commission. Legislation in Northern Ireland follows that first introduced for the rest of the United Kingdom in 1989. I can also tell the noble Lord that the department is a statutory water undertaker in Northern Ireland, so the system of undertakings in England and Wales is not appropriate.
If I have not answered all of the questions which the noble Lord raised I shall do so as soon as I possibly can. I commend the order to the House.
On Question, Motion agreed to.

Town and Country Planning (Fees for Applications and Deemed Applications) (Amendment) Regulations 1993
7.5 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Denton of Wakefield)The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Denton of Wakefield) rose to move, That the draft regulations laid before the House on 25th November be approved [2nd Report from the Joint Committee].
The noble Baroness said: My Lords, I understand that it will be convenient to consider at the same time the equivalent Scottish regulations, which were laid on the same day. I shall speak to both sets of regulations.
The regulations, which have been considered in another place, introduce changes to the parent regulations for England and Wales approved by Parliament in 1989 and for Scotland in 1990. If approved by the House, the amending regulations will come into effect in January 1994.
Since fees were introduced in 1981 they have represented an increasing proportion of local authorities' costs in determining planning applications, which are charged in accordance with the nature and size of the proposed development. Our main proposal is a general increase of 15 per cent. in fees with effect from January 1994, and a further increase of 15 per cent. from January 1995. These increases demonstrate the Government's continuing commitment to meeting their objective, announced in July 1990, that fees should fully cover local authorities' costs in processing and determining planning applications. Taken together, the increases should raise the average recovery rate to more than 80 per cent. nationally.
To propose two successive increases in one amendment is not a new proposition: fees were increased in two stages in 1987. We believe that our present proposals will give local authorities a helpful degree of certainty about their future income from planning application fees. The Government consider that the increases strike the right balance between progress towards full recovery and the likely impact on the construction industry. Fees remain a very small part of developers' overall costs—considerably less than 1 per cent. There is no evidence that they act as a deterrent

1325
to development. Very few householders pay any fee at all as most minor domestic development does not require a planning application.
Let me give some indicative figures. The minimum fee for a factory or office development would rise from £120 to £140 in 1994 and to £160 in 1995, while the maximum would rise from £6,000 to £7,000 in 1994 and to £8,000 in 1995. An application to build a new house would attract a fee of £140 in 1994 and £160 in 1995. Substantial alterations to houses would be charged at £70 in 1994 and £80 in 1995. Slightly lower fee levels apply in Scotland, because costs are generally lower.
Both sets of regulations make two minor changes to the fees regime. The first, effective from January 1994, is the extension to advertisements on public seating benches of the flat rate fee, currently £120, which applies to applications for advertisements on parking meters, litter bins and bus shelters within a specified area. Because they are of a similar character it is right that applications for bench advertisements should be charged on the same flat rate basis rather than individually.
The second minor amendment concerns applications for certificates of lawful use. Since July 1992 these have been replacing established use certificates. Where application is made to convert from the old-style certificate, the fee payable is one-half of that for an equivalent planning application. When this concession was introduced last year we indicated that it would be only temporary. We proposed that the full fee be payable from January 1995.
The Government believe that users and potential beneficiaries of the development control system should meet the costs incurred in determining planning applications which would otherwise fall to be met by council tax and business rate payers generally. Even after taking into account the increase in fees proposed in the amending regulations now before your Lordships, planning application fees continue to be modest and a very small proportion of developers' overall costs. We also believe that the other proposed amendments to the fees regime are fully justified. I commend the regulations to the House.
Moved, That the draft regulations laid before the House on 25th November be approved [2nd Report from the Joint Committee].—(Baroness Denton of Wakefield.)
Lord Williams of Elvel: My Lords, the House will be grateful to the noble Baroness for introducing these two measures, but they are not welcome. She must know that on average 85 per cent. of local government finance is provided by central government. She must also know that the extra 15 per cent. comes from council tax which, if standard spending assessments are exceeded, can be capped. Therefore, local government finance is severely constrained by central government. If the noble Baroness is arguing, as she appears to be, that planning services should in some way have their costs met, then she is going against the whole grain of local authority finance.
Furthermore, the Minister said that we are now talking about a 15 per cent. increase. I notice that the noble Lord, Lord Strathclyde, is here. He knows the
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arguments very well. There is a 15 per cent. increase now and another 15 per cent. increase in. January 1995. I understand from government figures the rate of inflation to be somewhere below 2 per cent. So why are the Government now saying that 15 per cent. must be added on these fees and a further 15 per cent. projected on an unknown inflation rate and an unknown cost rate in January 1995?
In practice this is a tax. I hope that the noble Baroness will come out honestly and say so. It is another tax which will fall on those who are less advantaged. Businesses can pay the extra costs. But the erection of dwelling houses and buildings referred to in Schedule 1, are all within the context of the lives of ordinary people who will have to pay. So this is yet another tax the Government are trying to impose on people, sliding it under a cost recovery programme. That simply will not work.
When the noble Baroness replies, I ask her to reflect for a moment that this is another way of inhibiting people from participating properly in the planning process. It is another way of saying, "We do not want to raise income tax. We are going to charge 15 per cent. on this and another 15 per cent. on that regardless of the cost." Is not the noble Baroness ashamed of the regulations? Would she like to withdraw them?
Lord Mackie of Benshie: My Lords. I support the noble Lord, Lord Williams of Elvel, in objecting to any rise in costs, particularly when they are well above the rate of inflation. In fact the costs have been reasonable when one considers the work involved for local government. I object to the rises, but I cannot say that I object to the principle of charging. We have a spate of planning applications and they have to be taken seriously.
I wish to know the difference between an application and a deemed application. Is a deemed application a doomed application or is it one which may become an application in certain circumstances? It is a curious piece of phraseology. I am sure that the House would like to hear an explanation.
Baroness Denton of Wakefield: My Lords, the noble Lord, Lord Williams, will not be surprised to know that it is not my intention to withdraw the regulations. The power to set fees for planning applications was prescribed in legislation in 1980. Today we are concerned with whether the proposed increases of 15 per cent. over the current national fees scales are reasonable in all the circumstances. The Government firmly believe that they are.
Lord Williams of Elvel: My Lords, can the noble Baroness say whether the legislation enables the Government to set fees, not for the coming year, but thereafter in 1995, and on what basis they are set?
Baroness Denton of Wakefield: My Lords, I said that to propose two successive increases in one amendment is not a new proposition. It was done in 1987. It gives local authorities the benefit of some, certainty in their plans. As the noble Lord may recall, that was welcomed by other members of the Opposition Front Bench.

