Lords Sitting of 21 October 1993

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Coventry.): The LORD CHANCELLOR on the Woolsack.

European Community: Descriptive Title
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
Whether they will confirm that, in the foreseeable future, the descriptive title "European Community" will continue to be used to identify each of the institutions named in Article 1 of the treaty establishing the European Community; to all committees and other bodies appointed by them and answerable to them; and to authenticate descriptively all decisions, directives, regulations, rules, recommendations, communications, logos, insignia and all other information material issued by and on behalf of the Community, to the exclusion of the term "European Union" in respect of all matters covered by the said treaty.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, the European Communities, that is the EEC, Euratom and the Coal and Steel Community, will remain in being after the Maastricht Treaty enters into force. They are not replaced by the European Union. No decisions have yet been taken on where it may be appropriate to replace "European Communities" by "European Union" as a descriptive title.
Lord Bruce of Donington: My Lords, I am most grateful to the Minister for her reply. However, is she aware that her right honourable friend the Prime Minister, in his definitive article in the Economist on 25th September, referred to the European Community no less than 40 times, of which five related to its future progress, and that not once was the question of European Union mentioned? Is the Minister further aware that there is a substantial caucus in Europe at present which has ganged up against the United Kingdom and which would wish to see a European Union established as an identity to the exclusion of the term "Community" as an ultimate means of weighting opinion in favour of a federal union of Europe?
Baroness Chalker of Wallasey: My Lords, I am aware of both points made by the noble Lord, Lord Bruce of Donington. I must make it clear that the Union itself has no international, legal personality. In more formal contexts, it must be clear that the member states are concluding agreements in their own names. Whatever phrase is used to describe the member states acting together in CFSP, it must be clear that it is the member states who take the decisions on the obligations.
Lord Hailsham of Saint Marylebone: My Lords, should we not be careful of being mesmerised by words and names? Are there not such organisations as the Church Union, the Western European Union, the National Union of Mineworkers and, indeed, many other unions and no one thinks that they deprive us of our essential liberties?
Baroness Chalker of Wallasey: My Lords, my noble and learned friend makes a marvellous point. Moreover, I do not think that anyone has ever objected to the Mothers' Union.
Lord Richard: My Lords, the Minister will no doubt have seen that in the Guardian today there is reference to the European Community and not to the European Union, especially as regards an allegation that the Government are throwing away the opportunity to create no less than 50,000 training places for the unemployed by failing to claim up to £100 million in grants which would be available from the European Community. Whether one calls it a "Community" or a "Union", can the Minister either confirm or deny whether that is true? I am sure that, with her customary assiduity and application to her job, she knows the answer.
Baroness Chalker of Wallasey: My Lords, the story in today's edition of the Guardian is both mischievous and inaccurate. The United Kingdom has not turned down any money from the European Social Fund. Despite repeated requests to the Commission for clear guidance, the Commission has so far failed to explain satisfactorily how it calculates the balance of money due to the UK at the end of individual annual programmes. Until the Commission does so, it is impossible for us to make an accurate forecast of future receipts from Brussels.
Despite the Commission's failure to respond, we decided that urgent discussions should, nevertheless, be put in train to identify a solution, thus enabling the UK to make full use of the funds that it has been allocated—and that we are busy doing.
Lord Stoddart of Swindon: My Lords, does the: Minister agree that there is a qualitative difference between the words "union" and "community"? Although words may not mean too much to the noble and learned Lord, Lord Hailsham, they mean a great deal to other people. Is it not the history of the EC that it has achieved power by ratchet effect? The word "union" will be used by the Federalists as yet another ratchet to achieve their full aim of a European superstate.
Baroness Chalker of Wallasey: My Lords, I believe that the noble Lord, Lord Stoddart, is wrong as regards his final point. As many noble Lords will remember, the term "European Union" was first put forward in the Stuttgart Declaration 1983 and then appeared in the preamble to the Single European Act. Perhaps I may remind the House that it was defined only for the first time in Article A of the Maastricht Treaty as follows:
"The Union shall be founded on the European Communities, supplemented by the policies and forms of cc-operation established by this Treaty".

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That applies to Titles V and VI referring to "common foreign and security policy and home and justice affairs. It is not the Trojan horse that the noble Lord, Lord Stoddart, seems to think it is. It is a way of referring to the Community as the body which is serviced by the Commission and the Union, which is wider than the Community.
Lord Barnett: My Lords, leaving aside the question of whether it is a union, a community or whatever, perhaps I may refer to the issue of the social fund. Can I take it that the Minister's reply to my noble friend Lord Richard means that the big issue of additionality in obtaining money from the social fund is not a problem for the Government and that they will find the additional funds to enable us to obtain that £100 million?
Baroness Chalker of Wallasey: My Lords, I am informed that the United Kingdom intends to make full use of the funds that it has been allocated. Therefore, the noble Lord must be right in his assumption.
Lord Bruce of Donington: My Lords, in view of the Minister's previous reply to my supplementary question, and reverting to the Question on the Order Paper, will she inform the House what action the Government propose to take in the forthcoming European Council to be held on 29th October if the proposal to use the term "European Union" is in fact proposed by the presidency and supported by other states? Will she undertake to veto the use of the term if it is proposed in that sense?
Baroness Chalker of Wallasey: My Lords, there is a sense in which I believe that the noble Lord, Lord Bruce of Donington, gets over-excited about this matter. The Union itself has no financial resources. The noble Lord has been most concerned with financial resources. That is why Article F3 cannot be used to obtain such resources. I believe that, as we have made clear on many occasions, what is decided in the European Council is a matter of what goes on the agenda and what the member states' governments decide. I do not see the dangers that the noble Lord envisages and I will bring his concerns to the attention of my right honourable friend the Prime Minister.
Lord Stoddart of Swindon: My Lords, does that mean yes or no?
Baroness Chalker of Wallasey: My Lords, it depends which of the many questions which the noble Lord, Lord Bruce of Donington, frequently asks me is being referred to by the noble Lord, Lord Stoddart.
Lord Stoddart of Swindon: My Lords, the noble Baroness was asked whether she would veto any suggestion by the presidency that the word "Union" should be more widely used. Will she do so or not?
Baroness Chalker of Wallasey: My Lords, as I believe I explained in my first supplementary reply, the word "Union" is defined in Article A of the Maastricht Treaty. In our many hours of long debates I made it clear that when the European Communities are further
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enhanced by common foreign and security policy and home and justice affairs they will be known as the Union; that is, the combined enterprise will be known as the Union.
Lord Mackie of Benshie: My Lords, does the availability of the £100 million depend on this country spending an equal or similar amount?
Baroness Chalker of Wallasey: My Lords, that is way beyond the scope of the original Question, but the matter will depend on whether the Commission can give us a proper answer to the questions that we have rightly asked about how it calculates the balance of moneys due to the United Kingdom.

BT: Video Services
3.12 p.m.
Lord Morris Lord Morris asked Her Majesty's Government:
Whether they intend licensing British Telecommunications plc to convey or retail video entertainment services to the public.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Strathclyde): My Lords, British Telecommunications plc is already licensed to provide a wide range of telecommunications services to the public. There has been speculation recently about whether such services could include what has become known as "video on demand". Her Majesty's Government's view is that BT's licence could permit certain types of video on demand service.
Lord Morris: My Lords, I am most grateful for my noble friend's Answer. Is he aware that it is perceived in many quarters that, should the measure he has mentioned come to pass, it would constitute a considerable breach of undertakings given to the many companies which have invested, and which propose to invest, billions of pounds in the telecommunications infrastructure in this country? Not only would that be jeopardised but the measure proposed would also encourage the maintenance of the old twisted copper-pair wiring, which is sitting in the ground at the moment, and which must be replaced as soon as possible.
Lord Strathclyde: My Lords, video on demand would constitute a new service and many technical, regulatory and commercial details are still unclear. However, if my noble friend feels he has a case that has not been heard by the Government, I should be interested to hear representations from all interested parties.
Lord Merlyn-Rees: My Lords, would such services be subject to the video recordings Act and to the British board of film control, which also statutorily controls video services?
Lord Strathclyde: My Lords, all contents of programmes transmitted via video on demand services would come under rules and regulations governing contents.
Lord Dormand of Easington: My Lords, whatever further decisions the Government may take in this matter, will they bear in mind—the noble Lord, Lord Morris, mentioned this—that massive investment has been undertaken by cable television companies? Will the Government also bear in mind that these schemes are in their infancy and nothing should be done to stifle that investment? As the Government often remind us, they are dedicated to consumer choice, and cable television, which incidentally almost always includes telephony, would add greatly to that choice. These are factors that the Government should take into consideration when dealing with this matter.
Lord Strathclyde: My Lords, the Government have certainly always supported consumer choice and indeed the choice that is supplied by cable television companies. The cable television industry in this country has been enormously successful over the course of the past few years and provides a most valuable service.
Lord Peston: My Lords, I am astonished by the Minister's reply. Surely, if we wish to satisfy consumer demand, the only criterion is competition. Why would the Government be a party to limiting any new entrant to this field by using licensing? Surely the Minister's correct answer is that the cable companies and every other company have to take their chances in the marketplace and if British Telecom can offer a competing service, the Government, far from worrying about licensing, should he encouraging it. Does he not agree with that?
Lord Strathclyde: My Lords, the noble Lord, Lord Peston, expressed the matter very well. I hope he did not misunderstand my earlier replies. We believe that British Telecom should be allowed to develop a new service, which is why I said in my original Answer that its licence currently allows it to do so.
Lord Peston: My Lords, the Minister seemed to take seriously the point made by the noble Lord, Lord Morris. With all respect, the noble Lord, Lord Morris, had a vested interest in that point, although not in a personal sense. The point was made that, because the cable companies have made a large investment in this area, the Government have some obligation to them. Will the Minister confirm that the Government have no obligation to the cable companies? The Government have an obligation to consumers who might wish to watch videos—I have no idea why they should wish to do so—to offer them a competitive service at the lowest price.
Lord Strathclyde: My Lords, I said to my noble friend Lord Morris that if the cable companies felt they had not been well heard by Government, the Government would continue to hear their representations. The comments of the noble Lord, Lord Peston,
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were correct. British Telecom is providing a valuable new service and providing consumer choice. That is right at the heart of government policy.
Lord Morris: My Lords, I am most grateful for my noble friend's replies. This is a wide and difficult issue. Will my noble friend be good enough to use his best offices, through the usual channels, to ensure that this difficult and complicated subject will be debated as soon as possible?
Lord Strathclyde: My Lords, if my noble friend wishes to table a Question for debate, I am sure that it will be considered.

Prisons: Overcrowding
3.17 p.m.
The Earl of Longford The Earl of Longford asked Her Majesty's Government:
Whether they still accept the principles of the Woolf-Tumim Report (Cm. 1456) following the Strangeways prison riot.
The Minister of State, Home Office (Earl Ferrers): My Lords, the White Paper Custody, Care and Justice, the Way Ahead for the Prison Service in England and Wales sets out the Government's response to the Woolf proposals. We remain fully committed to the policies in the White Paper.
The Earl of Longford: My Lords, I sympathise with the position of the noble Earl, who is such an acceptable performer here. He realises no doubt that what he has to say today is in total contradiction of the views expressed by the noble and learned Lord, Lord Woolf, whom the Minister appears to be praising in another part of the Answer. How does the noble Earl reconcile the statement he has just made with the comments of the noble and learned Lord, Lord Woolf, when he said:
"The Government's proposals were shortsighted and irresponsible"?
How can the Minister reconcile that statement with the statement he has just made?
Earl Ferrers: My Lords, I deeply appreciate receiving the noble Earl's sympathy. It is always welcome, but I am not certain why he was kind enough to express it today. I can assure him that there is no contradiction between the recommendations of the noble and learned Lord, Lord Woolf, and his recent suggestions, and what the Government are proposing. The noble Earl has plucked out a quotation and in so doing he has fallen into the trap that many newspapers fall into. Perhaps the noble Earl would be good enough to read the treatise of the noble and learned Lord, Lord Woolf, as a whole. He will find that what he is saying in his full treatise is rather different from the excerpts which people pluck out of it for their own aims.
Lord Allen of Abbeydale: My Lords, the noble arid learned Lord, Lord Woolf, made it clear that his Strangeways inquiry had persuaded him that overcrowding is the most corrosive influence on the prison system and that an overcrowded prison is an unstable

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prison. If the prison population continues to rise sharply—as the Government seem to wish—and the new prisons referred to by the Home Secretary are still years and years away, how will the Government cope with serious overcrowding, with all that that involves including, I am afraid, the possibility of further serious disturbances?
Earl Ferrers: My Lords, I do not believe that anyone would disagree that overcrowding is bad, corrosive and destabilising. That is why we have opened 12 prisons and provided 8,788 extra places since 1991. It is also why we intend to build a further six prisons. The purpose is to try to avoid the very problems to which the noble Lord, Lord Allen of Abbeydale, referred.
Lord Hailsham of Saint Marylebone: My Lords, should we not recall that overcrowding in prisons is not simply a function of the length of sentences imposed but of the conviction rate in contested cases? Is it not a fact that since about 1970 the conviction rate in contested cases in England and Wales has fallen from about 70 per cent. to about 40 per cent.?
Earl Ferrers: My Lords, my noble and learned friend is quite right. These are not matters which are capable of easy solution. Nobody has to go to prison if they do not misbehave. Prison ought to be available to remove people from society when they have done particularly bad things in order to protect the ordinary individual. It is not the Government's job to send people to prison. That is the job of the courts. But to make sure that sufficient prison places are available when the courts decide to do so.
Lord Harris of Greenwich: My Lords, is the noble Earl aware that the Prison Governors' Association has already drawn attention to its serious anxieties about overcrowding in the prison system? Is he aware that one consequence of overcrowding is likely to be once again sending prisoners to be housed in police cells? Does he accept that there is no point in Ministers saying that they want to have more policemen on the beat if hundreds of police officers are at risk of once again having to act as gaolers because of overcrowding in the prison system?
Earl Ferrers: My Lords, the noble Lord likes to attack the subject from a different viewpoint. He knows perfectly well that if there are too many people in gaols it may be necessary for prisoners to be housed in police cells. That is highly undesirable and it is something that we always try to avoid. That is why we are endeavouring to provide more prison places. That will continue in order to avoid the problems to which the noble Lord referred.
Lord Elton: My Lords, is it not also the case that a major contribution to overcrowding in prisons is the number of cases in which people are remanded in custody and the length of time those remanded in custody have to remain in custody awaiting their turn at the Crown Court? Will my noble friend ask his right honourable and learned friends to look again at the possibility of more offences being tried summarily
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rather than going to a jury and thus blocking the courts against the trial of more serious crimes for which suspects are remanded in custody?
Earl Ferrers: My Lords, I agree with my noble friend that the length of time people spend in custody determines and affects the number of people held in the prison system. That is one of the matters to which the Royal Commission on Criminal Justice addressed itself and was requested to address itself, the principle that justice delayed is justice denied. This is one of the reasons for overcrowding. Another is riots such as those which occurred at Strangeways and Wymott, when prisoners themselves deliberately put a number of prison places out of the system.
Lord Kirkhill: My Lords, is the Minister aware that the Council of Europe commission on torture reported recently, after some members of the commission had visited a number of United Kingdom prisons, that conditions in prisons generally in the United Kingdom are among the worst in Europe? How does the noble Earl respond to that comment?
Earl Ferrers: My Lords, we respond by trying to improve our prisons, which has been the case. One of the ways in which conditions have been improved is by contracting out, whereby the contracted out prisons can set a standard to which others can aspire. Before noble Lords opposite say, "Oh ! Oh ! Oh !", I remind them that in prisons which have been contracted out the amount of time spent out of cells is greater, the food is better and standards have been shown to be better. That provides a great incentive for other prisons to improve.
Lord Ackner: My Lords, given the widely held view that it is the threat of imprisonment rather than its imposition that acts as an effective deterrent, can the Minister assure the House that in the impending or future Criminal Justice Bill the Government will repeal Section 5(2) (b) of the ill-fated Criminal Justice Act 1991 and restore to the judiciary their previous discretion to impose suspended sentences? If not, why cannot that assurance be given?
Earl Ferrers: My Lords, in his keenness to know what is to happen after the Queen's Speech the noble and learned Lord has gone slightly outside the Question on the Order Paper. Of course the point which the noble and learned Lord made will be taken into account, but it would be improper of me to say exactly what is to appear in any Bill which might emerge.
Baroness Faithfull: My Lords, can my noble friend say whether in addition to the consideration given to the building and the problem of overcrowding the regime in the rebuilt Strangeways prison will also be changed? Does my noble friend agree that the regime at Grendon Underwood is such that there is less recidivism than among prisoners from any other prison in Great Britain? Would it not be wise to review the regime as well as the buildings?
Earl Ferrers: My Lords, I am sure that the regime will be considered. I know the interest of my noble friend Lady Faithfull in Grendon Underwood prison. I

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can assure my noble friend that having spent in the region of £100 million on the bricks and mortar of Strangeways we want to ensure that the prison works as well as possible. I would only say, particularly to the noble Lord who is concerned about the contracting out of prisons, that when Strangeways was market-tested an in-house bid from the prison system won the award to run the prison.
Lord McIntosh of Haringey: My Lords, is the Minister aware that the prison population in the North West—the area which includes Strangeways—is at present increasing by 500 a month? When the Home Secretary says, as he did at the Conservative Party Conference, that the success of our system of justice will no longer be judged by a fall in the prison population, does that not mean that the Home Secretary and the Government now propose to judge the success of their policies by a rise in the prison population?
Earl Ferrers: My Lords, the noble Lord always tries to find simple answers to difficult problems. He knows perfectly well that the real criterion as to whether there should be more people in prison is the amount of crime that is committed. When bad crimes are committed more people are likely to be sent to prison. There is nothing the Government can do. However, there is something that every single person can do, and that is to take steps to avoid crime and ensure that their colleagues, their neighbours, their friends, their brothers and their sisters do the same.
Lord Taylor of Blackburn: My Lords, is the Minister aware that even though the prison population in the North West is increasing it is not the population of the North West which is filling the prisons? The inmates come from all over the country and not just from the North West of England.
Earl Ferrers: My Lords, the noble Lord is quite right in that the prisons of the North West are becoming full. I am afraid that there will be quite a shift towards the southern part of Britain. The prisons there are less full and the only way to deal with the full prisons in the North West is to shove some of the prison population down to the South. It may be that some of those people who the noble Lord says are in the North when they should be in the South will find that they will soon be in the South.
The Earl of Longford: My Lords, is the noble Earl aware that the policy announced by Mr. Michael Howard, and supported (I am sorry to say) by the Prime Minister, who is even more highly esteemed, is in total contradiction of the policies announced by the past half-dozen Home Secretaries? And they were supported with much eloquence by the noble Earl in this Chamber. That policy is in total contradiction to the views of the judiciary which have been expressed publicly.
Earl Ferrers: My Lords, if I were to be discourteous to the noble Earl—I would not be—I should say that he was talking rubbish. However, I merely say that there is no change of policy. It is only a strengthening of policy. That policy is being strengthened to ensure that those people who commit bad crimes are dealt with properly.