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The noble Lord relates the issue to inflation. Of course it is good news that it is below 2 per cent. The difference that makes to the 15 per cent. is largely because of our control of inflation.
Lord Williams of Elvel: My Lords, I do not want to keep on interrupting the noble Baroness. Can she explain what she has just said? She referred to the difference between under 2 per cent. inflation and the 15 per cent. that she is now advocating that the House should approve of the charges, saying that that is due to the Government's successful control of inflation. Can she enlarge on that?
Baroness Denton of Wakefield: My Lords, I shall go over the ground again. I was trying to explain that the issue we are discussing is cost recovery. It is a policy we announced it was our intention to work towards in 1990. We have proceeded gradually for the benefit of the parties involved. The noble Lord related it to inflation. I was simply pointing out that the differential was such that it gave him anxiety because of our control of inflation. I am sure that the noble Lord will be able to read Hansard tomorrow.
Lord Williams of Elvel: My Lords, I shall read it, but I cannot understand what the noble Baroness is saying.
Baroness Denton of Wakefield: My Lords, the question is this: who should pay for planning applications? We believe that those people who take benefit from them should pay, not other taxpayers and business rate payers. That is the reason behind the provision. Cost recovery depends on two factors. We have commissioned research into the somewhat large variation in costs between local authorities. That is under review at the moment. I appreciate that there are anxieties. We are working towards a target which we announced some years ago of a 100 per cent. recovery.
I say to the noble Lord, Lord Mackie, that a deemed application reflects a retrospective application and not, as he suggested, a doomed application. I hope that that is of benefit. I am pleased to tell the noble Lord, Lord Williams, that the Government are always ready to receive suggestions for improvement to the fees regime. I hope that sensible ideas to improve the system will continue to come from all those who have an interest in planning.
On Question, Motion agreed to.

Town and Country Planning (Fees for Applications and Deemed Applications) (Scotland) Amendment Regulations 1993
Baroness Denton of Wakefield Baroness Denton of Wakefield rose to move, That the draft regulations laid before the House on 6th December be approved [2nd Report from the Joint Committee].
The noble Baroness said: My Lords, I have already spoken to this matter. I beg to move.
Moved, That the draft regulations laid before the House on 6th December be approved [2nd Report from the Joint Committee].—(Baroness Denton of Wakefield.)
On Question, Motion agreed to.

Small Businesses
7.19 p.m.
Lord Trefgarne Lord Trefgarne rose to ask Her Majesty's Government what steps they are taking to encourage the creation of small businesses, especially with regard to the provision of finance.
The noble Lord said: My Lords, I rise with your Lordships' permission to ask the Unstarred Question which stands in my name on the Order Paper and I must first declare an interest in that I am the President of the Mechanical and Metal Trades Confederation which indirectly enjoys the support of upwards of 4,000 industrial concerns, a high proportion of which may be considered small.
It is, I believe, no exaggeration to say that the small business sector, generally regarded as those companies employing fewer than 200 people, is the very backbone of our economy. There are close to 2 million such companies—a number which has steadily grown in recent years despite the recession—and it is a fact that if all those companies took on just one more employee, the unemployment problem which we have at present would be wiped out at a stroke. That is, of course, a wholly impracticable suggestion but nonetheless a real shot in the arm for those companies could certainly have an important and beneficial effect upon the nation's economic fortunes.
Furthermore, we are by nature a nation of entrepreneurs and our history is littered with memorials to industrialists who were, for the most part, small businessmen by any modern standards. The names of James Watt, Charles Rolls and Henry Royce spring instantly to mind, but there are of course many, many others.
What then can be done further to promote the creation and health of small businesses and what are the hurdles which we could help to lower in achieving those objectives? I should first of all say that Her Majesty's Government have in recent years implemented a wide range of measures to this end, and these I warmly welcome. Indeed, the recent Budget included some important provisions to which my noble friend will no doubt refer when he comes to reply. However, there is one problem above all to which I should like to direct your Lordships' attention and that is the provision of finance, and I refer both to the funds required for the initial start-up and for subsequent expansion and development.
It is a regrettable fact that most small businesses in this country which do not enjoy the support of a "business angel" (and I was glad to see that those splendid people have their interests properly protected in the new enterprise investment scheme announced the other day) rely to a great extent on their bank. Since the banks will only advance money by way of overdraft (which can be recalled or reduced at a moment's notice)

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and will not invest in equity, British entrepreneurs are left at a disadvantage compared with, for example, their German competitors.
I am not one of those who wishes to cast the banks as villains in this matter and of course they have to have regard to the interests of their depositors and shareholders, but I do wonder whether we should not be looking for a better and more easily available means of financing small companies.
Of course, I recognise that there are some institutional investors who are occasionally willing to help. But those sources are not sufficiently widely available to be considered a solution to the problem. I recognise, too, that the Government's recently enhanced loan guarantee scheme is a useful step in the right direction. But that is not designed for start-up situations and does not therefore address the whole problem.
What then is to be done? I offer no simple or easy solution and I am bound to recognise that many start-up propositions which fail to find support have not been properly thought through and are rightly rejected by banks and investors. However, I fear that there are too many excellent proposals which do not find support but which ought to do so. I know that my honourable friend the Economic Secretary to the Treasury has recently been giving some thought to this matter and I look forward to hearing more about that when my noble friend replies.
Perhaps I may now touch on some other matters arising from my Question but tangential to the central theme. I refer first to the quality of business proposals put forward to banks and other investors. It is surely incumbent upon those seeking support that they ensure that their proposals have been properly thought through and have, so far as is possible, benefited from the experience of those who have tried before.
Here I think that Mr. Heseltine's one-stop shops (now to be called Business Links) may have a role to play arid I hope that my noble friend can confirm that the staff at these places are willing to provide advice to would-be businessmen as well as those currently up and running. I know that some consultancy help is available from Business Links and I hope that it is available in the circumstances to which I have referred, as in others. A well thought-out business plan is surely an essential pre-requisite for those seeking to convince their bank manager, and that is where consultants can be of real help. I hope that there is no risk that a DTI consultant likely to be in a similar line of business himself will be tempted to pour cold water on a proposition just because it might represent unwelcome competition to his own business.
Secondly, I refer to the current discussion around the question of late payment of debt. My right honourable friend the President of the Board of Trade recently published a consultation paper on this topic which is most welcome.
I think that we need to be on our guard against introducing distortions in the relationship between companies on this matter. Furthermore, smaller companies ought to appreciate that if pressures are placed upon the traditional bogeymen —the very largest companies—then they will apply equally to the other
1330
end of the scale. Thus, small companies may find themselves obliged to pay rather more quickly than some do at present, which is not perhaps what they had in mind. Speaking for myself, I favour a code of practice in this matter rather than statutory controls and perhaps that could form part of some new or amended British standard.
However, I recognise that there are powerful arguments in favour of at least some statutory control, which the Government will want to weigh carefully. But the Government have a more direct role to play as well, particularly in areas where they have a mayor purchasing function; for example, the Ministry of Defence. I wonder whether my noble friend can tell me what has happened to the code of practice, introduced some years ago in that department, relating to the prompt payment of bills by prime contractors to their smaller sub-contractors.
Perhaps I may finally refer to a matter of equal interest to firms large and small but nonetheless of importance—and that is the proposed harmonisation of export credit guarantee arrangements within the European Union. This harmonisation is intended, I gather, to apply to all business written by European credit agencies whether relating to intra-European transactions or more widely. I must say that I have considerable doubts about this proposal which will, I fear, impose a straitjacket on companies to our considerable disadvantage.
The proposed maximum level of cover of 95 per cent. is a case in point. I very much hope that Her Majesty's Government will argue against this unnecessary bureaucratic intervention in our commercial affairs and seek to persuade our European colleagues to dlo likewise. But at the very least we should be arguing against the 95 per cent. restriction and in favour of maximum flexibility. I hope that my noble friend will be able to confirm Her Majesty's Government's position on the matter this evening.
I think that I have said enough to give your Lordships an inkling of the problems associated with the financing of smaller businesses. I look forward very much to the speeches of other noble Lords and, in particular, to that of my noble friend the Minister.
7.28 p.m.
Lord Weatherill: My Lords, in my maiden speech a year ago on the same topic I expressed the hope that the fiscal inequality facing small businesses, which was a major deterrent to their growth, would be removed. It is therefore a pleasure to be able to commend a number of new measures in the Budget which have gone some way to help small firms as they battle their way out of recession. The cut in interest rates is an important help. The vast majority of small businesses are reliant upon bank borrowing as their major source of finance and therefore any measure which reduces borrowing costs can only improve business cash flow.
Then there is the Chancellor's recent announcement, which the noble Lord, Lord Trefgarne, has already mentioned, the business angels initiative, the enterprise investment scheme and the proposal to create venture trusts, all of which will. encourage much-needed

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investment in small firms. Equally welcome is the Chancellor's intention to seize the initiative on late payments, which regrettably contribute to so many business failures.
My own family company—here I declare an interest—has survived over many decades. I preserve in my office in Savile Row a letter written in about the 1850s in which we inquired whether we could have the,
"privilege of the settlement of our account overdue these 20 years",
to which we received a reply stating:
"Sirs, I have received your letter of 14 December … and would say in reply that I am not prepared to satisfy your impertinent curiosity. Furthermore, I shall continue to shout from the housetops that you are at once the least competent and the most grasping of all the tailors in London".
But we have survived. We all know that the cost of borrowing today is much greater than it was in the last century.
The burden of legislation on small companies is great, so I welcome too the Government's initiative to cut red tape. While those measures are helpful and welcome, much more needs to be done. It must be a matter of great concern that 58 per cent. of businesses in Britain use bank overdrafts to fund their development, compared with only 31 per cent. in France and 14 per cent. in Germany. Short-term borrowing arrangements leave small firms especially vulnerable to interest rate fluctuations. Every 1 per cent. rise in bank rates costs small businesses £200 million in interest. Those added costs cannot be passed on to customers without losing competitiveness, and therefore they jeopardise cash flow and survival.
It seems curious that, while the Chancellor has given tax incentives to encourage outsiders to invest in other people's businesses through the Enterprise Investment Scheme and the Venture Capital Trust, measures which would allow small business owners to retain profits before tax in their own businesses have yet to be considered. So I was interested in what the noble Lord said about the Economic Secretary's meetings with small businesses and their representatives to examine sources of finance. I, too, will listen with great interest to what the Minister has to say on the subject. I hope that he will consider seriously the introduction of long-term financing schemes at stable rates. Such arrangements are already up and running in many other European countries, where they have significantly assisted enterprise start-up and growth.
There is one other matter of much concern to small businesses; that is, the proposal that employers will no longer be reimbursed for sick pay for the first four weeks of sickness. That will add significantly to the costs of small businesses, and will inevitably prompt discrimination against the employment of people with any history of illness. Those are often the people most in need of a job and whom society—there is such a thing as society—should seek to help.
It is a plain fact that in the world of new technologies big businesses will continue to shed labour. If we are genuinely concerned about unemployment, it is to Britain's 5 million small businesses and also to new businesses that we must look for growth. Some 10 years
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ago in my former constituency of Croydon, I set up an enterprise agency (Croydon Business Ventures) which to date has established 700 new businesses and created 4,000 new jobs. Small businesses employ one-third of the private sector workforce and produce one quarter of our country's turnover. It is often overlooked that 97 per cent. of all businesses in our country employ fewer than 20 people.
There is one other thing that we could all do to help employment; that is, to give a voluntary preference to goods and services produced and provided by British companies, both large and small. I know that that cannot be imposed, but we should give a voluntary preference.
I congratulate the noble Lord, Lord Trefgarne, on having initiated the debate. I repeat, if we wish to see Britain's economy thrive and prosper, and if we wish to see greater employment opportunities, it is to the small business sector that we must look.
7.35 p.m.
Viscount Caldecote: My Lords, we should be grateful to my noble friend Lord Trefgarne for introducing the subject because small companies are important centres for growth. It is relevant also that investment in small companies almost always has an objective of growing and creating more employment, whereas investment in large companies is designed all too often to produce the same turnover with fewer people.
My noble friend made so many good points in introducing the debate that there is not much more to be said, but I should like to make just one or two comments. There are two sides to the problem of financing small companies. There is, first, the supply of money. In general, there is no shortage, and recently the chairman of 3i has said that it has £1 billion available for investment. The question is how to exploit that availability.
Equity investments in small companies are important, but there is the problem of initial expenses. Therefore investments below £500,000, or perhaps £250,000, are unattractive to venture capital companies, but in the early stages many small companies require not large investment but investment of perhaps £100,000 or even £50,000. That is difficult to come by. Too often, as my noble friend said, those requirements are met by bank overdrafts—short-term money on call. It provides little stability in the longer-term, and some security, which is seldom available, is usually demanded. But most of all, in difficult trading conditions, as the noble Lord, Lord Weatherill, said, those facilities are all too easily withdrawn, creating great difficulties for the small company.
After a few years of development of a small company, the loan guarantee scheme is available. Although it was popular in boom times, it encourages banks to investigate proposals less rigorously due to the limited risk. It leads also to excessive gearing, even as high as 10:1. That presents no problem in boom times, but when turnover falls in a recession it often contributes to the failure of the company. Nevertheless, it is highly desirable to stimulate equity investment by banks. I should like to see them make more easily