Business
Viscount Ullswater: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lady Cumberlege will, with the leave of the House, repeat a Statement that is to be made in another place on managing the modern NHS.

Cardiff Bay Barrage Bill
3.31 p.m.
Report received.
Clause 1 [Construction of barrage etc. and other works]:
Lord Moran Lord Moran moved Amendment No. 1:
Page 2, line 27, at end insert:
("() The Development Corporation may riot commence the works specified in subsection (1) above, until and unless the Special Protection Area for the Lower Severn Estuary shall have been submitted, approved arid registered by the European Commission under the provisions of the European Wild Birds Directive of 1979.").
The noble Lord said: My Lords, this is a probing amendment. It is important that we should clarify further the question relating to birds and the Cardiff Bay barrage. The points were put clearly and cogently by the noble Lord, Lord Prys-Davies, at Committee stage. I do not wish to repeat them. However, I wish to clarify the position in the light of what the Minister then said.
The noble Lord, Lord Prys-Davies, raised the question of the relationship to Cardiff Bay of the judgment of the European Court on 2nd August in case C.355/90 EC Commission v. Kingdom of Spain. It is known as the Santona Marshes case. As the noble Lord pointed out, the RSPB believes that the case is relevant to Cardiff Bay. At Committee stage at col. 233 of the Official Report of 13th October, the Minister stated:"So far as can be judged at this stage, the circumstances of the Cardiff Bay are very different from those of the Santona marshes".
However, he explained that although there was not yet available an English language version of the Court's judgment, he was arranging for an English version to be prepared by the Foreign and Commonwealth Office. In due course it would be placed in the Library and would be available before Report stage.
I have had some difficulty. I have inquired from the Library. It was unable to find the judgment. However, I have just had handed to me in the Chamber the English version prepared, I believe, by the Department of the Environment. I have not had time to study it. I am told that there are two versions, one prepared by the Department of the Environment and one by the Foreign and Commonwealth Office, and that they are slightly different. I am also told that the covering letter from the Foreign and Commonwealth Office should have been deposited in the Library. The Library was unable to find it. However, I have had a note faxed to me by the RSPB. The document is entitled, "Points arising from case C.355/90: EC Commission v. Kingdom of Spain (the "Santona Marshes" case)". I have had time to consider the document only briefly. However, I note that in the covering note the Foreign and Commonwealth Office states:

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"The implications for the decision to exclude Cardiff Bay from the possible SPA in the Severn Estuary are not entirely clear. It may be that the margin of discretion in deciding the extent of SPAs has been reduced. Certainly if an area should be classified as an SPA the obligation to take protective measures for the ecology of such areas is said to arise even before designation".
That is an important issue of which your Lordships should take careful note.
Clearly none of us can pronounce with authority on whether the case against Spain is on all fours with Cardiff Bay. We have not had time to consider that factor. Moreover, as a layman I would not feel competent to pronounce on what is essentially a legal question. However, as I believe noble Lords know, a complaint has been made against the Government by the RSPB and other bodies. As I understand it, that is now being considered by the Commission. The Commission has not yet pronounced on it. When the Commission has made up its mind, it will then consider whether or not a reference to the European Court is appropriate. In those circumstances, I shall be interested to know the Government's view of the legal situation and whether they believe it right to proceed with the Bill until that complaint is upheld or rejected. That is an important and fundamental point.
Perhaps I may refer to remarks made by the Minister on the issue at Committee stage. At col. 232 of the Official Report of 13th October he stated:
"We are content to leave it to our statutory advisers, the Countryside Council for Wales, and to the RSPB to advise on the most appropriate measures to be taken".
In fact the Countryside Council for Wales, the RSPB and the JNCC advise that the Cardiff Bay should be included in a Severn Estuary special protection area. Government were not content with that advice and removed Cardiff Bay from the candidate site. To date they have failed to designate the remainder of the Lower Severn Estuary. The Government may be leaving the matter to the CCW and to the RSPB to advise upon, but they do not appear to be taking the advice that they are given.
At col. 233, the Minister also stated:
"of course, we shall do nothing to work against it",
meaning the Community wild birds directive. It is being argued by the RSPB and other conservationists that that is what the Government are doing. At col. 232, of the Official Report, the Minister stated:
"The Government and development corporation take very seriously the provisions relating to developing and conserving flora and fauna at all stages of the works authorised by the Bill".
That statement was welcome. The Government may have taken the provisions seriously, but they appear to have rejected them because the works at Cardiff Bay will not conserve flora and fauna. Effectively they will destroy what exists at present, as the Minister conceded at Committee stage.
Lastly, the Minister said, at col. 232 of Hansard, that:
"the development corporation has already indicated the measures it wishes to take by way of compensation for the birds".
It is true that the RSPB and other conservation bodies have helped to advise on a good design for the proposed new reserve on the Gwent levels, but they have never accepted that those measures are compensation. They have made that clear to everyone concerned. In fact the
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greater part of the proposed new reserve will provide for birds of a quite different type from those which will be removed from Cardiff Bay—primarily marsh birds, though I know that a small area in the new reserve is now being proposed as an inter-tidal area. That may provide for a small number of the birds. Those are the points that I wish to raise and I shall be interested to hear what the Minister has to say about them. I beg to move.
3.45 p.m.
Lord Prys-Davies: My Lords, I speak in support of the amendment which has been moved with clarity by the noble Lord, Lord Moran. The amendment raises an issue of great substance, as it involves our treaty obligations with the European Community. I should like to thank the noble Viscount, Lord St. Davids, for placing in the Library on Monday a copy of an English Language translation of the Santona Marshes judgment. The copy which I have seen is the copy prepared by the Foreign and Commonwealth Office.
The noble Lord, Lord Moran, has drawn attention to that judgment; it represents a major milestone. He also drew attention to the fact that the RSPB, supported by other organisations, has lodged a complaint with the Commission that the barrage would be in breach of the directive to which he referred. I am sure that the Government know very well what is the precise position in Brussels at this stage and they probably know that there is a meeting on Thursday of next week of all the representatives of the chefs de cabinet to consider whether the Commission should invoke infringement proceedings.
I wonder whether, in view of that development—if it be correct—the Government propose to press the Bill to a Third Reading on the same day as the meeting takes place. If they do, then the need for this amendment or an undertaking along its lines is extremely important.
When we discussed the amendment and a series of other relevant amendments in Committee, the noble Viscount informed the Committee that the judgment in the Santona case had no implications for Cardiff Bay. At col. 234 of Hansard for 13th October 1993 he said:
"I can confirm that it is our understanding that the case has no bearing on our proposals for Cardiff Bay".
I am sure that that was based on the advice of Welsh Office lawyers. However, a letter written on 12th October to the RSPB by a Welsh Office official, on behalf of the Secretary of State, was more cautious in drawing conclusions. The official said to the RSPB:
"while the RSPB's complaint about the decision to exclude Cardiff Bay from further consideration of the proposal to designate the Lower Severn Estuary as a Special Protection Area remains unresolved in the EC Commission, it would not be appropriate to comment. However, as far as can be judged at this stage the circumstances of Cardiff Bay are different from those of the Santona Marshes".
That is a more cautious approach.
A minute to which the noble Lord, Lord Moran, referred, which I believe was prepared by the Foreign and Commonwealth Office and which is attached to a copy of the judgment in the Library, is also very cautious. I should like to quote a few sentences from the minute because I consider that they are relevant:
"The implications for the decision to exclude Cardiff Bay from the possible SPA in the Severn Estuary are not entirely

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clear. It may be that the margin of discretion in deciding the extent of SPAs has been reduced. Certainly if an area should be classified as an SPA the obligation to take protective measures for the ecology of such areas is said to arise even before designation".
That is part of the complaint of the RSPB. The minute goes on:
"Cardiff Bay and the Santona Marshes can be distinguished in the context of their respective environments and ornithological importance … It is to be noted however that whilst under domestic law there is an extent to which decisions can be distinguished on their facts, in the EC system the principle of precedent is less defined and the European Court tends to adopt a more 'purposive' approach—considering the intention of the legislation to some extent more than its detail".
I should also be interested to know whether the Welsh Office has taken advice from its statutory adviser, the Countryside Council for Wales and also from the joint conservation commission on the significance of the Santona judgment. In fairness to the Select Committee, clearly that judgment was not before the committee when it reported many months ago.
The amendment seeks, quite simply, that the construction of the barrage should not commence until and unless the Commission or the European Court of Justice, if the complaint proceeds to trial, has decided that the construction of the barrage is not in breach of the directive. So I very much hope that the Government will accept the amendment or at least give an undertaking that they will abide with its essence.
I should have thought that such an undertaking should not present difficulties to the Government, as it would be fully consistent with the unambiguous, unqualified and considered words uttered by the noble Viscount, Lord St. Davids, in Committee, at cols. 232 to 233, according to the words quoted by the noble Lord, Lord Moran. The noble Viscount said:
"we shall do nothing to work against it".
The "it" is the wild birds directive. We should have thought that an assurance along the lines suggested in the amendment is also the best way to proceed, having regard to our treaty obligations.
If the noble Viscount is not instructed by the Welsh Office to give the House this assurance or an assurance along those lines, will he please ensure that the attention of his right honourable friend the Secretary of State for Foreign and Commonwealth Affairs will be drawn to this discussion before the Bill reaches its Third Reading stage?
The Earl of Halsbury: My Lords, I feel tempted to rise on this occasion because I sat on the Select Committee on this Bill in its original form and the Felixstowe Dock and Railway Bill as well as the Humberside estuary Bill. Although I am a member of the Royal Society for the Protection of Birds, pay my subscription and very much enjoy its publications and its wild nature reserves, I did not think that the quality of the evidence it gave in any of the commissions was at all satisfactory when it came to predicting the future. The effect of a great deal of international legislation is quite irrelevant to rare species. It deals with common birds such as the dunlin and the redshank, which one finds wading about any marsh in this country in completely satisfactory supply.
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With regard to the attempt to build an estuary alongside, the Cardiff Bay Barrage Bill will give rise to a freshwater lake which could be a beautiful asset to the city of Cardiff—a freshwater lake with freshwater birds breeding on it; indeed, an increased population of freshwater birds. Why was that not an object worthy of consideration, as opposed to the diminution in the quantity of saltwater birds? There are plenty of marshes and estuaries in this country for birds to migrate to if they want to over-winter here.
I asked the witness from the Royal Society for the Protection of Birds on a particular occasion (I believe it was that of the Felixstowe dock and railway Bill) about the meanders in the stream at low tide, dynamic affairs which wriggle like a snake and switch from side to side of the channel, and why the crustaceans that the birds lived on bred on one side of the meander and not on the other. Nobody knew. Nobody had attempted to pick up a ton of mud containing freshwater crustaceans and move them over to the other side of the meander. The money is simply not available for that kind of truly scientific experiment. Therefore I hope that the Minister who answers will stick to his guns and vote against this amendment.
Viscount St. Davids: My Lords, I thank the noble Earl for his comments. I should like to preface my reply to this and other amendments by bringing it to your Lordships' attention that the third week in November will see the celebration of the sixth birthday of this Bill. It has been before two Select Committees, both in this House and in another place. I cannot think of another Bill within living memory which has so been through the scrutiny processes of Parliament.
As to Amendment No. 1, I have made it clear before that the Government believe it is in full compliance with the European Wild Birds Directive. The directive contains no provision for the Commission to approve the designation of special protection areas.
The Government have already taken the decision that Cardiff Bay should not form part of a. lower Severn estuary special protection area. The decision has been the subject of a complaint by the RSPB and others to the European Commission. That is a matter before the Commission, but the Government's position is clear. The reasons for the decision were set out fully in the decision letter dated 1st November 1991, a copy of which is in the Printed Paper Office.
As for the remainder of the lower Severn estuary, its future is not affected by the construction of the barrage. I can see no reason therefore why commencement of construction of the barrage should be made conditional on a decision on that matter.
The RSPB negotiated extensively with the department on its petition before the Select Committee of this House chaired by my noble friend Lord Brabazon of Tara. In the end it received sufficient reassurance about the mitigation measures that it considered itself satisfied on all points in its petition. At no stage did the RSPB seek to persuade the Select Committee that commencement of construction should be made conditional on the designation of the lower Severn estuary as an SPA.

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Of course the RSPB and others would prefer that the barrage were not built at all. But that is the whole purpose of this Bill, and I am sure that the noble Lords, Lord Moran and Lord Prys-Davies, would agree with that.
I turn now to the comments made by the noble Lord, Lord Moran, on the Santona Marshes judgment. I did indeed place a copy—an English translation prepared by the Foreign and Commonwealth Office—in the Library on Monday afternoon. It seems that the noble Lord, Lord Prys-Davies, has been able to find it. The Library may have had some difficulty; I understand that the cover says simply Commission v. Kingdom of Spain.
Some noble Lords have made reference to the judgment in the Santona Marshes case. I made it clear during our debate last week, that the circumstances of Cardiff Bay are very different from those of the Santona Marshes. In broad terms there are differences in the character of the two areas. The extent of the impact is different and we are providing very extensive compensation measures. As I told the Committee last week, it would not be appropriate to enter into a discussion of particular judgments of the European Court here. Beyond the broad comments that I have just given, I do not propose to go into any further detail, particularly while the RSPB's complaint to the Commission remains unresolved.
Perhaps I could take this opportunity to set the record straight about the position of the RSPB. The noble Lord, Lord Prys-Davies, said that I told the Committee:
" … that the Welsh Office was looking to the Royal Society for the Protection of Birds for advice and that that body was one of its main advisers."—[Official Report, 13/10/93; col. 233.]
The noble Lord then went on to ask whether the Secretary of State had rejected the RSPB's advice on the relevance of the European Court of Justice judgment in the Santona Marshes case. I fear that the noble Lord may have misunderstood what I said in addressing the amendments in his name. I said that the Government were content to leave it to the Countryside Council for Wales, their statutory advisers and to the RSPB to advise on the most appropriate measures for developing and conserving flora and fauna. That is precisely what Clause 2(6) of the Bill requires the development corporation to do. It is also true that the advice of the RSPB has been sought on the development of the proposed bird reserve at Redwick and Goldcliff. They have, after all, considerable experience in the field. They, and the Countryside Council, have provided valuable advice. They remain fully involved in the bird reserve proposal.
However, it is a very different matter to suggest—as I suspect the noble Lord may have implied—that the RSPB are one of the Government's main advisers on the possible implications of the Santona Marshes judgment. That is certainly not the case. The RSPB have merely offered their own view of the judgment and its implications.
Yes, the chefs de cabinet are meeting. But they meet regularly and we do not see any special significance in next week's meeting. I invite the noble Lord to withdraw the amendment.
Lord Prys-Davies: My Lords, on a point of order, in fairness to the noble Viscount and myself I wish to clarify one point arising out of his reply.
In col. 232 it will be seen that the noble Viscount said:
"We are content to leave it to our statutory advisers"—
Comma—
"the Countryside Council for Wales"—
Comma—
"and to the RSPB to advise on the most appropriate measures to be taken".
When the noble Viscount delivered this sentence on 13th October, I was not to know that a comma had been inserted after the word "Wales". So that explains the discrepancy.
Viscount St. Davids: My Lords, I thank the noble Lord for his explanation.
Lord Moran: My Lords, perhaps I may first say a word about the remarks made by my noble friend Lord Halsbury. I fear that I cannot share his complacency about the prospects for wading birds on our estuaries. I am glad that my noble friend has been reading the literature produced by the RSPB. As a result, I am sure that he will know that the RSPB and other conservation bodies are greatly concerned about the threats to so many estuaries which are of great importance in Europe as a passage for wintering wading birds coming down from the Arctic, Canada, Iceland, Greenland, Russia and all over, and moving South in the winter. These birds come in considerable numbers at the moment to Cardiff Bay. Some are relatively numerous, but their numbers have been declining and they are under considerable threat. There should be no question about that.
I listened very carefully to what the Minister said in his very helpful reply. I believe that it is a little rash of the Government to be determined to go ahead regardless of what may happen in Brussels. None of us knows what line the Commission may take on the complaint that has been submitted to it; whether it will go to the European Court or, in that event, what the court will say. Clearly that may be very relevant to the points that we have been discussing. I should have thought that it would be much more prudent to do as my amendment suggests and wait until we know the answer to those questions before going ahead with the works.
However, I understand that the Government are determined to go ahead. In that event I do not honestly feel that we can stop them. Therefore I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4 p.m.
Clause 2 [Works: supplementary]:
Lord Prys-Davies Lord Prys-Davies moved Amendment No. 2:
Page 2, line 29, after ("operational") insert ("and (in the event of a proposal for a dewatering scheme satisfactory to the Welsh Office being received from the Development Corporation) a dewatering scheme which is agreed by the Welsh Office is in place").
The noble Lord said: My Lords, your Lordships will remember that it was not known at Second Reading on 16th November last year whether dewatering wells to control groundwater levels around the impounded lake