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available equity investment as well as short-term loans through overdrafts, as they do mainly at present. In most cases, equity investment in small companies is the best way to support risk and growth in the early stages. Moreover, it provides a sound base for loan capital when the company is established and expanding.
In effect, equity investment is a loan upon which no interest is required until the company is successful and making profits. But there is a need to face up to some obstacles in providing equity investment. The first I have already mentioned. It is the initial expenses problem. So I hope that the Government will look carefully at making grants to venture capital companies for initial expenses for small company equity investments. There would be no difficulty in such a scheme for providing for repayment of those grants when the company is successful and profitable, and perhaps when it seeks a quotation on the Stock Exchange.
As has already been said, the new EIS is helpful, as is the business angels concept. I am delighted to see that the EIS will permit directors and managers to make investments through it in their own companies. That was a great defect with the previous BES. I also look forward with great interest to the details of the proposals for the Venture Capital Trust, which the Chancellor mentioned.
But another problem remains on the demand side for equity capital. Many entrepreneurs are most reluctant to sell equity, even of a small share, because of the loss of full control. Even though that is understandable, it is unwise, because it is better to have 75 per cent. in a going concern than 100 per cent. in a company which is bankrupt when times get hard.
A possible contribution to solving that problem is to facilitate the issue of non-voting shares for external investors. Those shares could have voting rights restored in certain conditions; for instance, on under-performance by the company, or proposed takeover, or quotation for its shares. Until then the founders of the company would have full control of their company and perhaps be less reluctant to sell an equity stake. I recognise that different classes of equity shares are not popular in public limited companies which are quoted on the Stock Exchange. But it seems to me that there is little disadvantage in having them in private unlisted companies if it will facilitate equity investment in them.
Those are some ideas which I believe will help small companies to obtain the investment which they so sorely need, in particular equity investment. There is no single solution to the important problem of financing the growth of small companies. But let us admit that there is a problem and it needs to be tackled with determination, an open mind and a minimum of bureaucracy. I hope that in reply my noble friend will reassure us that something on those lines will be done.
7.42 p.m.
Lord Lucas: My Lords, I too am grateful to my noble friend Lord Trefgarne for having asked this Question. I have seen both sides of this matter; I have been a small businessman and I have been involved in
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providing finance to small businesses. I do not want to say too much about what brings people to create businesses and what makes them work all the hours that God has given in order to pay all their money to the VAT man. I want to say briefly that what matters is the environment that the Government create; how well the economy is doing (that seems to be picking up now); how light a burden of regulation we can get away with (the Government are tackling that not least through the raising of the VAT threshold in the Budget); how the entrepreneur is valued in society (that has been one of the great changes during the past 14 years); and the regulation of the balance of power between small and large businesses.
In that context, I mention particularly the burden of commercial leases and the way in which they are structured at the moment. I hope that the Government will find time to tackle that. I also wish to mention the payment of debt. I remember one particularly poignant experience when I went into the office of the managing director of a company that I was considering investing in. I was shown two letters. One was his letter to a large company about a debt of £500,000, which was six months overdue, begging to be paid. The other was a solicitor's letter from that same large company threatening action over a debt of £500, which was two weeks late.
I want to confine my main remarks to the help that the Government can provide in financing and advising small businesses. First, I want to say what I believe they cannot do—that is, to help to get money out of institutions and banks. As my noble friend Lord Caldecote said, there is a problem with institutions. Their cost structures do not allow them to invest less than £500,000. I do not think that there is any way in which any government will ever change that. The only exception to that rule is 3i because of its own particular size and structure.
The only thing that the Government could do, which would have many other advantages, would be to alter the tax system in some way so that those great investing institutions which benefit so much from the tax system would be constrained to have a view for the long term rather than the short term, if they are to receive those tax incentives. As regards the banks, I do not think that we should expect them to invest much in small businesses, either. They are businesses which take their depositors' money and their depositors expect them to invest it safely. Small businesses are inherently high risk because they are dependent on one or two people.
There are two sets of circumstances in which banks can invest in small businesses. The first is when they have some risk capital of their own and have shareholders' funds set aside to do that. That is not the situation in the UK at the moment. I do not see any way in which the institutions are going to provide a lot of money to banks to invest in small businesses. The other follows the pattern in the United States where banks are local, where they are drawing their deposits from people who have an interest in the businesses in their community thriving and where they are prepared for the banks to take extra risks for the sake of the community.

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We have abandoned that position in the UK. There is no sign of our current structures allowing local banks to develop.
So let me now concentrate on what I believe the Government can do. It can help with training, help with the tax system and support the voluntary sector. Much training is needed by those who run small businesses. No one who is starting up in business comes to it perfectly equipped with all the skills that are required. They have no back-up within their own organisations and no one to whom they can turn for advice. They need to be able to go somewhere to learn how to market better and how to handle their personnel problems better.
What I hope the Government will do—and I know they are doing a great deal already—is to use the further education sector more. Following the Education Act 1992, that sector is transforming itself into an entrepreneurial and an effective provider of industrial training. In a recent survey carried out in my locality, 68 per cent. of individual entrepreneurs said that they would turn to their further education college for training, and only 5 per cent. said that they would turn to any offshoot of the TEC.
Secondly, as regards taxation, I am delighted that the Government have not been put off by the failure of the business expansion scheme which, to look back on it, was open to abuse and distorted too much the process of investing in real businesses. I hope that the Government will learn from that failure and concentrate on keeping the substitute small and on keeping the focus on amounts of less than £250,000, where the shortage is. They must keep it simple, make easy the tax process and other processes which must be gone through, and keep it commercial.
There are reasons why 3i adopted its investment structure and why it uses a mixture of loans, convertible preference shares and a little equity. It is because most small businesses are neither successes nor failures. Most small businesses trundle on happily for years, looking after their proprietors and one or two others. Investors need a way of getting money back out of those companies. That is what the loans and convertible preference shares are for. If you disallow tax relief on those forms of investment, you make most investments failures; and that is one of the main problems with the business expansion scheme.
I turn to the voluntary sector. The Transport and General Workers Union, in what I am glad to learn we are now allowed to call Pembrokeshire, has inspired a cashless lottery. That lottery operates not by selling tickets to the public but by persuading them to subscribe by way of a banker's order or through their pay roll. It is attracting thousands of local supporters who are happy that their money should be used to support local businesses. A team of local people who know the area and the people in it will decide which businesses should be lent money from the resulting fund. What is happening there is a renaissance of the local lender; the role that the banks have abandoned. I hope that the Government will watch this initiative very carefully and, if it proves successful, encourage its replication.
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My Lords, I turn from Wales to His Royal Highness the Prince of Wales to the Prince's Youth Business Trust, which he founded and which he leads. Last year the Prince's Youth Business Trust gave advice to 25,000 people on how to set up their own business. It has funded 15,000 new businesses, mostly ones which no one else would fund, founded by young, inexperienced or jobless people. Of those businesses, 65 per cent. survived three years or more. That is an astonishing figure. If those businesses had been founded by people with experience, 25 per cent. surviving three years would have been good.
The reason why the Prince's Youth Business Trust does so well is that it has not only a staff of 240, many of whom are seconded from industry, but a network of 6,000 successful business people who assist in setting up the business, who continue giving active advice in the following years; and this support, which no other institution can provide in the same quantity, and which many are not equipped to provide, makes all the difference to the success of those businesses.
The greatest beneficiary of the Prince's Youth Business Trust is the employment department. When His Royal Highness was raising the funds for it in celebration of his 40th birthday, the employment department agreed to provide a £1 revolving loan for every £1 that was raised from the public. Through that, the employment department has saved a great deal in unemployment benefit because the Prince's Youth Business Trust concentrates on people who are on the dole.
The employment department would have benefited substantially even if none of the loans had been repaid; but many of them have, and the employment department has benefited twice over. I hope that my noble friend will confirm that the Government recognise the extraordinary qualities of this trust, the way in which every £1 that the Government give to it saves the Government a great deal more, and will confirm that they intend to continue to give the trust all that it can use.
The same of course will apply to the local enterprise agencies, which were mentioned by the noble Lord, Lord Weatherill. What makes the difference is the help of local businessmen, the involvement in their giving advice, and I feel that the most effective way that the Government can help small businesses is to encourage and fund these local agencies which can draw on resources that are not otherwise available.
I realise that in the course of this speech I have asked my noble friend to get help from five government departments—the DTI; the Departments of Employment and the Environment; the Department for Education and the Treasury. That is a tall order for a small business Minister but one that I am sure he will be able to fulfil.
7.53 p.m.
The Earl of Dundonald: My Lords, I too welcome this debate. I thank my noble friend Lord Trefgarne for introducing it. I regret to say that I shall be repeating a great deal of what he said in his excellent speech, although I shall say it in a slightly different way.

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I pay tribute also to the extremely interesting and informative speech made by my noble friend Lord Lucas. I found it fascinating, and I am sure that other noble Lords did too.
First, perhaps I may say how welcome is the Government's refreshing approach to small businesses and how delighted I am about how far the Government have moved in the past year in addressing themselves to the problem of assisting small businesses. I should like to single out a number of points: first, the DTI one-stop shops; secondly, the local enterprise trusts, which are now better supported and in more diverse areas; the EIS, which is much welcomed; and venture capital trusts on which I, like many noble Lords, look forward to receiving further details in the new year.
At this stage, I should declare an interest. I am a director of a number of small businesses, in particular a company which is now, I am delighted to say, in receipt of a large amount of direct government support from the DTI. The company is involved in high technology, cutting edge technology, in a joint venture with the DRA at Malvern. Therefore, my experience of small businesses is limited but fairly pointed in the direction of technology companies.
I should like to give a summary of the importance of small business to the United Kingdom. The point has been made on a number of occasions this evening. There are over 2 million self-employed people in the UK, and there are more small businesses per capita here than in any other European country. The hope is that today's small businesses will be the big businesses of the future. It is critical to the wealth creation base of this country that we support existing small businesses and start-ups.
I wish to give a synopsis from my personal experience of the problems from which small businesses suffer. The first, mentioned by many noble Lords, is that they are unquoted. There is therefore no ready market in their shares. They are generally under-capitalised which causes cash flow problems. They are far too dependent on the lending institutions, in particular banks, for finance. That is because they have no real access to the financial markets of the City. The owners of small businesses in the main wish to hold on to 100 per cent. of the business rather than sell a percentage to other investors. To do so would improve the capital base of their companies but that is not usually the way they see it. Lastly—a matter not so far mentioned—they tend to have a limited knowledge of overseas markets. In essence that is because they are small businesses and their business activities are focused upon the UK.
Some problems are self induced but a number are not. I shall give reasons. As a number of noble Lords said, there is a reluctance by banks and institutions to place money in unquoted companies for expansion or start-ups, except in exceptional circumstances when an enormous amount of collateral cover is provided by the individual company concerned. There has been a limited source of venture capital in this country for start-ups, in particular of technology companies.
When venture capitalists get involved in start-up situations, they are very greedy. They expect, typically, an internal rate of return of between 35 and 70 per cent. I stress the figure of 70 per cent. because that is what
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they are looking for if investing in technology companies in this country. I believe firmly that if this country is to have a future, we must invest in technology companies. If the basis of making that investment decision is a 70 per cent. IRR, most people arid most companies would do better to board a plane to the west coast of America and speak to any number of venture capitalists in California who will not be looking for such a greedy return.
I should like to presume to make some suggestions for small businesses and the needs they may have. We need to convince owners of businesses in this country to give up some of their equity in order to build their balance sheets for the future. That is a cultural problem which does not exist in America. It is a problem the Government should spend some time trying to address.
We need to encourage banks to lend to start-ups: they are not prepared to do so at present. They are rebuilding their own balance sheets. Somehow we need to encourage them back into the market. Venture capitalists need to be attracted back into start-ups and particularly into technology companies. From my own experience, I can tell your Lordships that there are only four venture capital companies in the country that invest in high technology stocks. That is a tiny number. I can also say that the amount of money that they put in is less than £5 million a year which, I am afraid to say, is pathetic; there is no other word for it.
As I said, small businesses need much help in addressing overseas markets. I would love to see the Government become more involved. I know that they are doing so through the one-stop shops. However, my hope is that they will continue to do so and perhaps push their involvement further.
We need to provide investors with a clear exit route from small businesses in order to encourage them to invest in the first place. In the United States and in North America generally, there is a very clear exit. They can float their company on NASTAC, they cart go to Toronto or, alternatively, Vancouver. It is possible to raise three million dollars almost immediately; there is no problem. However, that cannot be done in this country because of our over-regulated stock market and the entrenched views of the City of London. Those concerned do not wish to give up their market-making position.
Perhaps I may give the House an example. I do not know whether noble Lords are aware of it, but the Vancouver market is a completely transparent market. It has been somewhat discredited by people, but it is still used. Noble Lords may be interested to know that some of the principal traders on that market are British institutions. Therefore, there is no reluctance on the part of British institutions to invest in small companies. However, they need to see an exit route where they can trade the shares. If we were to see something that was genuinely transparent, I believe that it would greatly improve the situation. I would welcome some positive thoughts on the matter from my noble friend on the Front Bench.
I believe that the Government have done a great deal thus far. As many noble Lords have said, the EIS is of tremendous importance. I hope that it will he the success