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were feasible. The noble Viscount, Lord St. Davids, said that dewatering was an innovative procedure and that it was right that a pumping well pilot study should take place to establish the feasibility of a dewatering scheme after the construction of the barrage had been completed. The noble Viscount rightly pointed out in the Second Reading debate that the need for remedial works to properties would be significantly reduced or removed altogether if the results of the pilot study were successful. Indeed, he could have called in aid the old adage that prevention is better than cure.
The pilot studies referred to in the Second Reading debate were undertaken and a week ago the results were conveyed to the Secretary of State. I am glad to see that the results are most encouraging. They demonstrate that a dewatering system will work. Mr. Stoner, the independent specialist groundwater adviser to the Secretary of State, reported to the Secretary of State in the following terms:
"The dewatering pilot study successfully demonstrated that such a scheme"—
in other words, the dewatering scheme—
"will provide a satisfactory means of maintaining pre-barrage water levels in the lower areas of Cardiff under post-barrage conditions … More work is required on the design of the proposed system and any areas that may arise that will need special extra measures should be identified and such measures as may be necessary, defined".
I believe that that is the best news yet to emerge from the Welsh Office in connection with the Cardiff Bay barrage.
The Bill itself does not contain any powers to operate dewatering wells. But, as the Select Committee pointed out—obviously before it knew the results of the pilot studies—in paragraph 36 of its report:
"It is clear that if wells are used, they will become integral to the whole project".
I go along very much with that conclusion.
At Second Reading the noble Viscount said:
"If a decision to proceed [with the installation of dewatering wells] is taken, the Government will not be seeking powers under the Bill to do so. That can be done under existing legislation".—[Official Report, 16/11/92; col. 459.]
Can the Minister tell the House how that will be achieved? If the Welsh Office is satisfied that a design system has been devised and is shown to be workable, this amendment would require the CBDC to implement the agreed dewatering scheme. That is the essence of the amendment.
I am sure that we all wish to achieve that desired end. But if it can be achieved by other legislative means, possibly as suggested by the noble Viscount at Second Reading, I for my part will be content. But I should be grateful if the noble Viscount would take advantage of this amendment to explain to the House the legislative means that the Government have in mind. Were the Government to accept this amendment or give us assurances or an appropriate undertaking today or at Third Reading, I am sure that it would be welcomed by the people of Cardiff as evidence that the Bill will not be as harmful to their interests as some people believe it to be. I beg to move.
Viscount St. Davids: My Lords, your Lordships will remember that there was a very extensive consideration indeed, during the earlier stages of this Bill, of the
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effects of groundwater that would result from the barrage. This culminated in a year of further work by Hydrotechnica, followed by a public consultation exercise, and by advice to the Secretary of State from his independent adviser, Mr. Roy Stoner. As a result my right honourable friend the then Secretary of State for Wales was able to conclude that the barrage could safely proceed, whether or not dewatering proved to be practicable, given the comprehensive safeguards in Schedule 7 of the Bill. That conclusion was endorsed in another place and by this House at earlier stages on this Bill.
The noble Lord will be aware that pumping tests have now indicated that dewatering would work in practice. My right honourable friend the Secretary of State has therefore given his approval to the development corporation to produce a detailed design for the scheme for further consideration.
Although dewatering may well prove to be a satisfactory way of controlling groundwater levels after impoundment, it remains the position that we see no reason why the Bill should be made dependent on it. II: may be reassuring to know that the scheme proposed in the dewatering study would involve putting wells into operation before impoundment began, with provision for further wells to be installed if they proved necessary.
The amendment does not in fact provide any further protection to local residents. Under its provisions, if the corporation had not satisfied the Welsh Office with its dewatering scheme, there would be nothing to prevent: the impoundment proceeding without it.
In the light of that explanation and the reassurances I have given, I hope that the noble Lord will not press his amendment.
Lord Prys-Davies: My Lords, I am a little disappointed by the response. The fault may be mine in that perhaps I did not make the position clear. I welcomed very much the report of Mr. Stoner. I sought assurances from the Minister that the Welsh Office will have access to certain procedures which will ensure that the CBDC introduces the dewatering system if the Welsh Office is satisfied that it is workable. I was relying on the assurances given to the House at Second Reading (col. 459 of Hansard). So I am a little disappointed that the Minister is unable to tell us how the Secretary of State will ensure that the CBDC will implement such a scheme.
We shall have to consider what has been said. I am disappointed—it may be that the Minister has not quite understood the amendment—but at this stage I do not propose to press the amendment to a Division. Therefore I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Clause 8 [Directions as to operation of barrage]:
Lord Prys-Davies Lord Prys-Davies moved Amendment No. 3:
Page 4, line 29, at end insert ("including standards laid down by the European Community Urban Waste Water Treatment Directive").
The noble Lord said: My Lords, this amendment was discussed when the House was in Committee on 13th October. I am sorry that I did not table the amendment until yesterday, but I was involved in consultations with

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others until yesterday afternoon. The amendment was discussed in Committee but there remain three points of uncertainty. We believe that those uncertainties should be removed before Parliament enacts the Bill.
First, we want to know whether the Government received clear advice from the National Rivers Authority that the impounded lake should be classified as a sensitive area for the purposes of the EC Urban Waste Water Treatment Directive. I construed the words of the noble Viscount in Committee to mean that it was indeed advice which had been received from the NRA. Others who have read his words, possibly more carefully, are not sure that the Government acknowledged that they received that advice. There should be no doubt as to what was the advice given by the NRA and the amendment gives an opportunity to the Government to confirm the position.
That brings me to my second point. The noble Viscount told the Committee that it would be for the Government to decide, in the light of the NRA advice, whether or not they would designate the impounded lake as a sensitive area. The NRA is the expert body offering advice; but it is for the Government to decide. That is the point that was made.
We all understand that constitutional doctrine. But we would find it difficult to believe that on this issue the Government would reject the advice of an authoritative body such as the NRA. Is the noble Viscount saying that the Government would seriously challenge the advice of the NRA? We therefore want to establish at this stage and before the Bill is enacted how great is the risk that the Government may reject the NRA's recommendation.
I believe that the Minister went some way to assure the Committee that the advice would not be challenged. I base that comment on what the Minister said at col. 236 when he stated,
"Should the National Rivers Authority seek to designate Cardiff Bay as a candidate for sensitive area status, measures will then be implemented to clean up the discharges that enter the bay".
That is unqualified. But can we divorce that statement from another made by the noble Viscount to the effect that nothing had been decided? I should be grateful therefore if the noble Viscount would clarify the Government's position.
My third point relates to the capital cost of upgrading the three sewage treatment works which are located around 15 miles upstream from the barrage and also of upgrading the 381 combined sewer overflows into the Taff and the Ely. Perhaps he can give us the consequential revenue cost if the impounded lake is classified as a sensitive area. In Committee I specifically pressed for the costs so that the Committee could appreciate the possible effects of passing the Bill. The noble Viscount did not provide the Committee with any costs. The Committee was told,
"As yet we can put no cost on the proposals because the matter does not arise. As and when it does the project will be costed".—[Official Report, 13/12/93; col. 237.]
My noble friend Baroness White and I were not the only people to be astonished by that admission. It has been known for six or seven years that the EC Urban
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Waste Water Treatment Directive might apply to the impounded lake. Indeed, at Second Reading I asked the Minister whether or not he could tell the House what would be the cost of complying with the directive. It is strongly felt by many people that a responsible course of action on the part of the Government would be to work out how much it would cost in approximate terms if it became necessary to achieve the standards of the EC directive.
Yesterday the noble Viscount was kind enough to send me a copy of a letter which he had sent to my noble friend Lord Morris of Castle Morris. I am bound to say that I did not find it particularly helpful. The letter pointed out that the cost of diverting sewage outflows away from the bay itself would be £14.8 million—that was included in the financial memorandum. In our submission that is a misleading figure in relation to the question which we were pressing on the Minister in Committee. The figure of £14.8 million entirely ignores the costs involved if it became necessary to upgrade the three existing sewage treatment works upstream of the barrage and to improve the 381 sewage outflows into the Taff and Ely rivers.
That is the information that we have been seeking from the Minister since the Second Reading debate last year. I should have thought that there could be no possible grounds for denying the House that information before it decides whether or not to pass the Bill. I beg to move.
Baroness White: My Lords, my noble friend Lord Prys-Davies clearly outlined the main difficulties before us, so I do not want to take up too much time at this stage. We are being asked to pass legislation which leaves us with unanswered questions. If one looks at Clause 8, to which the amendment relates, one sees,
"The Development Corporation shall operate the barrage in accordance with any reasonable direction given by the National Rivers Authority".
Who decides what is reasonable? The Welsh Office certainly does not possess the knowledge or capacity to judge.
We are concerned that should conditions arise—nobody can prove it until the barrage has been built—as described by my noble friend, connected with the dangerous nutrients from the three sewage works, it would be much more costly to remedy that situation than to remedy the oxygen situation described in the Bill before us.
I have been even more puzzled by something which appeared in cols. 55 and 56 of the Written Answers in yesterday's Hansard. It is true that it relates primarily to charges. But it is made clear that in various circumstances the Government will expect the environment agency, which is not yet in existence, to take over some of the relevant functions of the National Rivers Authority and the Drinking Water Inspectorate. Will that really happen?
There are references also to the fact that the Government are inviting their EC partners to re-examine priorities for the Urban Waste Water Treatment Directive, which is part of the amendment moved by my noble friend. There are uncertainties which we are being asked to accept in good faith. It

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would be helpful if we could have further reassurance that there will be means by which, should the condition arise in particular with the three sewage works concerned, it will be possible to deal with them adequately when the time arises and that funds will be available for doing so. At the moment we have no assurances whatever on either of those points.
Lord Moran: My Lords, I should like to lend my support to this amendment moved so clearly and persuasively by the noble Lord, Lord Prys-Davies. I have a particular interest in sensitive waters because I was a member of your Lordships' environment sub-committee which first considered the European Community Urban Waste Water Treatment Directive. We went into it very thoroughly and we were in no doubt about the importance of sensitive waters.
My information is that the NRA has advised the Department of the Environment that the Cardiff Bay impoundment should receive sensitive area status if the barrage is built because it complies, in its judgment, with the criteria for designation outlined in that directive and with the additional guidelines developed by the DoE. I very much share the view of the noble Lord, Lord Prys-Davies, that since the NRA, which has gone into this very thoroughly and considered the chemical content of the water and all aspects of it with great care, has recommended that the inland bay should receive sensitive area status., it would he very surprising indeed if the Government were to reject that recommendation. I hope very much that they will accept that and that before the end of the year they will have designated the bay as a sensitive area.
The second issue that then arises is the question of whether there is a need for nutrient stripping. If the bay is designated as a sensitive area, the requirements of the directive for nutrient removal will apply to five, not three, sewage works. There is a clause in the directive which allows exemption from nutrient removal. It states:
"Removal of phosphorus and/or nitrogen should be included unless it can be demonstrated that the removal will have no effect on the level of eutrophication".
As I understand it, as yet, the NRA has not received any guidance or advice from the Department of the Environment on how an application for exemption status can be made or how one can demonstrate—I draw your Lordships' attention to the word "demonstrate"—that the removal of phosphorus and nitrogen will have no effect on eutrophication. That is extremely important.
I do not believe that the costs are likely to be so great. I believe that the cost of nutrient removal at the five sewage works will not exceed about £1 million. So in terms of the total cost of the project, it is not excessive. If one were to clean up all the outflows into the Taff and Ely all the way up, it would be a very expensive operation indeed. But I do not think that it has yet been demonstrated that that will be necessary, and obviously it would not be sensible to do it unless one really believed that it would have a beneficial effect. I know that the NRA is discussing all these matters with the Cardiff Bay Development Corporation and it is wholly in the interests of the development corporation that the
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water quality should be satisfactory. I hope that these discussions will result in a satisfactory solution. It is essential that, the NRA having recommended that the bay should be a sensitive area, the Government should accept that recommendation.
Viscount St. Davids: My Lords, as I indicated to the noble Lord, Lord Prys-Davies, when he raised this matter in Committee, no final decision has yet been taken about whether the impounded lake will be designated a sensitive area. I am not sure as to where the noble Lord, Lord Moran, obtained his advice. I am advised that it is on the NRA working document, but as yet no formal decision has been made. However, it is on the current working document. If it remains on that list when it is submitted formally, the Government would have to think very carefully indeed before they chose to disregard the advice of their statutory advisers on water quality. I have to say that I consider it highly unlikely that such a situation would occur.
The provisions of the Urban Waste Water Treatment Directive are there to be complied with. If it was thought that the Government were failing to comply with provisions of the directive, then the usual remedies before the European Court are available.
Following last week's Committee stage, I wrote to the noble Lord, Lord Morris of Castle Morris. Copies of my letter have been placed in the Library. The directive does not require the removal of nutrients by means of tertiary treatment if it can be shown that removal will have no effect on the level of eutrophication. The development corporation's investigations Indicate that it would be possible to remove 80 per cent. of the total phosphorus load at the treatment works. However, the release of retained phosphorus in the bay would mean that the level of algal growth would not be reduced. That is the basis on which the development corporation concludes that tertiary treatment will not be necessary. It is not a case of the development corporation seeking exemption from the requirements of the directive. It will be for the NRA to advise at the appropriate time whether or not the removal of nutrients will be necessary.
Your Lordships are rightly concerned to know what the costs associated with achieving water quality will be. The work which the development corporation knows will have to be undertaken has been costed. The diversion of direct sewer discharges will cost about £14.8 million. This is included in the £37 million identified in the Financial Memorandum on the face of the Bill. Your Lordships are not therefore being asked to pass the Bill without knowing the financial implications.
Despite the fact that the corporation does not expect to have to undertake the removal of nutrients, it has examined the order of magnitude of costs involved if it were required to do so. Based on the evidence of nutrient removal techniques in Germany and Ireland, the development corporation estimates that the capital cost of carrying out such work at the relevant treatment plants would be around the figure indicated by the noble Lord, Lord Moran—between £1 million and £1.5 million. Annual running costs would be of the order of £300,000. But I want to emphasise once again that this is not an official estimate of the costs and it is still too