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that we all wish to see. However, I suspect that it will not have enough up-front tax benefits for investors to overcome the cultural problem of investing genuinely in risk-reward situations. If it does not happen, I hope that the Government will keep close tabs on it and that they will, perhaps, be encouraged to change the up-front tax breaks if enough people are not attracted into the scheme. I should welcome more details on the venture capital trusts in due course.
I hope that DTI one-stop shops will concentrate on the investor-equity match against business opportunities and assist small businesses with overseas markets. I have a few further suggestions to make. I have mentioned the principal one; namely, the exit route. The third market and the USM did not work in the City. I like to think that other countries have got it right and have managed to create markets that genuinely work. I commend the North American model to the Government. I sincerely hope that that is something that they will seriously consider. If we can provide people with an exit route, I believe that we shall encourage more to invest in genuine start-up situations.
I suggest that one of the ways of encouraging banks and institutions back into the lending market is to provide them with some form of tax breaks. I know that that is anathema to the Treasury, but it may be a means of encouraging start-up situations. Perhaps my noble friend can give the suggestion some thought.
I hope that the Government will put increased effort behind the enterprise companies they have set up. There is certainly a culture in Scotland among some local enterprise companies that it is really a question of providing capital in order to create jobs. There is the concept that the more jobs one creates per pound put in constitutes the best form of investment criteria. I believe that that is changing. I am not sure, however, that it is changing fast enough. I hope that the pace will be forced.
In conclusion, I should like to repeat that I believe the Government have done a great deal so far. However, let us not lose the momentum now. Let us try to continue to improve the climate for young businesses to enable them to survive and flourish in the future.
8.5 p.m.
The Viscount of Falkland: My Lords, I too thank the noble Lord, Lord Trefgarne, for giving me the opportunity to speak in a debate on small businesses. I am also grateful to my noble friend Lord Ezra who would normally be dealing with the matter but who is not available today. I have had quite a lot of experience in small businesses, though possibly not as much as my noble friend.
As one so often does in your Lordships' House, I have found this rather late and short debate absolutely fascinating; indeed, I have not been bored for one moment. It has been an invigorating debate and, if I may say so, some of the contributions made by younger noble Lords have been particularly expert and especially interesting. I believe that that says a great deal for your Lordships' House. I hope that people outside will take note of it.
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Of course, as the noble Lord, Lord Trefgarne, said, our great industrial history started with small businesses which, in many cases, became large ones and ultimately the backbone of our great industrial empire and part of our culture. I believe that it is correct to observe that many of the qualities and attributes of inventiveness and flexibility which formed part of that great industrial expansion, together with the strong entrepreneurial spirit, have probably been more conspicuously successful in small businesses than is the case in large businesses. That was often because when they became too large they became submerged—sometimes by inertia, lack of foresight, and the stubborn refusal to face change. All of that could and did lead to labour problems and the failure to attract investment which led quickly to grave problems of uncompetitiveness, especially in world markets. A good and conspicuous example of that—and it will probably be thought that I am saying this just to make a particular point—was the great motorcycle industry in which noble Lords know I take a lively interest.
Today there is still the inventiveness and entrepreneurial spirit and many small businesses are formed in a highly technological age by bright, young and resourceful people. However, unhappily—as has been mentioned—too high a proportion of those businesses fail and good ideas are wasted. As the noble Lord, Lord Trefgarne, pointed out, that is sometimes due to poor preparation and planning and poor management skills, even though there is a correctly identified need for the goods or services which are to be produced. Too often the failure is due to an environment which puts too great a burden on inexperienced businessmen entering into such ventures. It is here that the Government obviously have a most important part to play by creating the right environment and removing unnecessary burdens on new businesses.
There are two main issues that I should like to cover to which reference has already been made. However, I hope that I can produce one or two points that are new to the debate. First, there is obviously the question of finance; and, secondly, as has already been mentioned, especially by the noble Lord, Lord Trefgarne, there is the enforcement or the encouragement to pay outstanding bills.
So far as concerns finance, it seems to me from my experience that young entrepreneurs who go into business are often, if I may say so, because of the nature of their energy and their entrepreneurial spirit, somewhat autocratic and stubborn in some areas. An example of what I mean was given by the noble Viscount, Lord Caldecote, who quite rightly said that one often comes across such a situation. People stick stubbornly to their 100 per cent. or their 90 per cent. of their shareholding and are reluctant to part with any of it. It is hard to persuade them to see that it is better to have 51 per cent. of a very good business than 90 per cent. of something which will probably fail. That is a most important point.
I now come to what I regard as the most important issue. At the moment I am visiting a company that has just been set up and I know it will have problems as regards the point I am about to mention. When

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companies start out they have difficulties in obtaining finance. They are short of finance. Entrepreneurs are often not businessmen. They are frequently what one might call boffins. Some boffins have commercial expertise but others, conspicuously, do not. They seem to be concerned more with the positive net worth of the company rather than its cash flow. I suggest that many small business failures are connected with improper control of the cash flow which, put in its simplest terms, is a matter of watching carefully what comes in and what goes out. Companies need experienced professional advice in that situation, but that advice is expensive. I believe that many people who start businesses do not consider expenditure on such professional advice to be a high priority. They feel that they can regulate these matters themselves or that they can get an unqualified person to regulate them. In my experience, businesses quickly run into trouble by doing that.
As has been said, many small businesses have borrowed finance from banks. Many speakers have said how difficult it is to attract investment into a company. As the noble Earl, Lord Dundonald, said, the criteria for high technology by venture capitalists are strict and the terms are harsh. In the past, government finance schemes have, in my view, been too oriented towards tax incentives. I hope the noble Lord, Lord Strathclyde, will comment on that point when he replies to the debate. It would be a great help if the Government provided companies that meet the necessary criteria with loans that are repayable over a number of years. I believe that that could be a possible solution in certain situations. A company having that additional money would gain additional flexibility. The company could then see its way clear to spending some money on obtaining proper professional advice to control its expenditure; for example, on research and development. That is often one of the main reasons for running out of cash.
A point that I believe has not been mentioned tonight is that when companies using new technologies start up they often have a key man who is involved with the new technology. I do not wish to be pessimistic about these matters, but we all have to take care of our personal affairs as regards making a will and other such matters. Where companies have such a key man, it is essential they take out "key man insurance". Many companies say they cannot afford such insurance. However, if that company's key man is knocked over by a bus on his way to work the company may well be finished as there is no one to replace him and develop the product that has been planned. That is another expenditure which companies that are starting up often cannot afford. I hope the Minister will mention a different approach as regards government support for new businesses.
I now turn to the matter of outstanding bills. I agree with what the noble Lord, Lord Trefgarne, said on this issue. It would be much better to have a code of practice which could achieve the results that we all want as regards payment of outstanding bills. Some £50 billion of unpaid bills are outstanding to companies—not just small businesses—in this country. That has an enormously adverse effect on companies' cash flows. I am told by my noble friend Lord Ezra—I have no way
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of confirming this—that our companies are the worst payers in the European Community, or at least among the worst.
The Government themselves were guilty of late payment of contracts, but I believe matters have improved dramatically since they gave instructions to all their departments to pay promptly. However, the Government seem reluctant to introduce legislation on this issue. The noble Lord, Lord Trefgarne, may be right to say that statutory legislation may not be the, way to tackle this issue, but the payment of outstanding bills is a grave matter that needs to be corrected, I hope the Minister will comment on that aspect. Voluntary codes have been tried as regards this matter, but so far they have failed. Outstanding bills are an inhibiting factor for businesses and some businesses are pushed under because their bills have not been paid. I look forward to hearing the Minister's reply to what has been a fascinating debate.
8.15 p.m.
Lord Ewing of Kirkford: My Lords, I join all your Lordships who have contributed to this debate in thanking the noble Lord, Lord Trefgarne, for tabling the Unstarred Question which has allowed us to hold this brief debate. I hope sincerely that the message does not go from this House that the brevity of the debate reflects our strength of interest in small businesses, because that is far from being the case. In my view this debate—until I rose to speak—has been of a high standard and it illustrates a deep concern for the well-being of small businesses throughout the country.
Before I move to the burden of my own remarks I wish to refer to two points. One was made by the noble Lord, Lord Lucas, in relation to the Transport and General Workers' Union scheme in Pembrokeshire. It has always stuck in my mind that one of the greatest successes in this country, Girobank—albeit it is no longer a small business but a large enterprise—was sold by the Government for an enormous profit. That enterprise was the brainchild of the trade union movement. The noble Lord, Lord Strathclyde, has a furrow on his brow. He is obviously not too well aware, of the history of Girobank, which was the brainchild of the Post and Telecommunications Union. This is another good example of the trade union movement inspiring industrial development. I do not make that point to be partisan but rather to seek to encourage the Government, through the noble Lord, Lord. Strathclyde. to accept that there is an expertise across the whole of British society which can contribute to the well-being of small business throughout this country. That expertise is not confined merely to one sector of British society.
The other point I wish to take up from the debate is that made by the noble Earl, Lord Dundonald, in relation to the local enterprise companies in Scotland. They have not been the success that the Government had hoped, and indeed the Select Committee on Scottish Affairs is to conduct an investigation into the activities of the local enterprise companies throughout Scotland. One or two of them have been heavily criticised by auditors appointed to investigate the way in which these local enterprise companies have been run. However, I shall

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rest my remarks on the local enterprise companies there because of the inquiry that is to take place by the Select Committee on Scottish Affairs.
I turn now to the Labour Party's position on small businesses. On 3rd November this year the Labour Party published its discussion document in which a number of ideas were floated which sought to help the well-being of small businesses throughout the United Kingdom. On 10th November a conference was held which was opened by the Leader of the Labour Party, John Smith. I am pleased to say there was participation in that conference from the CBI, the Small Business Council, the Midland Bank, the Forum of Private Business, the National Federation of Self-Employed and Small Businesses and from a number of other organisations which would not normally be identified with the Labour Party.
I make that point because I believe that it is important that we listen to what small businesses and those who advise them have to say rather than dictating to small businesses what we believe is good for them. One of the purposes of the Labour Party's discussion document, as I say openly and honestly, is to seek the views of small businesses and those who advise them so that we can formulate a policy for small businesses against the background of the widespread discussion in which the Labour Party is now involved.
The experience of Europe proves conclusively that any vibrant economy badly needs a vibrant small business sector. There was a time in this country not so long ago—and I confess my own guilt—when we all thought that big was beautiful. It is interesting to note that some large companies—ICI is a good example—are now breaking themselves up into much smaller units. That leads me to the conclusion that in any vibrant economy the small business sector is vital.
It is an astonishing fact that 97 per cent. of the companies in this country employ fewer than 20 people. I do not believe that that fact has been grasped either by the business sector or the community at large. As the noble Lord, Lord Weatherill, said, companies employing fewer than 100 people are responsible for 20 per cent. of the turnover in this country. That illustrates the importance of the small business sector.
I am not partisan to the extent that I do not recognise that in their recent Budget the Government have given some help to the small business sector. However, at the end of my remarks I want to leave the Minister with a question about one of the promises that was made in the Budget which the Federation of Small Businesses now claims was misleading.
Mention has been made of the question of late payment. The noble Viscount mentioned the Government's position. I recognise that the Government have instructed their departments to pay within 30 days. I believe that that ought to be extended and that the Government ought to impose an obligation on all public bodies to pay accounts within the same 30-day period that they have now imposed on their own departments.
There is a case for saying that part of the qualification for the British Standard certificate BS 5750 should be a requirement that accounts are paid on time, within 30
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days or certainly within a reasonable period. BS 5750 has nothing to do with the quality of the product which a company produces. It has everything to do with the quality of the management of that company. Surely a test of the quality of the management of a company is how promptly it pays its accounts.
There may well be a case for introducing a system whereby companies indicate in their annual report and accounts their policy in relation to the payment of accounts. As the noble Viscount said, the question of late payment is a very serious matter. I accept that the Government realise that it is a serious matter and are trying to do something about it. My comments are designed to leave with the Government some ideas as to how the whole question of late payment ought to be tackled. It is a very serious matter indeed.
I turn now to the financing of small businesses. As the noble Lord, Lord Lucas, said from his extensive experience, there is a major problem. I do not join in the chorus of condemnation of the banks either. The banks naturally see small businesses which are starting up as a risk and they do not involve themselves greatly in risks. The competitive nature of banking in this country at present puts small businesses at a distinct disadvantage when it comes to attracting finance. What small businesses need is not short-term finance which can be withdrawn almost at a day's notice but long-term security so that they can plan their development for some years ahead. The problem for small businesses in this country has been that they have been unable to plan ahead for any decent length of time. That is one of the main reasons why Great Britain has a poor record in growing small businesses into medium-sized businesses; it is the uncertainty of the availability of finance.
I have no doubt that the noble Lord, Lord Strathclyde, has been advised by the researchers employed by Central Office that the Labour Party document floats the idea of a private-sector managed investment fund in order to provide the finance which small businesses need to be able to plan on a long-term basis. That is one other aspect which we should consider.
I suggest to the Minister that the DTI should make a study of our experience in the recession. I join those who hope that we are coming out of the recession. All my political life I have said that I would far rather contest a general election in conditions of full employment and a vibrant economy so that we can discuss other issues—moral and social issues and all the other issues which affect people's daily lives—rather than go on the hustings and discuss high unemployment and the resulting tragedies which we have seen over the past 14 or 15 years.
One of the experiences of the recession has been the almost indecent haste to push small businesses into bankruptcy at short notice. We ought to look at our insolvency laws to see whether something can be done to protect small businesses, particularly in periods of recession. As a constituency Member of Parliament for 22 years, my experience of small business has been in trying to protect people whose homes have been sold because their businesses have been put into bankruptcy. I do not suggest that we should create a situation in

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which people with small businesses can divert all their resources into houses that become palaces in order to protect their businesses. However, there ought to be some level of protection for the home of someone who has taken a risk in order to provide employment. Therefore we should examine our insolvency laws.
We ought also to look at the possibility of a moratorium law in this country under which a small business could apply to the court to delay debt collection in order to allow the possibility of that small business being restructured. The court itself would decide the period that would be allowed for the company to be restructured.
The final point that I want to leave with the Minister is that raised by the Federation of Small Businesses, which claims that the Budget was misleading on the question of the statutory sick pay scheme. The Government indicated in the Budget that the total burden for statutory sick pay will be transferred to companies. When that scheme started in 1980, the Government bore 100 per cent. of the cost. In 1990 that proportion was reduced to 90 per cent. Now the whole burden is to be transferred to the employer.
Small businesses are claiming that even the 1 per cent. reduction in the employers' national health insurance contribution will not be sufficient to compensate them for the cost of meeting the sickness pay arrangements that have been in place and continue to be in place. They make the point in particular in this year when there has been a flu epidemic. Small businesses employing fewer than 20 people have been hard hit. Bill Anderson, the Scottish secretary of the small business federation, has been particularly critical of the Government for misleading the small business people on the promise that was made in the Budget.
I conclude as I began, by thanking the noble Lord, Lord Trefgarne. I look forward to hearing the Minister's reply.
8.30 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Strathclyde): My Lords, it is a great pleasure to respond to the debate on behalf of Her Majesty's Government and to reply to the Question put down by my noble friend Lord Trefgarne. It is a welcome opportunity to discuss the subject of small firms; their success; their financing requirements, and so on. At the same time, I should like to welcome all those who have spoken. I join with the noble Viscount, Lord Falkland, and others in saying that it has been an extremely high quality debate. The brevity of the debate will not lead anyone to believe that no one has a great deal of interest in the subject.
I welcome, too, the contribution of the noble Lord, Lord Ewing of Kirkford. It is the first time that he and I have parried across the Dispatch Box, and I enjoyed his professionalism in making his speech. It was, of course, that very professionalism which allowed him to keep a straight face throughout the course of his discussion. The Labour Party discovered small firms on 3rd November of this year. For years they have decried
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the existence of small firms, falling at the feet of the trade union barons who payroll the Labour Party. But I shall come back to that subject in a moment.
Small firms are the seedcorn for future large companies. They are the companies which provide the enterprise and the innovation for our economy. The noble Viscount, Lord Falkland, and my noble friend Lord Caldecote are absolutely right in saying that they will provide the growth in terms of employment and financial growth for the future. But it is not just Government who help small firms to grow. It is also the private sector. I salute the work of the noble Lord, Lord Weatherill, in his former constituency in Croydon in setting up the Croydon business ventures, and my noble friend Lord Lucas who mentioned the excellent work carried out by the Prince's Youth Business Trust which has given so much hope to so many small businesses up and down the country.
The Government's main concerns are to create the essential conditions in which business can develop and flourish through sound finance, low inflation, low interest rates, free trade, minimised burdens on business and a flexible labour market. If the Labour Party is so serious in supporting policies for small firms, I hope that it, too, will subscribe to those policies.
To help achieve our aims, we have a range of specific measures which are relevant to the creation and development of small businesses. The first is Business Links—formerly called one-stop shops, to which many noble Lords have referred—with the provision of quality services delivered locally for businesses to provide them with the information they need, based in one location, providing expert help. The first of those Business Links has opened over the past few weeks. We hope to have some 40 Business Links in operation by the middle of next year, and 200 within two years. The partnership organisations bring together the training and enterprise councils, the chambers of commerce and the local enterprise agencies. They are designed to help riot just with existing companies but also with start-ups. Perhaps I may say to my noble friend Lord Dundonald, that it is my wish that they should play an important part in developing overseas markets and providing the information that so many small firms need in order to take that step to export.
We also have other initiatives. There is our continuing support for training and enterprise councils, the DTI's enterprise initiative, the business start-up scheme, and the loan guarantee scheme which has been providing finance to small firms since 1981 and was substantially improved in July of this year. I welcome the words of my noble friend Lord Trefgarne on that subject.
I am sure that the House will agree that the recent Budget was excellent for smaller businesses, containing many positive measures to encourage their growth and help them to achieve their potential. I was particularly pleased by the measures to address the financing needs of smaller businesses. I refer to the new enterprise investment scheme which will, at last, include investors who are also directors and managers. The details of those schemes and the venture capital trusts are still being drawn up. I look forward to seeing the closer