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early to reach a firm view on how the implementation of the directive will impact on the inland bay or indeed any other stretch of water. In the circumstances I would hope that the noble Lord would seek the agreement of the House to withdraw the amendment.
Lord Prys-Davies: My Lords, I wish to make two points in reply and I shall make them quickly. I believe I heard the noble Viscount confirm that if it is the advice of the NRA that the impounded lake should be given sensitive area status, it is highly unlikely that the Government would reject that advice. I find that reassuring because we do not want to rely on Clause 8(3) (b) of the Bill, which enables the NRA to set objectives for improving water quality, unless there is an understanding with Ministers that the impounded lake will have the status of a sensitive area.
As for the costs, at least we have today exacted some information from the Minister. With the greatest respect, the figure of £14.8 million did not include the cost of upgrading the sewage plants and of improving the 381 outflows. I am grateful for those figures. I shall consult with others and decide whether or not I should bring the issue back before the House. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 7 [Groundwater damage protection]:
4.30 p.m.
Lord Prys-Davies Lord Prys-Davies moved Amendment No. 4:
Page 32, line 36, after ("building") insert ("and a garden belonging to a building").
The noble Lord said: My Lords, this is the last amendment. I shall deal with it as quickly as I can. It is my fault that an amendment relating to gardens was not adequately presented to the Committee. By way of mitigation, I believe that my instructions were not too clear at that stage. I remind your Lordships that under the terms of Schedule 7 to the Bill which sets out the compensation code, groundwater damage suffered by a building or a garden—I emphasise "or a garden"—will be covered by the compensation code in Schedule 7 if they are situated within the district referred to in the Bill as "the protected property area". In addition, a building outside the protected property area but sited within the districts referred to in paragraph 5 of Schedule 7 will also be covered by the remedial or compensation code. But for reasons which clearly seem to have nothing to do with logic, damage to a garden outside the protected area but within the districts in paragraph 5 will not be covered by the code even though the adjoining building will be covered.
Like many others in Cardiff, I am puzzled as to why the Bill should draw this distinction between a garden which is within the protected area and one which is outside it. Indeed, the position seems to be unfair because it is our experience that a garden will often suffer damage, while a building which adjoins it will escape any damage. It is usually the garden which will suffer. It is the first to suffer in the event of flooding or
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rising water levels because it is at a lower level than the building or because it is on a slope. It does not have the benefit of a damp course.
This amendment seeks to extend the protection to gardens which are outside the protected area. I accept that the amendment is imperfect, but if the essence of it is acceptable to Ministers, I shall be very happy to leave it to them to perfect it. I beg to move.
Viscount St. Davids: My Lords, the protection of gardens is covered under paragraph 18 of Schedule 7. The protection is limited to gardens within the protected property area at the specific request of a Select Committee in another place. It is extremely unlikely that damage to gardens outside the protected property area will occur and inconceivable that such damage would occur without damage to the associated building.
Under the circumstances of the building outside the protected area suffering groundwater damage, under paragraph 9(1) of Schedule 7 the building is treated as if it were a building within the protected property area. In this event the protection to gardens under paragraph 18 would then apply and the garden would be protected.
The essence of the noble Lord's amendment is therefore already addressed in the Bill. Protection to gardens is available outside the protected property area if damage to both the building and associated garden occurs. Perhaps I may refer the House again to the words of my noble friend Lord Brabazon of Tara in his report from the Select Committee dated 16th March of this year:
"We are content that gardens and other open lands are now adequately protected by the Bill and the various related agreements".
The Select Committee considered in detail petitions relating to additional protection to gardens. I commend to the House the views of the Select Committee, who have considered these issues in far greater depth than we can do today. I urge the noble Lord to withdraw the amendment.
Lord Prys-Davies: My Lords, I thank the Minister for that very helpful response. It may well be that I and others who advise me have failed to identify the appropriate paragraph or sub-paragraph in Schedule 7. But in the light of what the Minister has said, we shall obviously have to read the schedule once again. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Royal Assent
The Deputy Speaker (Baroness Cox): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Welsh Language Act,

National Lottery etc. Act.

Managing the New NHS
4.35 p.m.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, with the leave of the House, I should like to repeat a Statement which my right honourable friend the Secretary of State for Health has made in another place. The Statement is as follows:
"With permission, Madam Speaker, I wish to make a statement about the management of the health service in England. Our health reforms are now firmly in place and here to stay. From next April, 90 per cent. of acute and community health services will be provided by NHS trusts. Patients are already benefiting from the freedom to innovate and improve which we have given to NHS trusts, to GP fundholders and to local health authorities. By passing responsibility down to local level, we have released the innovation and energies of those working nearest to users of the service. The result has been a fundamental shift of power towards the patient.
"The priority now is to support better patient care through the continued drive towards decentralisation in the NHS. I have concluded that to do this requires changes to the management structures of the health service—structures which are largely unchanged since before the reforms. By streamlining management, we can also make substantial savings in administrative costs. These changes will maximise the proportion of NHS expenditure devoted to direct patient care.
"My proposals for achieving these objectives are set out more fully in a background paper, copies of which are in the Vote Office. They follow the functions and manpower review which I announced to the House in May. I should like to place on record my thanks to Kate. Jenkins and Alan Langlands, who led the review, and to their team, for the work they undertook.
"A guiding principle of the review was that change should support the development of the all-important purchasing function. This function is now the distinctive role of district health authorities. Their job is to build up an accurate picture of what health services local people need and to purchase services which best match those needs. Like GP fundholders, they have the power to change and to improve services. They lead the drive towards better quality care and better health in their areas.
"A key feature of better purchasing is closer working between district and family health service authorities. It makes it easier to take an all-round view, to strike the right balance between hospital and community-based care and to improve public health. These authorities are already working in close partnership in many areas. We wish actively to encourage this. I therefore intend, subject to Parliament's consent, to introduce a power to enable district and family health services authorities to
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merge. Such mergers will also eliminate duplication and produce savings in overhead costs which can be spent directly on patient care.
"This will build naturally on progress locally. It is clear, however, that as the new system matures, strategic management above that level needs to be better tailored to a decentralised service. We need a lighter touch, geared to developing the potential of purchasing while respecting local freedoms. It must also uphold and strengthen the national accountability of the health service.
"Regional health authorities have served us well for nearly 20 years. I pay tribute to their chairmen, general managers and staff who have led the health service through challenging times. The old hands-on style of the regions is, however, no longer appropriate. I therefore propose to abolish them. I will bring forward legislation to this effect as soon as parliamentary time permits.
"In a national service, accountable through the Secretary of State to Parliament, a degree of strategic overview is required. For this reason, I also propose to reform the NHS management executive so that it can more effectively and efficiently discharge those functions which must remain the responsibility of central management.
"The NHSME will remain within the Department of Health but will take on a clearer identity as the headquarters of the National Health Service. It will be accountable, through its chief executive, to the Secretary of State for delivering against clearly defined targets and priorities. It will have precise responsibilities for strategic management and a straightforward structure to ensure cohesion and clarity of purpose. Central management will continue to work with professionals to ensure that high quality clinically and cost-effective practice is identified and systematically implemented and that new health problems are tackled in a coherent way.
"The National Health Service is the largest organisation in Europe. Its size, complexity and importance demand that central management operates through a regional structure. No institution in the world, private or public, would attempt to run such a scale of operation from a single headquarters.
"I will therefore establish, as an integral part of a streamlined management executive, eight small regional offices. Each will be run by a director accountable to the chief executive. A regional structure will enable the NHS management executive to give more effective support to the development of local policies. These policies will provide high quality health services to the standards set by purchasers and the health service professions and will ensure effective co-operation across service, education and research. The regional offices will also replace the existing outposts and inherit their responsibility for monitoring trusts. We wish to build on the light touch approach which the outposts have successfully developed.
"Like the outposts before them, the regional offices must be compact. I intend to set a limit on the total staff budget of each office, commensurate with

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their functions. A similar limit will be set for the management executive as a whole. The NHS needs strong management; but we must bear down on administrative costs to maximise spending on patients.
"Health authority and trust chairmen have a key role as local leaders. They will be expected to play a prominent role in the new arrangements. We must also ensure a non-executive link between them and Ministers. The NHS policy board will therefore be restructured to include additional non-executive members, each covering one of the eight new regions. These regional policy board members will provide a channel of communication to and from Ministers. They will be respected local figures able to make a powerful contribution to ensuring that national priorities are delivered in their areas.
"In light of the need for primary legislation, we expect the new arrangements to be fully in place by April 1996. We have plans, however, to make immediate progress towards a slimmer organisation. I propose to reduce the number of RHAs from 14 to eight by next April and to align the boundaries of the remaining regions with those of the management executive's new regional structure. This would facilitate a smooth transition to the new system. Change will be managed to ensure that the effective day-to-day operation of patient services is maintained. Management cost disciplines and targets will be met at each stage.
"Ten years ago this Government introduced general management into the health service. The author of those changes, Sir Roy Griffiths, observed then that it,
'cannot be said too often that the National Health Service is about delivering services to people. It is not about organising systems for their own sake'.
That principle, above all, has guided the changes which I have announced today.
"These changes will slim down NHS management. They will make it simpler and sharper. They will clarify its precise roles and responsibilities and ensure that it delivers results measured against explicit targets. They will save money on administration to spend on patients. They will uphold and strengthen accountability. They will continue the process of decentralisation. And they will support the development of high quality, cost-effective health care.
"A better managed health service means better care for patients. These proposals turn the clock forward to more modern and more efficient management, building on the progress of our health reforms. I commend them to the House."
My Lords, that concludes the Statement.
4.43 p.m.
Baroness Jay of Paddington: My Lords, I thank the Minister for repeating the Statement of her right honourable friend, but fear that it may be greeted with
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an exhausted sigh by many of those who work in or are patients of the NHS. The Statement quotes Sir Roy Griffiths saying that the NHS,
"is not about organising systems for their own sake",
but I suspect that that is how it may be viewed by many of those in the health service community who find themselves struggling with the realities of the problems of day-to-day life in the NHS with its expanding waiting lists and new funding crises.
Despite the Statement's confident opening tone about the present confident state of the market, I am sure that many of us who use the health service (as well as many of those who work in it) would echo the statements by the chairman of the joint conference of the medical colleges who this week called for the Government to give priority to curbing the gross inequalities of care that have been created by the GP fundholder system and not to emphasise new management arrangements.
Frankly, our concerns about the market are concerns about uncertainty and my concerns about the Statement are that they will make that uncertainty worse. For the past two years, the regions have been a stable force in what has been the very difficult process of managing change. Although I would certainly welcome any moves which helped to achieve a lean, efficient management of the health service bureaucracy, I have to say that it is somewhat paradoxical that this Statement now speaks of streamlining the management to make substantial savings in administrative costs when we know that 18,000 new jobs have been created at a cost of about £41 billion as a result of the restructuring and reform of the health service. We need to ask how much the new changes will cost. What will be the real benefits to patients in terms of released funds? How many jobs will be lost in the regions in spite of the 18,000 that have recently been created?
One regional function, which many of us have valued, has been that of controlling the strategy for regional specialties in clinical care, such as neurosurgery and certain aspects of renal care. Those regional responsibilities have achieved a degree of equity in the services in those specialties which I suspect may now go the way of equity in general as a result of GP fundholder practices. Who is going to plan and organise those important specialties which have previously been organised at regional level?
These questions relate not only to the strategy of planning services, but also to the accountability of the health service. I refer not only to its accountability to Parliament but also to the financial scrutiny which we all recognise as being very necessary.
The Statement twice refers to taking "a lighter approach", but I have suspicions about a lighter approach. Although I recognise that the intention is to release the energies that have been described in the Statement, I fear that a "lighter approach" may mean a looser approach. There have already been considerable anxieties in the past two years about financial laxity in the organisation of local health authorities and local trusts. I suspect that, although we may want to see a tighter approach, a "lighter approach" is not a useful line to take.

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I am also concerned about the words used to describe the management executive, which is to become the headquarters of the NHS. Reading the words of the Statement—I have tried to look in more detail at the supporting papers which accompany it—it sounds to me as though the NHSME will become a Next Steps agency. If that is so, it is a very significant change in the organisation of the health service and in its political accountability. It is important at this stage that we understand the principles behind that. If the NHS management executive is to become a Next Steps agency, is that a step on the road towards the privatisation which some of us have suspected?
Another area of concern relates to the additional non-executive members of the NHS policy board. Paragraph 26 of the supporting papers indicates that the eight new non-executive members will have significant powers. They will hold meetings with the chairmen of the health authorities and act as advisers to the Secretary of State, including on—and I think that this is significant—the appointment and reappointment of chairmen and non-executive directors in the regions. The Statement states that those people will be "respected local figures", but I must advise the Minister that there is a certain degree of cynicism among some of us about who those "respected local figures" may be. We must bear in mind the fact that 56 per cent. of the new chairs of the third-wave of new trusts have business backgrounds and that, although that may help them to contribute to some of the financial aspects relating to a trust's efficiency, it does not necessarily reflect a concern about the consumer or equity or any political or philosophical adherence to the health service.
The next point is, who in the new eight small regional offices—the emphasis is put strongly on the fact that they will be small—will scrutinise the DHAs and the trusts? Who will be responsible for their financial probity? My noble friend Lord Dean of Beswick has given your Lordships' House many examples of problems in relation to that issue. Again, the concern relates to the phrases, "the lighter touch" and "the small regional office". We need detail. We need tightness, and, as I have said before, the lighter touch may not be the right approach.
I should like to mention also the special case of London. Why is it that in this Statement the Government seem to suggest that the London area should, once again, be divided into two? Was the case for a pan-London region considered? That is a topic which I am aware is controversial but which has had a great deal of support. If it was considered, why was it rejected? Two new regional offices for London do not seem to meet some of the problems of the reorganisation of London health care that we have all discussed.
Although I should like to accept that something that improves the regional and management structures of the health service is to be welcomed—I am especially interested in and glad to see that FHSAs and DHAs may be able to merge, although there is a question about which side of the provider-purchaser split they fall—overall, my suspicion is that in the present
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circumstances these proposals will make the market more unstable and more uncertain, and that the lighter touch may lead to less accountability.
Earl Russell: My Lords, I thank the Minister for repeating the Statement. She offers us another reorganisation. While I understand that there are general phrases setting out the case for it, I should like to understand slightly better than those phrases permit the underlying reasons for bringing in this reorganisation. I should like to ask the Minister: is your reorganisation really necessary? However strong the case for reorganisations may be, there is truth in the principle that all reorganisation leads to disorganisation. I know that after the first Question today I cannot condemn disorganisation, but for that very reason perhaps I am entitled to say that I regret it. If the House will forgive one word, I had forgotten that there were no Prayers; I was by the ticker-tape. I am extremely sorry.
This is not merely a reorganisation. It appears to be, if I have understood it aright, a booster rocket to reorganisation, in two stages: first, a reduction in the number of RHAs, coming in by regulation, followed by their abolition, as soon as space for the necessary Bill can be found in the Queen's speech. I wonder why that two-stage process has been decided upon, because the two changes in immediate succession will surely make it much harder for the new organisation to bed down than would otherwise be the case. There will be at least a year, I should have thought, of reorganisation, as it were, in camp beds.
We are again told about the need for decentralisation. I must touch briefly, and not for the first time, upon the paradox of imposing decentralisation from the centre. That sounds like the famous maxim of forcing men to be free.
The note of concern for savings is of course constant. One understands the problem, but in the invocation of efficiency that goes all through this document, I am left wondering whether efficiency really works efficiently; whether enough account has been taken of the concept of the true cost which cannot be reduced by competition, and which is limited by the fact that one cannot provide a service for less than it costs to supply it. I wonder whether we are getting near to the time when we must look again at the whole management culture of which this notion of efficiency forms a part.
I have some misgivings also about the introduction of a cap for regional offices. When one reaches a cap one finds occasionally that the lack of the money for some trifling thing may cause vast extra expenses arising from its lack. The inability, for example, to replace a broken photocopier may increase costs unnecessarily. So, one needs to ask again: does saving always save money? I do not believe that the answer to that question is yes.
I noticed of course in this morning's newspapers the comments of Sir Michael Atiyah on behalf of the Royal Society about the effects of this organisation on money previously spent on research through RHAs. That is a point which has been made before. The division between ministries works unfortunately here. It is always necessary to repeat that the NHS is not just an organisation for treating patients; it is also an