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detail shortly. There is, too, the extension of capital gains tax rollover relief. Perhaps I may say this to the noble Lord, Lord Ewing of Kirkford. If the Labour Party is serious in its encouragement to small firms, it will have to reform in a wholesale manner its treatment towards capital taxes, inheritance tax and gains tax.
All those measures will help to provide the smaller amounts of equity that can currently be difficult to secure. The noble Viscount, Lord Falkland, suggested that rather than financing companies through the tax relief on those schemes that I have mentioned, it should be through grants. As he will know, there is some direct help but it is minimal. Generally, tax incentives are better. I cannot support the view that civil servants should decide who receives grants from the taxpayer.
I am also particularly pleased with the deregulatory measures which were announced in the Budget. I refer to the relaxation of audit requirements for small companies, the agreement to look at the administrative complexities of PAYE and national insurance, and the raising of the VAT and corporation tax thresholds. A subject which has raised a great deal of comment this evening is the publication of the DTI's consultation paper on late payment. That paper seeks views on the legislative option of a statutory right to interest but also includes many other possibilities. One factor is clear: that the statutory right to interest is in itself no panacea. It is an extremely complicated issue, which is why we have brought forward that consultation document. The Government have never ruled out the possibility of legislation; but we have been concerned that there is a downside which may be damaging for small businesses. It is therefore right that at this stage we keep an open mind. I am sure that the consultation process will enable us to make a more informed decision on the next steps. If it has not been done, I shall ensure that a copy of that consultation document is placed in the Library.
I cannot confirm to my noble friend Lord Trefgarne what has happened to the Ministry of Defence's code of practice. I am sure that it is still in existence. However, I can tell the House this evening that I, as small firms Minister in the Department of Trade and Industry, have an outstanding commitment to all small firms which have not been paid either by Government, government bodies, or the top 100 stock exchange companies. Those small firms can write to me; and I shall write direct to the chairmen. I can tell noble Lords that that normally has the desired effect.
Despite the measures already in place and those announced in the Budget, the Government are not complacent about the provision of finance for industry in general and small and medium-sized enterprises in particular. Access to adequate finance is vital to all businesses, and at a time when the economy is recovering it is vital that the employment-creating and producing base is not denied the resources it needs.
The noble Lord, Lord Weatherill, was absolutely right when he said that the interest rate reduction was most welcome. The reduction over the past 18 months has done a great deal to improve the competitiveness of British industry. He and other noble Lords were also right when they said that British business relied too
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much on short-term overdraft finance. Therefore, the Chancellor of the Exchequer has asked the Economic Secretary to the Treasury, Anthony Nelson, to examine the contribution which the City and financial institutions make to facilitating the growth of commerce and industry in this country. His review is assessing all the current sources of funding for industry with the aim of identifying whether there are any market imperfections which may distort the flows of finance and, if there are, to consider how the present arrangements can be improved. His review is particularly to look at those lower levels below £½ million, as mentioned by my noble friend Lord Caldecote.
As part of the review, Mr. Nelson and Treasury officials have embarked on an extensive programme of visits and meetings. He is talking not only to banks and other financial initiatives but also to business, both large and small. The initiative will help to inform the consideration of public policies that bear on the provision of finance for industry. Already a number of broad themes are emerging. Short-termism is a perennial concern, and one question will be to ask whether there are institutional barriers to investment. Another common theme is the relationship between banks and businesses. Although often repeated, it remains true that the relationship between smaller firms and their banks is crucial to the provision of finance.
However, there still remain a number of concerns in this area. In order to tackle those, the banks are taking steps to improve the training of their managers and to understand better the needs and the perspective of industry. While on the subject of training, perhaps I may say to my noble friend Lord Lucas that the Government are working closely with industry to raise awareness of best management practice: for example, the Management Charter Initiative, Managing in the 90s and the Enterprise Initiative Scheme, which covers management and production, business planning and financial information assistance.
However, we should always remember that the problems are not always one-sided and small businesses in turn need to accept that banks are businesses too. The banks are also taking action to deal with the criticism that they too often lend on the basis of security offered rather than of the business proposition and that they are too risk-averse. For example, they have introduced better risk assessment techniques. Also, the Government will continue to seek to encourage more diverse financing for small firms, in particular to encourage less reliance on debt finance, especially overdrafts. Much greater use could be made of equity finance, both through institutions and informally through individuals. I understand the point made by my noble friend Lord Dundonald that many owners of small firms do not wish to sell equity. There is a cultural problem, and it is one that we shall have to tackle.
Perhaps I may finish by mentioning the TGWU initiative. If it is the sign of things to come from the trade union movement, surely it must be welcome. I thank my noble friend Lord Lucas for bringing it to our attention. It is an initiative at which the Welsh Office is looking closely, with a great deal of interest, and I hope it will be a great success.

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In the light of those remarks, I hope that noble Lords will acknowledge the positive steps which the Government are taking to encourage the right climate in which small businesses—both start-ups and established firms—can develop and flourish and the continuing steps we are taking to ensure that businesses are able to secure the finance that they need.
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I conclude by again thanking my noble friend Lord Trefgarne for initiating this debate and putting down the Question. I hope it is an area to which we may return soon.
House adjourned at a quarter before nine o'clock.