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organisation for medical research and the training of doctors. If those three functions become separated too much, none of them is done properly. I hope that the Minister can reassure me somewhat about the effect of this proposal on research.
I hope that the Minister can reassure me also that some account has been taken of the start-up costs which are inherent in any reorganisation and which are certain while the savings are uncertain. I share the doubts expressed by the noble Baroness, Lady Jay, about the phrase "a lighter approach". It sounds awfully nice, but what exactly does it mean?
There is a strong case here for more clarity about public involvement; when we discuss accountability, for thinking in terms of local accountability; and, when we consider the boundaries of DHAs, for wondering whether it would save a great deal of muddle if they were to coincide with local authority boundaries. Finally, I ask the Minister whether she can ask her right honourable friend to remember the Foreign Secretary's warnings at Blackpool about the danger of leaving our public services in a state of permanent revolution.
Baroness Cumberlege: My Lords, perhaps I may first reassure the noble Earl, Lord Russell, and the noble Baroness, Lady Jay, that this is not another reorganisation. The reforms started at the bottom. Their whole purpose was to devolve power to the local level, to introduce the concept of trust hospitals with local management boards, and GP fund-holders. Health authorities were to purchase health care by assessing local needs and then purchasing the services to meet those needs. That is all now in place. It is working well. But what is happening is that the top of the organisation does not fit in with the bottom.
The noble Baroness will know, as a member of a health authority that is a purchasing authority in central London, that the responsibilities have changed totally. A great deal of the work that those health authorities are doing now, and increasingly so in the future, will be the work that is now being done by RHAs. That is wasteful. That is bureaucratic. It puts into administration more and more money that should be spent on patient care. We want to weed that out. We want a slim organisation that is effective, accountable, and has a direct link between the people who run the hospitals and the community units to the Secretary of State. That is why we need a non-executive in the regional offices to form that link.
This is a lighter touch. I believe that people in the service will welcome that. The last thing that they want is a heavy, bureaucratic organisation that interferes constantly with local decisions. They want to be able to get on with the job. The system that we have designed will enable them to do so.
I agree with the noble Earl, Lord Russell, that we need clear public accountability. The document which accompanies the Statement sets that out very clearly and I commend/it to your Lordships. Managing The New NHS sets out a great deal of the thinking behind the reforms and will answer some of the points made by the noble Baroness, Lady Jay, with regard to the
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boundaries; that is, whether we should have a London region or two regions of south and north London. However, I shall not go into detail because I know that other noble Lords wish to ask questions. The logic is clear and I recommend the document to your Lordships.
5 p.m.
Lord Boyd-Carpenter: My Lords, can my noble friend indicate the financial consequences of the changes? Can she name a figure for the increase or decrease in public expenditure which is likely to result? I appreciate that it might be difficult, but it is unlikely that any Government will introduce such changes without having an idea of the likely financial outcome, in particular in one of the largest areas of public expenditure.
Baroness Cumberlege: My Lords, I am afraid that I shall disappoint my noble friend to some extent. We have a rough idea but the NHS is a complex organisation employing 1 million people. We are anxious to have their input on the details of the proposals that we have put forward today. Therefore, I cannot give a definite figure as regards the numbers or the money involved. However, I can reassure my noble friend that we are determined that the slimming down of the bureaucracy in the National Health Service will save money, which will go directly into patient care.
Lord Molloy: My Lords, I thank the Minister for repeating the Statement. Will she take full account of the extremely valid points made by my noble friend Lady Jay? Parliament, and in particular this House, can give excellent service; and I refer to the Statement and the valid points made by my noble friend.
I have been converted to the fact that the NHS should be examined a great deal more. That will be good provided that the reforms are designed to give better patient care. I support that because a large organisation such as the NHS needs constant examination by Parliament. I also believe that we must never forget that the NHS is cast in the noblest mould of any measure that has ever come before our Parliament. It is the pride of our nation and it is the envy of and an example to the rest of mankind.
Baroness Cumberlege: My Lords, I agree with the noble Lord that we need strong accountability. The National Health Service is now subject to independent audit and is further scrutinised by the Audit Commission. We believe that our proposals will not only streamline the service but strengthen accountability.
Lord Carr of Hadley: My Lords, perhaps I may strike a different note. Does my noble friend realise the great satisfaction which the changes she has announced will give to many people inside and outside Parliament who are deeply anxious about improving the standards of care, the value for money and the service to patients which we can obtain from the NHS? All experience shows that when in a large organisation one can remove a whole tier of administration and unite the different parts—as the Government have by bringing together the family health services and the district health authorities

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—immense benefits flow in obtaining better value for money by producing savings in expenditure or, as I hope, more treatment of the right kind out of the total expenditure on the NHS. Today's Statement marks the beginning of an important step forward.
Baroness Cumberlege: My Lords, I thank my noble friend for his comments. I know that his anxiety has existed for a long time. I believe that the proposals will be warmly welcomed by the majority of people working in the NHS. They certainly should be welcomed by those who use the service because, as my noble friend said, they will mean even more patient care.
Lord Stoddart of Swindon: My Lords, is the Minister aware that many Members on this side of the House are puzzled by her denial of the fact that this is a reorganisation? The management structure is to be reorganised and the number of regional health authorities reduced to eight and eventually abandoned. If that is not a reorganisation I do not know what is. Will the Minister explain that?
Is she further aware that I am surprised that she was unable to say how much money will be saved and how many staff will be made redundant as a result of the reorganisation? I wish to press the Minister on that. I and other noble Lords cannot believe that the Government will undertake reorganisation without knowing the financial effects and the effects on staff. If the Minister cannot give exact figures can she give us some idea?
Finally, can we be assured that the local people whom the Minister will consult about local needs will be chosen from a wide spectrum of the population and not merely from her friends and those of her noble friends in the business and other communities who are members of the Tory Party, with little experience of what is needed in their areas? Can we be assured that the consultation will be wide and that all kinds of people will have an opportunity to give Her Majesty's Government good advice, which they badly need at the moment?
Baroness Cumberlege: My Lords, I reiterate that this is not a reorganisation; it is evolution. The proposals put into place the final piece of the whole reforms. We have established trust hospitals; indeed, by next year the vast majority of hospitals and community units will have become trusts. The legislation will be passed if that is the will of Parliament. We know that family health service authorities, district health authorities and the populations that they serve, advised by community health councils and other organisations, want that change. GP fundholders are becoming established and their numbers are gathering momentum. That is all happening and that is what was intended. We must now look to the top of the organisation and ensure that it fits in with the rest of our reforms. That involves streamlining, slimming down and creating a more effective organisation at the top. I believe that that is welcomed by the majority of people.
As regards non-executive members, yes, we take wide soundings. I have recently completed an analysis of the number of people who help the National Health
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Service in the form of chairmen and non-executive members. Noble Lords opposite will be surprised to note the number of people who are involved in that way and who are not paid-up members of the Tory Party. Indeed, we have a prime example sitting on the Opposition Front Bench.
Baroness Faithfull: My Lords, will the cutting down of the bureaucratic machine, which we all welcome, bring closer together the doctors, the nurses and the administration? As a result of the heavy bureaucratic structure, the doctors and nurses have not been closely in touch with the administration. Will not the reforms make it possible for them to be in touch?
Baroness Cumberlege: My Lords, my noble friend is right. The strength of the National Health Service depends a great deal on team work. The reforms have sought to bring doctors, nurses and managers closer together. In nearly all hospitals we have seen the establishment of clinical directors. Those directors are doctors and nurses who are working closely with managers. The freedoms which the new proposals will bring will enable that to take place in a more effective way.
Lord Howell: My Lords, is the Minister aware that the claims in the first part of the Statement are mind boggling? Moreover, to suggest that the National Health Service in its present form now has the support of the whole nation is a statement of complacency the likes of which I have never heard. It is all the more astonishing because it was made on the day when the Secretary of State has told us that she has requested Marks & Spencer to open its shop before nine o'clock because she has been harassed by normal shoppers in the store about the state of the health service for which she is responsible.
Noble Lords: Question!
Lord Howell: My Lords, it is a question. I would inform the Government Chief Whip on the other side that I intend to continue with my question.
Is the Minister also aware that this very day consultants and doctors representing every hospital and the public in Birmingham have issued a statement about the total disarray of the hospital services in that city? They have done so as a result of the concept of purchasers and providers which seems, these days, to supplant the notion of patients in the health service.
Finally, I turn to the very important point of the democratic control of the health service. To whom are we to depute now when we wish to take up matters of great concern? Who will make such overall judgments, as my noble friend on the Front Bench asked, as to which hospitals will stay open and which will close? It sounds as though the work of those non-executive directors is a very executive role indeed.
I asked to see the chairman of the regional health authority in Birmingham. I went to the National Health Service executive and was referred to a general manager. I complained on the grounds that Members of Parliament and Peers should not be sent to see functionaries; they should be sent to see people who are

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responsible for the decisions. Can the Minister tell us who will take such decisions and who can we depute to, or write to, in respect of them?
Baroness Cumberlege: My Lords, perhaps I may deal with the noble Lord's first question concerning Birmingham. Clearly, whenever you bring in changes there are people who resist them and who find them hard to accommodate. However, you only have to look at the progress made in the National Health Service in the past two or three years. We are treating more patients than ever before, our waiting times are decreasing remarkably and we are spending money better. However, we believe that there is still room for improvement and that that will come from a streamlined, clearer accountability which will be introduced through the measures that we are proposing today.
With regard to local issues, when noble Lords or Members of another place wish to find out information about their health services, the people to consult are the health authorities; that is, the purchasers. They are the people who make the decisions as to what services are to be provided and how they are to be acquired. However, if it comes to the running of individual hospitals or units which will become community trusts in the future, then it is up to those who are concerned to consult the chairmen of those boards and non-executive directors. The lines of accountability are very clear. We now have more people involved in local hospitals than ever before. They are people who come from different walks of life and who bring in different skills which are clearly benefiting the services that are being provided.
Baroness Eccles of Moulton: My Lords, I should also like to thank my noble friend the Minister for repeating the Statement and to say how much I welcome it. Does my noble friend agree that the proposals for reshaping the regional tier will result in district health authorities having greater scope for developing plans that are finely tuned to the varying needs of the communities that they serve? As the reforms have removed the responsibility of directly managed units from health authorities, they can now concentrate on looking at the real health needs of the population as never before in the life of the National Health Service.
Does my noble friend also agree that the plans to devolve greater responsibility on health authorities for local policy and strategy will make it easier for them to work more closely with local authorities and the independent sector, thus avoiding unnecessary divisions and reducing the risk of gaps, duplication and waste? I should also like to say that I warmly support the proposal for combining DHAs and FHSAs into one authority. As has been said, considerable progress has been made throughout the country towards common boundaries among DHAs, FHSAs and local authorities; indeed, that has happened in many places.
In Ealing, Hammersmith and Hounslow, the DHA has a common boundary with the FHSA and three local authorities. We have already formed a commissioning agency with the FHSA. As our strategies and plans integrate, it is clear that, operating as two separate
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statutory authorities, we have much duplication and an increasingly artificial division of our responsibilities. Can my noble friend say what can be done to accomplish the bringing together of the authorities with all speed? Once the decision has been announced, as it has today, the sooner the legislation is in place to allow us to operate as one authority the better.
Baroness Cumberlege: My Lords, I thank my noble friend for her comments. As the chairman of one of the district health authorities, she obviously has a very clear vision of how she sees the future. We shall encourage district health authorities and family health service authorities to do just the things that are happening in parts of London by joining together as joint commissioners. We hope that that movement will gain pace and we expect to pass the legislation in April 1996. That is quite a long time to wait. However, it is an evolutionary process and we believe that many people will take the necessary steps so that, if your Lordships decide to pass the legislation, they will be ready to implement it.
Lord Rea: My Lords, I should like to contest a remark made by the Minister in reply to my noble friend. She said that waiting lists were going down. That is not the case in Camden and Islington (my own area) where they have increased considerably over the past year. While discussing the question of London's health service, there is a matter that the Minister has not properly explained. She referred to the accompanying booklet on why London will not have a unified regional health authority. I have read the paragraphs concerned and I am not convinced. I wonder whether the Minister can expand further on the matter? This is a good opportunity to put the special needs of London together under one regional authority.
I should also like to ask the Minister about the proposed merger of FHSAs and DHAs. Up until now, FHSAs have mainly acted in a provider role, looking after the provision of primary health care services. Moreover, through their contracted practitioners, they also have an indirect purchasing role. That is especially so now through fund-holding practices, whether one likes it or not. However, they are in fact a relic of the type of authority which was both purchaser and provider. Is it the intention that the provider element will be part of the merged DHA/FHSA? Further, will GPs not lose the special relationship that they now have with FHSAs as providers of primary health care? The help that they receive from FHSAs is, in the main, greatly appreciated. I can predict with certainty that there will be much discussion on the issue in the months ahead.
Baroness Cumberlege: My Lords, I should like to reiterate that, nationally, waiting times are coming down and that in no part of the country are people waiting for over two years now for an operation. That was not the case three years ago. London is a very complex problem. As noble Lords will know, there are many decisions to be made regarding the services in London over the next few months. It was the view of Ministers that we did not want to go for a total London health

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authority. When one looks at how resources have been allocated in the past, London sucked in a disproportionate amount of resources in order to serve its population. We know that where reallocations have taken place and where redistribution has been successful, it has been because the other areas associated with inner and outer London have ensured that they get a fair share of the money that is available.
If one looks at the coastal areas—South West Thames is a region I know well—regions such as Chichester, Worthing and mid-Downs kept asking us what we intended to do about the over-resourcing of London. That enabled us to ensure that some of those resources were re-allocated. There are some complex problems in London. We believe they are best dealt with by looking to the north of the river for a north London authority and south of the river for a south London authority.
The Earl of Onslow: My Lords, is it within order—
The Lord Privy Seal (Lord Wakeham): My Lords, we have taken up the 20 minutes available. The Companion to the Standing Orders states that we should now move on to other business.

Employee Share Ownership
5.21 p.m.
Lord Reay Lord Reay rose to ask Her Majesty's Government how they intend to give further encouragement to employee share ownership in general and statutory employee share ownership plans in particular.
The noble Lord said: My Lords, as I will have no opportunity to speak again at the end of the debate I should like at the outset to thank all those who are to take part and to say in particular how much I am looking forward to hearing the maiden contribution of the noble Lord, Lord Haskel.
It has for many years been the policy of this Government to seek to increase the numbers of those having a stake in society. The statutory right-to-buy for council tenants, introduced in the 1980 Housing Act by my noble friend Lady Thatcher, brought an additional 1.5 million families into home ownership and raised the proportion of those owning their own homes from somewhat over one half in 1979 to over two-thirds today.
Wider share ownership has also been promoted, with the result that the shareholding proportion of the adult population rose from 7 per cent. in 1979 to 22 per cent. in 1992. Privatisation issues were the main means of bringing this about, the sale of BT alone bringing more than a million investors into shareholding for the first time.
Many steps have also been taken by the Government in recent years to involve employees more closely in the fortunes and ownership of the companies they work for. Indeed, virtually every budget of the past 14 years has contained specific tax reliefs designed to increase employees' financial participation in their firms. The first significant move in that direction took place under
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the Lib-Lab pact. As a result of the 1978 Budget companies could receive tax relief up to a certain limit on their contributions to profit-sharing schemes set up by them for the benefit of employees, and further relief was made available for individual employees who held their shares beyond a minimum period.
One of the early acts of my noble and learned friend Lord Howe of Aberavon as Chancellor was to make the provisions of the scheme more generous, and successive Chancellors have raised the limits ahead of inflation. My noble and learned friend also introduced save-as-youearn share option schemes under which tax inducements are available for employees who save on a regular basis to buy shares in their companies at a previously agreed price. The number of employees benefiting from both these schemes rose rapidly and by the end of 1992 stood at some 2.9 million receiving shares or share options worth initially some £10.3 billion.
In 1987 my noble friend Lord Lawson introduced profit related pay. Under PRP schemes a part of employees' pay is linked to changes in the profits of their company and a proportion of this pay element is free of tax. The intention was to produce an alignment of interest between employees and the companies they worked for and also to increase pay flexibility. In a recession when profits declined, the argument was that the wage bill would decline, thereby reducing the pressure on companies to lay off labour. How far this second objective has been achieved remains to be fully assessed, although my noble friend Lord Lawson in his memoirs refers to some favourable evidence. In any event, PRP has proved popular. Almost 5,000 profit related pay schemes covering nearly 1.2 million employees have been registered. That is twice what there were barely two years ago.
A rather different type of scheme is the discretionary share option scheme introduced in 1984. The tax advantages under this scheme have been widely used, particularly as a means for firms to attract and hold top executives. By September 1992 the number of discretionary share option schemes which had received Inland Revenue approval was over 5,000.
Finally I come to ESOPs—employee share ownership plans. I refer to statutory ESOPs to distinguish them from so-called case law ESOPs. Case law ESOPs result from the initiative of businessmen making use of UK trust law for the benefit of their employees. Their tax status has been a constant matter of dispute in the courts and it was partly to put the ESOP advantages on to a more satisfactory basis that my noble friend Lord Lawson introduced statutory ESOPs in 1989. They were improved in 1990 by my right honourable friend the Prime Minister, then Chancellor. who described ESOPs as being,
"an attractive option which deserve further encouragement".
They were improved again the next year by my right honourable friend Norman Lamont.
Under statutory ESOP legislation a company may set up a trust whose function is to buy or otherwise receive shares in that company, borrowing to do so if necessary, before passing them on to employees to hold individually.
ESOPs today enjoy three specific tax advantages. Sellers of shares to the trust enjoy roll-over relief from capital gains tax; the company enjoys tax relief on payments made to the trust to enable borrowings to be serviced and repaid; and the company is entitled to tax relief on the costs involved in setting up ESOPs in the first place. To acquire entitlement to these tax reliefs, a statutory ESOP must satisfy a number of conditions. Shares must be passed on to individual shareholders, not held collectively, and this must be done within seven years of the shares being acquired by the trust; shares must be offered to all employees and on similar terms; and a majority of the trust's trustees must be selected by the employees. Unfortunately the first and the third of these restrictions which were invented to prevent abuse have served to prevent virtually any use being made of the legislation—and that is quite contrary to the Government's intention.
The fillip which my right honourable friend the Prime Minister at the time believed would follow for ESOPs from his introduction of roll-over relief has not materialised. I wish to explain why I think this is so. One of the important potentials of ESOPs is to enable substantial transfers of shares to be made to employees by large individual shareholders in privately owned companies. Let me say here that it is evident from what my noble friend Lord Lawson said when he first introduced ESOPs that he particularly had in mind privately owned companies as an area where ESOPs could flourish. A typical situation is one where an owner, perhaps the founder of a successful private company, is faced with the problem of his own succession and is anxious to preserve the independence of the company. To sell his shares, probably at a favourable price, to a trust established for the benefit of the employees, can be for him an attractive option. However, he will be deterred from, and even advised against, doing so on account of two of the restrictions I mentioned.
The present requirement that a majority of the trustees should be employee-selected gives rise to a fear that such a body might accept an external offer for the company as a whole—one which will cost the company its independence—an offer less likely to be acceptable to a board where independent trustees hold the balance. Further, no vendor is likely to opt for a disposal where the danger exists that substantial tax benefits may be reclaimed from him seven years later as a result of developments over which he would have no control. That is the effect of the requirement that all shares must be passed on by the trust to individual employees within seven years.
The perverse situation now rules whereby such a vendor would be advised instead to sell to an external buyer in exchange for shares, roll-over relief being available in such a case and not liable to clawback, thereby bringing about the very loss of independence which he wishes to preserve. The result is that, while case law ESOPs have flourished, statutory ESOPs alone among the measures introduced to encourage employee share ownership over the past 14 years, and despite the attentions of three successive Chancellors, have
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remained earthbound. Yet statutory ESOPs are the one means which offer the possibility of really substantial transfers of shares to employees being made and therefore of providing a significant boost to employee share ownership as a whole.
I very much hope that the Government will remedy those defects in legislation. I know that the Treasury has been in discussion with Job Ownership Limited, the body probably most concerned with this issue and of which I believe the noble Lord, Lord Grimond, is a director, as is my honourable friend Ian Taylor in another place, himself a tireless advocate of employee share ownership. Job Ownership has acquired a considerable reputation under the admirable leadership of Robert Oakshott, who is also known to other noble Lords. I hope very much that its concerns and my concern can be met.
The spread of employee share ownership would also be given a boost were the Government to bring forward at last their proposals on partnership companies and on Table G of Section 128 of the Companies Act 1989. I understand that the Government have now given an undertaking to do that, and I look forward to hearing confirmation of that when my noble friend the Minister replies.
There is another reason to believe in a future for statutory ESOPs aside from the continued proliferation of case law ESOPs and the rapid growth of all the other schemes which have been introduced to encourage employee share ownership, provided the right fiscal framework can be found. That is found in the American experience.
ESOP legislation originated in the United States, the first tax reliefs being introduced there in 1974. Thereafter, employee share ownership burgeoned in a most dramatic fashion. There have been hundreds of cases each year in which the principal shareholder—the private company—has made use of ESOP legislation to solve a problem of ownership succession. ESOPs are used in the United States in other situations also. For example, in the US steel industry they have played an important role in enabling a large number of companies to weather the crisis in that industry.
ESOP legislation in the United States is in many ways similar to that in this country. In some respects it is less generous. A vendor to an ESOP trust in the United States must own 30 per cent. of the stock of the company before he qualifies for roll-over relief. In the United Kingdom the threshold is set at 10 per cent. The vital difference lies in the presence in United Kingdom legislation, and the absence in the United States legislation, of the restrictions which I have described. The result is that, whereas the number of ESOPs in this country can be counted on the fingers of two hands, in the United States there are estimated to be over 7,000 ESOPs covering today some 7 million employees. In this country no more than 30 companies are fully or majority employee owned compared with an estimated 1,000 to 1,500 in the United States. Of those, the largest single category is private companies, in particular family companies. I see no reason why we should not

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see the same development here given similar encouragement. That means remedying the defects in current legislation.
That represents the minimum, not the sum, of what the Government should do if they still wish to see advances in employee share ownership. Today the focus is on the Treasury. The remedy lies in Treasury hands. My noble friend Lord Henley, in his capacity as Treasury spokesman, is replying to this debate. In the longer term it should be a matter for the Department of Employment to take up. I should like to see that department show a more positive and involved attitude to the subject than I believe it has shown to date. As my noble friend Lord Henley now happens also to be the Minister at that department (and I congratulate him on his appointment) I am particularly pleased that he will be able to hear why I believe that it is important that his department should take up this cause.
The closer involvement of employees in their companies improves their motivation and therefore tends to improve companies' performance. It is not for nothing that many well-run large companies—from BASS to Royal Insurance to Sainsbury—have set up their own all-employee share ownership schemes. Employee share ownership induces more realistic attitudes to pay. The instances of employee owners having forgone a wage increase or accepted a wage reduction to save the life of their company and their own jobs are too numerous to mention. The result is that there is less wage-inflationary pressure in the economy. That is the economic advantage of employee share ownership.
I believe that the reasons for supporting employee share ownership stretch further. I am certain that the Government remain committed to the goal of a share-owning democracy. The scope for progress in that direction remains considerable. Despite privatisation sales, the proportion of equity in the hands of individuals as opposed to institutions is less than it was 12 years ago. The trend which my noble and learned friend Lord Howe vowed to reverse in his Budget Statement 10 years ago has not in practice been reversed. Privatisation sales must now be approaching the end of the road. Other means of promoting the policy must be sought. Is not employee share ownership one of the obvious ways in which the Government could procure a serious advance in wider share ownership?
I believe that there is also another reason for the Government seriously to consider giving a major boost to employee share ownership at the present time. The Government took the controversial, but I believe justified, decision to opt out of the Social Chapter of the Maastricht Treaty. I agreed with the Government that the Social Chapter represented a type of thinking that was unsuited to the times, even for the rest of Europe but particularly for this country which had recently but all too painfully thrown off the shackles of over-mighty trade unions and where decentralised, flexible and non-corporatist methods of consultation were becoming the norm and should be preserved.
Does not employee share ownership offer an alternative to the socialist vision of M. Delors, one which this Government could embrace, which renders
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unnecessary statutory representation on boards by workers, which bypasses trade union representation and which emphasises individual rights and secures the individual involvement of employees in the ownership and management of their companies? Is that not a suitable vision for a Conservative Government to put forward? Is it enough for the Government to be purely negative in the councils of the Community so far as concerns social policy? What other vision do they have?
I believe that employee share ownership, created out of the new wealth generated by an expanding economy, could be a major development in the future of capitalism, one which improves its functioning and yet which also serves to render less harsh the inequalities which result from competition, that competition which nonetheless we cannot dispense with, as the last decade has also taught us. Noble Lords opposite will not agree, but I believe that the Conservative Party, with its belief in capitalism, its support for individual freedom and its commitment to a share-owning democracy, is its natural champion. Indeed, the Conservative Government have already shown admirable consistency over the past 14 years in the support they have given employee share ownership. I say now that it is time for that support to be renewed and indeed reinforced. I hope that when he replies my noble friend the Minister will be able to show that he agrees with me.
5.38 p.m.
Lord Haskel: My Lords, although it is only 10 days since I was introduced to your Lordships' House, your warm and friendly welcome has given me sufficient courage to address your Lordships for the first time. I am grateful to the noble Lord, Lord Reay, for giving me the opportunity to do so in this important Unstarred Question.
My confidence also springs from my personal experience in the matter your Lordships are discussing. That experience has been gained during 30 years of work in the textile manufacturing industry, at all levels: as a technologist, as a manager and as chairman of an international company. In addition, as a founder member, secretary and latterly chairman of the Labour Finance and Industry Group, I have been able to share experiences and gain insights from other people engaged in different sectors of business and industry.
During those 30 years, because of worldwide competition, I have seen the pressures increase enormously on people working in the textile industry and indeed in the whole of manufacturing industry. In my company we used to have four weeks between receiving an order and delivering it; today we have four days. Faults in quality were previously expected and tolerated; today our customers expect perfection. Innovation was leisurely and haphazard. Today it has to be quick and constant. With all those demands, our industry has to produce extraordinary results with ordinary people. Industry will succeed in doing that only by harnessing the skills, energy and enthusiasm of all employees. That is a key factor in our nation's wealth.
In my industry the best firms rise to that challenge in three ways: training to supply the skills; investment to provide the tools; and participation to provide the

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motivation, enthusiasm and dedication. It is in that final element where employee share ownership plans play their part. I have no doubt that employee share ownership plans work in harnessing the enthusiasm of employees. But they must be introduced with care. First, the plan must apply equally at all levels of the company, not just to managers. Secondly, there has to be a way that employees can at some stage sell their shares, otherwise they become handcuffs inhibiting employees joining and leaving the company and, perhaps, encouraging the sale of the business.
In the textile industry there have been various share ownership and profit sharing schemes for over 100 years. But they have never been wholly satisfactory. Indeed, it was because of the resistance to change and lack of mobility inherent in some of the schemes that eventually some firms went out of business. The more successful plans in the industry have been introduced as part of an overall company culture. That is because employee share ownership has a subtle effect on the relationship between directors and their employees. As shareholders, employees participate in appointing the directors and so judge their performance differently from when they perceive them purely as their boss.
The relationship between the directors and employees can come under strain when employees ask for more financial information than the directors think is good for them, especially in smaller private companies. Employee shareholders have been known to upset the cosy relationship between the directors and the auditors. In my experience, employee share ownership works when the changed relationship leads to an open, frank and trusting management style. It could well be that it is that management style, added to the incentive of share ownership, which creates the enthusiasm and involvement which the managers seek.
Employee share ownership plans can work and are a good idea. However, like all good ideas they can be spoilt by abuse. That abuse is sometimes found in executive share option schemes which are introduced under the guise of employee share ownership. They can be legitimate, such as in the case of a company in trouble which can only afford to attract an executive capable of rescuing the business by offering a generous share option. But in too many cases options are used to entice new senior executives into companies by giving them a riskless one-way bet complete with substantial tax advantages. There are other abuses, for example, when company executives reward each other with share options purely to take advantage of the tax allowances available—a kind of tax efficient carrot without a stick. Without careful regulation, those abuses will bring the whole idea of employee share ownership plans into disrepute. Sadly, recent privatisations have been among the worst offenders.
The timing and spirit of this Unstarred Question suggests that it is part of a series of representations to the Chancellor prior to the November Budget. It is not my intention to make any special representation. My purpose is to state that I am in favour of those plans, provided that they are for all employees, are strictly regulated to avoid abuse and are incorporated in an open
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management culture. If I were to make a special plea to the Chancellor, it would be to help to restore and enhance the stature of manufacturing industry which I believe must be our main aim in the 1990s.
5.45 p.m.
Lord Carr of Hadley: My Lords, I am sure that all noble Lords will wish me to thank and congratulate the noble Lord on his outstandingly good maiden speech. I hope that he will continue to speak to us on this important subject and related matters in the future. I have a number of close associations with him. If I am correctly informed about his higher educational background, like him I had a scientific/technological education. He became a professional textile technologist; I became professionally a metallurgist. I do not know whether he would be happy to be questioned about textile technology today; I certainly would not wish to be questioned too deeply about metallurgical matters. However, that is an unusual background in the political world. I do not know whether my noble friend Lady Thatcher realises it, but we have at least one thing in common: we both took science degrees at university.
I share too with the noble Lord experience of different levels in industry before I entered Parliament. Finally, I share with him the fact that I made my maiden speech in another place on joint consultation in industry. Even in those days, to my mind employee share ownership was closely bound up with that subject. I have stated that I made my speech "in another place". In parliamentary terms, I did so, but as at that time (and it was 43 years ago) another place was physically recovering from being destroyed in the war, I in fact made that speech from these red Benches. I have therefore much in common with the noble Lord. I wish him a long, happy and active life in your Lordships' House.
I thank my noble friend Lord Reay for raising the subject today. I support him strongly in what he said to the Government about the need to give the development of employee share-ownership a strong, new push forward. There is no need for me to reiterate the list of actions which the noble Lord gave about what has been done by a succession of Conservative Governments to promote the increase of employee share ownership. It is a good record. However, I too believe that some of the Government's latest measures have become stuck. It is urgent that they now become unstuck.
I therefore strongly support my noble friend, for example, about the need to give a new push forward to statutory employee share ownership plans (ESOPs). There is little doubt that in the current climate those plans could be a potent means of extending employee share ownership. It is ridiculous—or so it seems to me—that they should be stymied or stillborn by the red tape with which the Treasury has bound up the plan. I cannot believe that the potential losses to the Treasury from relaxing the two restrictions which my noble friend Lord Reay mentioned are worth considering. They are small in the counterbalance of what would be achieved if we could give a big push forward to the development of statutory ESOPs in this country, as we

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have seen happen in the United States, as my noble friend said. So I beg the Government to look at the suggestion most seriously and constructively.
Having once been both junior Minister in the Department of Employment and Secretary of State for Employment, I wish that I too could have been a Treasury Minister. I hope for great things from my noble friend Lord Henley and that he will bring to the Treasury the common sense and constructive ideas typical of the Department of Employment, but, in my view, not always to be found in the Treasury. Perhaps my noble friend Lord Boyd-Carpenter would not agree with those liberal statements. Anyhow, I hope that the matter will be taken seriously.
There are two other areas which I wish to mention where I feel that the development of employee share ownership is getting stuck. One is in the management-led employee buy-outs of local transport companies. Here, the situation has been distinctly made less favourable by measures taken by the Government since the last general election. Up to that time they were progressing quite fast, but since the last general election a new condition has been introduced whereby none of the schemes can go forward unless it is put out to competitive tender. That I understand to be a measure to protect the value of public assets. Perhaps I ought not to be opposed in principle, but it is important that a real advantage should be given to management buy-outs, as long as they are soundly based, in competition with open buy-outs. Otherwise, the Government's own policy for local transport can easily be defeated. If the local companies are gradually absorbed into big companies, we shall find ourselves, 10 years from now, back in as nearly a monopolistic situation as we have recently been in.
Thus I believe that it is in the Government's own economic and financial interests to do what they can to encourage the revival of the management-led employee buy-out schemes of local transport which were going forward fast prior to the general election, as I understand it, but have been slowed down since by the new condition. The Government should look carefully at whether the small advantage which I believe is still granted to buy-out schemes should be increased if the schemes are to go forward, to the greater good of the whole idea behind the proposals.
The third area which I wish to mention is a matter which was introduced in the Companies Act 1989 and which proposed that a new form of corporate entity called a partnership company should be introduced and should be made possible by means of secondary legislation. I believe that there was to be a new Table G to the Companies Act. That was the situation four years ago and there is still no new Table G. I do not wish to make too crude a pun, but it is time that this was "geed up". It is absurd that this has gone on for four years while lawyers have been quibbling about how they interpret the amendment which the Government themselves wish to introduce into the Bill, in order to make it easier.
I believe that my noble friend Lord Onslow at that time—and he will have something to say about this so I shall not steal his thunder—agreed to withdraw his
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amendment to allow the Government's wording to be introduced in order to make it easier. Instead, it seems to have made it more difficult and something must be done.
I strongly support my noble friend Lord Reay's plea that the Government should look at all that they have been doing to promote the share ownership schemes and should carefully pick out for attention the three areas which we have mentioned where their efforts are being frustrated by their own, in my view misguided, detailed policies. The broad policies are right, but the way in which they are being applied in a detailed manner seems to me to be causing obstruction rather than being helpful. I hope that this debate will help to bring that about. Again, I thank my noble friend Lord Reay for raising the subject today.
5.54 p.m.
Lord Boyd-Carpenter: My Lords, I think that your Lordships' House and those who are concerned outside with the working of the British economy are much indebted to my noble friend Lord Reay for raising this matter this evening. If I may say so, he has shown considerable adroitness in the timing inasmuch as he introduces it during quite obviously the period in which Her Majesty's Government and the Treasury are considering the Budget and the Finance Bill. Timing in politics is one of the most important matters and my noble friend's timing seems to be quite perfect.
If I may pick up what my noble friend Lord Carr of Hadley said, it is a matter for the Treasury. That is a good thing, because while I have the highest regard for the department in which he served, I think that most people who seriously study the working of government know that the Treasury is the central machine of government. I am not talking of Ministers, but at the official level where it holds the cream of the Civil Service. It is a good thing that this important matter should be considered by that department.
Risking a rebuke, I should like warmly to congratulate the noble Lord, Lord Haskel, on his most interesting maiden speech. It had the enormous advantage of his practical experience behind it which he deployed so interestingly and impressively. I am sure that his contribution has added considerably to the impact of the debate.
I wish to make only one point of substance on the issue. It is that employee shareholding is socially, economically and financially an extremely important activity. It is one which, I am afraid, has in recent years made rather disappointing progress. Employee shareholding means that those who work in an enterprise have a direct financial interest in the success of that enterprise. It is in that respect the very converse of a nationalised industry, where those who work in the industry know that their prospects and earnings are utterly unaffected by the success or failure of the industry. With employee shareholding, they have a direct and visible contact with the earnings of the company. That seems to me of enormous importance. In large measure it prevents disputes between capital and labour, between employer and employee, which do so

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much harm and cause so much delay from time to time in various enterprises. Everyone is on the same side and that is an enormous asset.
Therefore, I suggest that it is up to Her Majesty's Government to show their full appreciation of that by the steps they take, I hope in the next few weeks, because the employee shareholding movement has not gone as fast or as far as most of us would wish. As my noble friend Lord Carr of Hadley said, it is no doubt because of the various rather rigid restrictions which are imposed in a rather short-sighted view of the possible expenditure involved.
I hope that, although my noble friend Lord Henley cannot anticipate the Budget Statement—or he would cease very quickly to be on that Bench—he will be able in his usual tactful way to indicate the sympathy of Her Majesty's Government with the development of employee shareholding and give some indication that they realise its great importance and the desirability of taking action on it. In any event, I am quite sure that this debate has served a most useful purpose in making clear from both sides of the House how important those of us who have had any industrial experience know employee shareholding to be. I hope that we shall get an encouraging reply from the Government.
6 p.m.
Lord Grimond: My Lords, I too should like to join in the congratulations to the noble Lord, Lord Reay, on introducing this debate. I also congratulate the noble Lord on his speech, which dealt most admirably with both the wider issues and the particular points which are, as has been pointed out, of some immediate importance in view of what the Chancellor is leading up to in regard to the present legislation.
I feel some sympathy with the Chancellor over insisting that a majority of the trustees should be elected by their workers under an ESOP, and also that they should eventually take the shares into their own hands. But as the noble Lord, Lord Reay, has pointed out, this has proved a serious, almost fatal, defect in the Bill. I therefore hope that the Chancellor will drop it.
In general, one of the troubles in trusting the Treasury—which, as the noble Lord, Lord Boyd-Carpenter, as an old Treasury hand quite rightly pointed out, is a most splendid institution—is that the British appear to look under every carpet to see what mousetraps there may be and to find the possible loopholes for evading taxation.
Taxation is always being evaded. I fear that if now the limited liability rules were brought into effect, the Treasury would find some objection to them. The Treasury is quite right to raise objections and to maintain the honesty of the tax system. But it must also realise that it must move forward and risks must be taken.
Like other noble Lords, I too was deeply impressed by the maiden speech of the noble Lord, Lord Haskel. I too should like to join in congratulating him. Two particular points struck me. First, the noble Lord emphasised the different atmosphere in companies in which the employees have a substantial say. He also attacked the share options given to directors—which
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appear to me to be one of the lesser scandals, (but nevertheless a serious scandal) in relation to the general scandal of ever rising directors' pay, regardless of whether companies do well or badly, and quite regardless of whether it is inflationary. I am glad to hear that the noble Lord came out against that.
If it is said that there have been rather small advances in certain directions, as over ESOPs, the noble Lord, Lord Reay, was quite right in saying that in general there have been very considerable advances in workers becoming shareholders. We can point to the success of such undertakings as John Lewis and Baxendale in the whole campaign which we are conducting.
I do not want to reiterate what has been said about the technical possibilities, tax concessions and so forth, for encouraging shareholding among the workers. Nor do I want to reiterate what the noble Lord, Lord Reay, said about the general desirability of such moves. But I want to stress two points.
First, it is absolutely essential in this country to spread wealth. It is deplorable that the poor, as I understand it, are in real terms 14 per cent. poorer than they were, while in the meantime the rich have become richer. If we are to have a decent and satisfactory country, whatever our Party, it is essential that the gap between rich and poor should not grow. One way of tackling that (only one way, admittedly) is through wider share ownership, and particularly the ownership of businesses by those who work in them.
My second point is that we are watching an immense change in the balance of power between capital and labour. In the old days mass labour, organised through its unions, could exercise very considerable influence. But now the way to get on in the world is to have some access to capital, or to own capital. We have seen the decline in the power of the trades unions partly as a result. Again I say that it is essential, if this is the modern tendency, that the nation as a whole should have a share in the capital it possesses and that capital should not be confined to a small elite. This permeates everything, not only businesses but also the social services, in which the clients are so clearly distinguished from those who actually dish the money out. Therefore I hope that employee participation will also be considered possible in the running of the social services. Otherwise, we shall have a highly divisive country, and to my mind an extremely inefficient one.
I come to my last point. The American economist, Weitzman, has pointed out that there may be great overall economies in rewarding labour through profit and not solely through wages. Whether he is accepted by Congress I do not know, but I find his arguments rather persuasive. I have also found, looking round, that however much we may believe in the private enterprise system of competition—and I certainly do—it has hardly turned out to be as satisfactory as we hoped it would. State socialism may be very unpopular at the moment, but it will certainly rear its ugly head again unless we are careful, and the capitalist system gives some better reward to the majority of people in this country, among whom, most prominently, are the unemployed. Unless we can find some way of bringing

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them in to the general advance in prosperity, to my mind we shall see a return to state socialism, which I would much regret.
Therefore I beg the Government not only to remove the present drawbacks to employee ownership, not only to implement Table G (so admirably moved in this House by the noble Earl, Lord Onslow) but to go forward and, as the noble Lord, Lord Reay, suggested, aim at a situation in which at least a high proportion, if not an absolute majority, of the nation receives benefit, either through shares or through some equivalent ownership of capital, and people are not merely either turned into dependants upon the social services or are among the unskilled workers. For my part, I do not see the present system ever absorbing the unemployed. It has to cater for them, and introduce new ideas, even if it runs some risks arid possibly forgoes some efficiency in that process.
6.8 p.m.
Lord Vinson: My Lords, it gives me great pleasure to support the noble Lord, Lord Reay, in this matter. Like the noble Lord, Lord Haskel, who made such an excellent speech, I have a particular interest in employee share ownership, not least from practical experience. Like the noble Lord, I know that the whole concept works greatly to the benefit of the employee, the company, and thus no doubt to the nation at large. It is excellent that the Government have done so much to encourage wider employee share ownership. I very much hope that this debate will accelerate that process.
It may interest noble Lords to know that for 15 years I was either chairman or president of the Industrial Participation Association, a society which for over 100 years has advanced the cause of wider share ownership and the sense of common purpose that such ownership engenders—greatly, I believe, to the public good.
I was also fortunate enough to be able to build up a business from scratch. At the point at which we were employing about 1,000 people, I took the company public. That gave me the opportunity to practise what I had preached, and to give 10 per cent. of the shareholding of that company to the employees proportionate to their length of service and seniority. Without going into that matter too deeply, I should like to say that I think that I have seldom been more moved than when walking round the works about a week afterwards one elderly employee came up to me and said, "Guv'nor, you don't know what it means to me to feel I own a bit of this company." When one sees the effect that ownership has on job satisfaction, work satisfaction and indeed on life satisfaction, one does not need any convincing of the importance of engendering wider share ownership throughout the community for all the excellent reasons that the noble Lord, Lord Grimond, has just given.
I do not for one moment suggest that all employees are motivated to the degree of that lovely woman. But my experience tells me that many are and in a wholly beneficial way. Fortunately, too, my entirely subjective observation in this matter is borne out by extensive research—particularly in the United States, as the noble Lord, Lord Reay, mentioned—which shows that
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employee share ownership based companies have consistently higher productivity, higher profitability and better growth. That must be something which we all want to see.
There are plenty of cynics about to denigrate the concept. We have all heard the expressions "Well, employees always would grab a freebie, wouldn't they?" or "They will sell them as soon as they can". The fact remains that although some employees may take advantage of that kind of situation and prematurely sell their shares, the majority of employees do not and many of them hold on to their shares for many years. That alone is a positive benefit. It should be considered in relation to the problems of short-termism and the goal of broadening the property ownership base of this country which is so important.
I realise that the Government clearly recognise the benefits of ESOP schemes, but it is, particularly ludicrous that many of the useful steps that they have taken to promote their introduction are, not for the first time, frustrated by minor legalities which were not envisaged when the wording of the legislation was drafted. It is ridiculous that those worthwhile schemes are held up by matters which could be so easily overcome—such as the modification to the seven-year rule and the simple declaration as to what constitutes a significant number. In that respect I suggest that a figure of 30 per cent. would be a perfectly sensible working figure that would break the current legalistic log jam. I echo the words of others in saying that the Government must take steps urgently to remove the legal entanglements which are strangling at birth the emergence of such schemes.
Meanwhile, we all try to put an optimistic gloss on the economic position of this country. But the fact is that we have a howling balance of payments deficit such as no nation can sustain for long. Fortunately, now that our currency is at an appropriate exchange rate level, we are in a unique position to trade ourselves out of the problem. Many people argue that we do not have the supply side capacity. But it is surprising what capacity can be squeezed out of existing investments, if one harnesses the ingenuity and inherent skills with which we are so well blessed in this country. To accelerate personal endeavour and commitment we need to induce a greater sense of joint endeavour throughout the workforce. I do not say that it will have immediate effect, but overall the introduction of such schemes and wider share ownership generally induce such a feeling of joint endeavour. Whatever the critics may say, people like to belong and feel that they are part of an organisation; and they rightly like to reap some benefit from it, not just in their weekly pay packets but over the longer term. Indeed, the longer term is a concept that we need to encourage in all walks of life, not only in government but in shareholding as well.
The concept of employee share ownership precisely meets those needs and helps to fulfil them. I hope that the Government will be able to give the House an assurance that they will look again at this matter with a view to removing at an early date the obstacles that prevent its wider implementation. If they do so, I am

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sure that we shall be doubly grateful to the noble Lord, Lord Reay, for raising this matter again at such a timely moment.
6.15 p.m.
The Earl of Onslow: My Lords, I must first congratulate the noble Lord, Lord Haskel, on what he had to say. There was hardly anything with which we could not all agree. I am awfully cross that the noble Lord, Lord Reay, has had to bring up this matter at all. He should not have had to do so.
This has been government policy. With regard to the famous new Table G in the Companies Act, in 1989 I moved an amendment to which my noble friend Lord Strathclyde agreed. I thought to myself that it was magic that there was something which I had agreed with my own Front Bench, and it had been arranged that it would go forward. But, no, the wording that I originally put forward was "majority shares" whereas the government amendment said "to a substantial extent".
The wording "to a substantial extent" obviously produced among the Treasury lawyers a mood which could only be described as like that of the argument between the arian bishops, the catholic bishops and the monophysite bishops at the Council of Nicaea. It is a marvellous argument over the nature and substance of shareholding. It is government policy. We all know that it ought to be done. No doubt we all know that according to Locke, property is the basis of human liberty. We all want to diffuse property ownership to the maximum number of people possible, so that they all have a stake in society. The greater the stake in society that people have, the more liberty there is, the more social cohesion there is and the more general wealth is created because of the motivation mentioned by my noble friend Lord Vinson.
It is irritating that one has to come back on something which is policy and which has been agreed. It is something which everybody agrees is a good thing but nothing has happened about it. Thank goodness my noble friend Lord Reay has brought up this matter. I sincerely hope that he never has to bring it up again, because my noble friend on the Front Bench will make sure that government policy is carried out and not forgotten.
6.17 p.m.
Lord Rochester: My Lords, everyone who has spoken has welcomed the request for information from the noble Lord, Lord Reay, as to how the Government intend to give further encouragement to employee share ownership. I am delighted to do the same. As the noble Lord, Lord Boyd-Carpenter, said, the noble Lord, Lord Reay, is particularly to be congratulated on the timing of his Question, coming as it does only a few weeks before the Chancellor is to make his Budget Statement at the end of next month. For obvious reasons the noble Lord, Lord Henley, will be limited in his remarks in reply, but at least we have been given the opportunity to express our views on this important subject. I shall have a little to say about statutory employee share ownership plans
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in particular, but I hope I shall be forgiven if, for the most part, I deal with the broader matters raised by the Question.
Ever since publication of the Liberal Yellow Book in 1928, democratisation of the structure of industry has been a major theme in my party's policy. The most significant political advance in encouraging employee share ownership, as the noble Lord, Lord Reay, was gracious enough to acknowledge, came from our initiative during the Lib-Lab Pact when the 1978 Finance Act introduced tax relief for approved schemes. Recent studies in the UK have shown that the benefits of employee share ownership can be substantial. For example, in one survey profit-sharing companies as a group out-performed their non-profit sharing counterparts over a range of nine performance indicators. However, such studies also showed that employee share ownership schemes only improve a firm's performance when they are accompanied by greater involvement of the workforce.
Moreover, by itself this form of ownership does not necessarily lead to an increase in employee participation. Management has sometimes seen it simply in terms of increasing incentives. The United States National Centre for Employee Ownership found that the most significant factor in the success of American-style employee share ownership plans is worker participation. ESOP companies that simultaneously instituted participation plans grew three or four times faster than ESOP companies that did not. Other American studies suggest that ESOPs will improve economic performance only if they lead to greater employee participation.
Evidence of that kind suggests that proposals for further encouragement of employee share ownership should be aimed at increasing both the number of employee shareholders and employee participation. This is not the time to offer detailed suggestions as to how that participation may be encouraged further, although there is one proposal that I should like to make on the matter before I conclude.
With regard to share ownership, my party proposes, first, that the limit on the value of shares which may be made available to an employee in any year under a share ownership scheme should be increased from the present figure of £3,000 to £5,000, or 10 per cent. of salary whichever is the higher, and that the cut-off point should remain at £8,000, except that it should be permissible to appropriate a limited proportion of shares in each year above the cut-off.
Secondly, we propose that changes should be made to the present guidelines of the investment protection committees which represent the major pension funds and investment companies. Those guidelines at present prevent more than 5 per cent. of pre-tax profits per annum going into employee shares and share dilution exceeding I per cent. a year. In our view, it is for the directors of a company to balance the interests of shareholders and employees. Indeed, that is part of company law following the Second European Company Law Directive, which excludes issues of shares to employees from the need for shareholder approval. We would not permit the Stock Exchange to continue to

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impose its present requirement that broadly-based employee share schemes must have shareholder approval. In that way we would remove the power of institutional investors to inhibit such schemes.
Thirdly, executive share option schemes designed as incentives for senior management do not involve the same spread of share ownership as all-employee schemes, and in fact contribute to the increasing divergence of earnings deplored so much by my noble friend Lord Grimond. We think it regrettable that the operation of those schemes and the tax relief that goes with them have not been made conditional on a company either operating them on a broad basis or also operating a widely-based scheme, particularly as more schemes for executives have been approved than those that are broadly based. In our view, the law should be modified to bring that condition into effect. The noble Lord, Lord Haskel, whose maiden speech I too so much admired, appeared to me to sympathise with that view.
Perhaps I may turn to the statutory employee share ownership plans for which the 1989 and 1990 Finance Acts provided encouragement and to which the noble Lord, Lord Reay, referred specifically. Like him, we see a useful role for those trusts, particularly when there is a significant change in the ownership of an unquoted company, whether or not it involves flotation and its desire to vest ownership of the shares in a vehicle which will benefit employees generally. We would add to existing tax incentives for owners to transfer their business to their employees by means of an accession tax, which would restore effective taxation on the passing of property on death or by gift. Again, this is not the time to deal with the matter in detail. Suffice it to say that the main purpose would be to tax not the donor of the gift but its beneficiaries, thus encouraging the wider distribution of assets.
If that suggestion is considered too radical for speedy implementation, at least let action be taken to ensure that the main deterrents to companies using statutory ESOPs are removed. If that means altering the composition of the trustee body—as suggested by the noble Lord, Lord Reay—so that control is more evenly spread between trustees who are elected by the workforce, those appointed by management and others acceptable to both groups who are independent, for my part I would not dissent. Similarly, if the present rule that an ESOP must distribute the shares bought to individual employees within seven years or lose tax relief can be shown, as seems to be the case, to be the deterrent which has most severely inhibited take-up under existing legislation, then I would agree that permanent shareholding by a trust should be made possible.
I said earlier that measures to increase employee shareholdings should go hand in hand with action to develop employee involvement more widely. In that connection I should like to refer once more to an amendment which I proposed to what became the Employment Act 1982. That amendment, which was accepted by the Government and now forms part of the Companies Act 1985, requires directors of larger companies to include in the report accompanying their annual accounts a statement describing action taken
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during the accounting year to develop employee involvement in a number of ways. One is providing employees systematically with information on matters of concern to them as employees. Another is consulting employees or their representatives regularly so that their views can be taken into account in making decisions likely to affect their interests. The third and most significant in the light of the Question we are now discussing, is encouraging the involvement of employees in the company's performance through an employees' share scheme or by some other means.
Following the 1982 Act the Institute of Personnel Management and the Industrial Participation Association (now the Involvement arid Participation Association) produced a code and action guide aimed at helping companies to develop employee involvement under those headings in practical ways. Both organisations asked the Government to give statutory effect to the code, but at the time the Government were unwilling to do so. Now I ask the Government to reconsider the matter. To act in that way would be an unmistakable sign of their desire to give further encouragement to employee involvement generally and employee share ownership in particular. I do not expect the noble Lord, Lord Henley, to respond positively to that proposal now. But I hope that when he replies he will agree to take the request back to his department for further consideration.
In conclusion, perhaps I may say again from these Benches how much I welcome the timely initiative of the noble Lord, Lord Reay, in asking his Question.
6.28 p.m.
Lord Peston: My Lords, in echoing other noble: Lords who thanked the noble Lord, Lord Reay, for introducing this interesting topic, I hope that he will forgive me if I do not follow him entirely through his; denouement. It seems to me that the Conservative Party has lost a great leader—or rather thrown her away—and is now looking for a vision. Somewhat far-fetchedly that vision is supposed to be wider employee share ownership. I should have thought the future of that party should be sought elsewhere rather than in something as narrow as that. But we shall have other occasions to discuss those matters.
I wish to concentrate on the main theme—that is, employee share ownership. In doing so, I congratulate my noble friend Lord Haskel on his maiden speech. He said many things with which I agree. But in particular—a point made by the noble Lord, Lord Boyd-Carpenter—my noble friend spoke from experience. That is enormously valuable to your Lordships' House. It is particularly valuable to those of us who speak from these Benches. I certainly do not speak from experience. In the American vernacular, I have never had to "meet a payroll". No doubt my noble friend has, and that makes quite a bit of difference. He will both strengthen your Lordships' House and these Benches.
I was particularly struck when my noble friend spoke about not abusing employee share ownership, particularly employee options. Indeed, he referred to the share option schemes. I was thinking that many years ago the right honourable Member for Old Bexley and

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Sidcup, Mr. Heath, referred to some of the activities of the Lonrho company as the unacceptable face of capitalism. I am bound to say that what I have seen in the financial pages of the newspapers in the past year about senior management share option schemes suggests to me that Lonrho got a raw deal in being described as the unacceptable face of capitalism. I am glad that my noble friend referred to that.
The remarks made by the noble Lord, Lord Reay, and other noble Lords were perfectly sensible in so far as we are discussing the technical matters to do with possible changes in the Finance Bill. I think we would all agree that the Government were too cautious. As the noble Earl, Lord Onslow, said, they should have done the thing rather differently, and there is still time to get that right. I do not think that there is anything between us on that. I hope—I know, indeed—that the noble Lord, Lord Henley, will see to it that these technical points to do with taxation are brought to the notice of his right honourable friend the Chancellor, although nothing more can be said on that.
I think that someone—and it has to be me—has to introduce a word or two of controversy into this matter. If I may wear my economist's hat, the case for employee participation is put in terms of raising productivity and improving economic performance. It is not the only case. The Liberals, traditionally, have also argued that it is a good thing in itself. But it is not the main case.
The main case is that it allegedly raises productivity and economic performance. An economist would then be bound to ask: if it does that, why does the market then not see that it happens? Clearly, if it does it, as noble Lords have said, firms gain from it. But if firms gain from it, the market ought to see that this becomes the characteristic behaviour of firms. Therefore, I have to say that if I were in the Treasury, and if it were my ambition to be there—as I was in my younger days—I would have to ask the difficult question: if it is such a good thing, why does it not happen as a result of the working of the free market, and why is there any need for any public money in terms of tax concessions to be involved here? The very least one wants is an answer to that question.
I am not trying to be a total dampener on it but I think that the role of the economist—I hope that the Treasury speaks up in these harsh terms—has to be to demand an answer to that question.
There is a second question which concerns the position of the employee. The noble Lord, Lord Grimond, referred to Professor Weitzman's papers, which were brilliant papers. In large part—I am speaking only from memory—those were papers about profit related pay that would give the worker a more sensitive interest in the performance of the firm. But I think that what Professor Weitzman was looking for there was the notion that that would lead to more stability of employment. Therefore, in discussing the subject, one is discussing a change in the form of workers' remuneration—to make it more sensitive to firm performance—rather than in the first place the level of workers' remuneration.
Lord Grimond: My Lords, I do not want to attempt to enter into controversy on economic matters; nor do I want to appear to be an expert on what Professor Weitzman may or may not have said, but I think that I ought to reserve my position. When I have thought over it I shall see whether or not the noble Lord's interpretation of Weitzman is correct.
Lord Peston: My Lords, I am delighted that the noble Lord said that because I, too, can only partially remember the papers. I just remember how good they were. I may have misled your Lordships as it is some years since I read them.
If I may stick with the theme of remuneration being sensitive to the performance of the firm, we have to ask the question whether it is rational on the part of the employee to wish his or her remuneration to be so sensitive, because there is then introduced into that remuneration an element of risk. It is not obvious to me that an employee would welcome that element of risk. Indeed, to go back to another point raised by my noble friend Lord Haskel, which is that the shares should be marketable, if they are marketable, one then asks the question: what is the optimum form of behaviour for the employee? Is it to hold on to those marketable shares and place his or her whole economic future in the hands of the firm that he or she is working for; or is the sensible thing to sell those shares and invest in another firm, the cyclical behaviour of which will be different from the behaviour of the firm that the person is working for?
I am not trying to argue to your Lordships that profit related pay and employee shareholder remuneration of this kind are bad things. I am simply pointing out that there are complications and economic difficulties with these matters that ought to be addressed.
Noble Lords will recall that quite a number of the ideas put forward by the noble Lord, Lord Reay, were argued by my noble friend—and certainly by my noble friend Lord Williams of Elvel, who is now sitting next to me, when we were discussing the Companies Act 1989. We were pressing the Government to do rather more than they were doing. In that connection, our arguments were frequently to do with how we would deal with public companies rather than private companies. I do not reject entirely the private company argument put forward by the noble Lord, Lord Reay. However, I do think that the Opposition's credentials on these matters are rather good, and that is what enables us to be as supportive of the noble Lord, Lord Reay, as I have tried to be.
In conclusion, I suppose my position is that of the standard economist—on the one hand this, and on the other hand that. I am trying to say that some of these ideas are good. I am certainly trying to say that I hope that the Chancellor of the Exchequer will look seriously at the points made on the tax treatment of ESOPs. Having said that, I do not believe that this is other than a minor problem in terms of the reform of the way we conduct our economic arrangements. Certainly, I do not see this—if I may echo the noble Lord, Lord Grimond

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—as the way to make the 3 million unemployed both not unemployed and feel a larger part of our society. I think that other routes are the routes to that.
All one can do at this point is to wait. We shall have the Budget speech in about a month's time. I am told that we shall be allowed to debate that speech in one form or another. I hope that the noble Lord, Lord Reay, will put down his name to speak on that occasion and will either congratulate the Government on doing what he wants or remind the Government that they ought to have done what he wants.
6.37 p.m.
The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley): My Lords. I join my noble friend Lord Carr and others in congratulating the noble Lord, Lord Haskel, on his maiden speech and welcome the wealth of practical experience—the noble Lord, Lord Peston, stressed that we are sometimes lacking in practical experience in some parts of the House—of both the textile business and employee share ownership in general that he brought to the debate. We look forward to hearing him on many other occasions.
My noble friend Lord Reay is justified in drawing attention to the impressive results of this Government's employee share ownership policies. The Government are proud of their commitment to advancing employee share ownership. In all but two of the past 14 years, as my noble friend made clear, they have introduced measures to make it easier for employees to acquire shares. In 1979 there was a total of 30 approved share schemes open to all employees on similar terms. Since then the number has grown to more than 2,200 all-employee share schemes. Nearly 3 million employees, as my noble friend made clear, are estimated to have benefited since the introduction of these schemes, receiving shares, or options over shares, worth around £10.3 billion.
As, I believe, all speakers made clear, with the possible exception of our noble economist, the noble Lord, Lord Peston, there are clear advantages to be gained from the identification of employees with the success and profits of the enterprise employing them. Employee involvement is likely to result in improved productivity and improved industrial relations, which are crucial if the process of wealth creation is to be advanced. Ultimately employee share ownership can be good for the economy as a whole and, as my noble friend Lord Boyd-Carpenter made quite clear, can bring considerable social advantages to the country as well.
It is for those reasons that we have been prepared to use the tax system to encourage employee share schemes which give employees a genuine stake in their companies' fortunes. That was why we introduced legislation in 1989 to provide a specific tax relief for a company's contributions to an ESOP. The Government decided that there was a gap in the range of opportunities for promoting employee share ownership that statutory ESOPs could fill. There were cases where large shareholdings might be made available for employees, larger than those usually associated with approved schemes, but where financing the acquisition
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of the shares would be difficult. Inspired by US experience, ESOPs—a kind of employee benefit trust—were being set up. But before 1989 there was uncertainty whether company contributions to such trusts qualified for corporation tax relief. It was appropriate for the Government to fill this gap with a new type of statutory arrangement.
But in designing their legislation, the Government were concerned to avoid certain pitfalls, and to be consistent with their existing employee share ownership policies. In particular, the Government were determined that the new facility for statutory ESOPs should not fall into various traps. It should not divert attention from, or undermine the continuing success of existing approved employee share schemes. It should not provide only financing benefits for companies, nor become a tax shelter.
It should not provide special benefits for directors or top managers only. It should not delay real employee share ownership, or seek to restrict it.
In 1990 we took a further step to assist statutory ESOPs. A capital gains tax relief was introduced to encourage owners of shares in companies to sell them to statutory ESOPs. This relief allows gains on the sale of shares to be deferred. Finally, in 1991, the Government introduced a corporation tax relief for a company on its costs in setting up a statutory ESOP.
The introduction of all these measures confirms the Government's view that ESOPs can usefully add to the further development of employee share ownership in the UK.
I have described some of the principles underlying the ESOP legislation in some detail because I suspect that critics of the statutory ESOP requirements do not always take account of them. We understand, however, as I believe my noble friend Lord Carr put it, that we have got stuck and that not many ESOPs have been set up which comply with the statutory rules. My noble friend Lord Reay in particular, and other noble Lords, mentioned two of these rules—the trustee requirement and the seven-year rule, which he believes require modification to stimulate the setting up of more ESOPs.
Obviously my honourable and right honourable friends in the Treasury will note what my noble friend Lord Reay and other noble Lords have said. I can assure them that they have had discussions with various interested parties; in particular with those mentioned by my noble friend. I can assure my noble friend and others that they will continue to keep them under review. But as my noble friend Lord Boyd-Carpenter made clear, and only a month before the Budget, I believe that noble Lords will not expect me to comment on the possibilities for change. I again stress that we note all the various suggestions, particularly those from the noble Lord, Lord Rochester. They will all be passed on to my right honourable friend.
However, some general comments may be helpful. The trustee requirement, which specifies that a majority of the trustees must be employee-selected, was intended to ensure that the trustees would remain independent of the company and its owners throughout the operation of the ESOP, and that at all times employees' interests would take precedence. We believe that the Maxwell

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affair is a powerful reminder of the necessity for providing some form of protection for employees' interests.
We recognise that the trustee requirement may be a deterrent to the take-up of statutory ESOPs. But before taking any decision to make any radical changes, my right honourable friend will want to ensure that their underlying objectives will not be compromised.
Similarly, the seven-year rule—the period within which the ESOP trust must distribute its shares to employees—was intended to ensure that employees take real ownership of their shares without unnecessary delay. Ministers wished to avoid a criticism which is sometimes levelled against US ESOPs. I note what my noble friend Lord Reay had to say about them and also the praise of the noble Lord, Lord Rochester, for them. There has been some criticism levelled against them, but they are used mainly as a substitute for more widely based and safer retirement provisions and are often of no real benefit to employees during their working lives. So if a statutory ESOP trust fails to distribute its shares within seven years, clawback charges of the corporation tax relief and of any CGT roll-over relief, can arise. I understand that it has been argued that this is a deterrent to the use of ESOPs by private businesses; for example in the case of a retiring owner who wishes to sell a large holding of his shares to his employees. I can assure the House that my right honourable friend and other colleagues in the Treasury, will continue to consider these points carefully. But it is important that ESOPs should be a vehicle for advancing employee share ownership, not permanent holders of shares in their own right.
I turn to the amendment to the Companies Act 1989 moved by my noble friend Lord Onslow and which I understand was then withdrawn as a result of a commitment made by my noble friend Lord Strathclyde on that occasion. I believe that my noble friend gave a commitment to consult interested parties on the draft of an appropriate model table which would be Table G to the Companies Act 1985. No single model of a partnership company exists. The task has proven to be extremely complex. However, I understand that in August this year the Department of Trade and Industry renewed its discussions with those in the employee ownership community with a view to the preparation of the draft Table G. I can only apologise to my noble friend Lord Onslow that it does appear to have taken some time. But I hope that we can move forward without any unnecessary delay.
As I have explained, in the field of employee share ownership, we have come a long way since 1978 or even since 1928 and the Liberal Party Yellow Book, of which I was not aware as I was not around at the time. The array of tax incentives to encourage employee share ownership have never been so attractive. Earlier this year the Government, with the participation of the CBI and the TUC, undertook a promotion campaign to make more employers and employees aware of what is on offer. There has been considerable interest in the
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promotion booklet, Sharing in Success and we hope that this will generate further interest and lead to increased employee share ownership.
In his speech, my noble friend also suggested that employee share ownership offered a more effective and direct route to involving successfully employees in the management of their firms than does the prescriptive legislation on worker participation proposed by the European Commission.
We fully support a voluntary approach to employee involvement which allows companies the flexibility to tailor arrangements according to their needs. Share ownership is one of a variety of methods which are being employed by many British companies to create a well-trained, well-motivated, flexible workforce. The Government are actively encouraging others to follow suit. I can certainly accept the general tenor of my noble friend's remarks in that field.
As to future encouragement, the Government have prepared the way, but we believe that it is up to companies to take the matter forward. Wearing my ministerial hat as a Department of Employment Minister, perhaps I may stress the importance which the Department of Employment and the Government as a whole attach to employee share ownership. I can assure my noble friend and other noble Lords that the Department of Employment was involved in the booklet, Sharing in Success. My noble friend will note that that has a foreword signed by both the then Chancellor and the then Secretary of State for Employment. I can stress that there is to be a new booklet from the Department of Employment on employee involvement arrangements generally in the United Kingdom. It will include a chapter on employee financial participation, including employee share ownership schemes.
Finally, perhaps I may reassure my noble friends Lord Reay and Lord Boyd-Carpenter and all others that the Government's commitment to encouraging this process is as strong as ever even if, obviously, I cannot anticipate what might emerge from the Budget. Fully motivated employees with a financial stake in their enterprises are far more likely to be a decisive factor in the success of companies which are looking to compete in the expanding European and world markets of the 1990s and beyond.

World Heritage Sites
6.50 p.m.
Lord Kennet Lord Kennet rose to ask Her Majesty's Government what is their policy towards world heritage sites, in particular Stonehenge, Avebury and associated sites.
The noble Lord said: My Lords, turning from broad things to deep things, as it were, and from new to old, I am glad to have the opportunity of tabling this Unstarred Question tonight and I am grateful to noble Lords who are present for this debate and to those who will speak after me. I am sorry that the noble Earl, Lord Clanwilliam, has had to scratch from the debate. He told the House what he thought earlier in the week, so we shall take that on board.
The United Kingdom is bound by the 1972 international Convention Concerning the Protection of the World Cultural and Natural Heritage to do the following things. It is bound to ensure the,
"protection, conservation … and transmission to future generations of the cultural and natural heritage".
The UK adhered to the convention in 1984 and our 13 world heritage sites were identified by the Government themselves. Stonehenge, Avebury and associated sites is one of them—I am sorry about the cumbersome expression, but that is its name—and is alone of its kind in that it comprises two great neolithic ceremonial landscapes which are quite widely separated one from the other.
Another international instrument which the Government have signed but which is not yet in force is the Council of Europe Convention on Archaeology. This should not be forgotten either. The English Tourist Board published an excellent document on sustainable tourism a couple of years ago; and that concept is taken up in another recent Department of the Environment consultation paper called Sustainable Development. The Regional Planning Guidance for the South West, in which Stonehenge and Avebury lie, also talks sensibly about "sustainable tourism". I shall return to these points.
At Stonehenge itself one of the most important factors is, indeed, sustainability. What is the maximum sustainable number of tourists at the stones themselves and over the whole equally important associated sites area?
A paper called the Draft Policy Planning Guidance No. 15, which has just finished its consultation period and is due out in its final form later this year, does mention world heritage sites, but pretty much in passing. As interested Members of the House will know, these planning policy guidances are the daily bread-and-butter manual for local planning authorities when dealing with planning. This guidance is devoted to "the heritage" and is consequently of extraordinary practical importance. For that reason it is a great pity that the present draft text is rather weak. It seems almost to be telling local authorities that the Government are not too concerned about their commitments to world heritage sites under the 1972 convention; and seems to suggest they need not be too concerned either. I have sent to the relevant Minister some suggestions for beefing the whole thing up: that would be quite simple to do.
The point is that the Government of this country have under this convention assumed certain obligations, and have done so before world opinion. That is what treaties mean. And if the central government have done so as a whole, then they have done so on behalf of every part of central government. They have also done so on behalf of the local planning authorities, who are the creatures of Parliament and form part of the government of this country. They are as much bound by the 1972 convention as the central government, and it is the duty of central government to tell them how to carry out their obligations and to see that they do.
The Stonehenge, Avebury and associated sites world heritage site shows up only too clearly the problems at
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present facing world heritage sites in relation to the planning system—and vice versa. Everything that happens at Stonehenge has implications for Avebuty. This has to be borne in mind now at Stonehenge. I have in mind particularly the great discovery of two large neolithic circles at Avebury under the West Kennet farmhouse. This discovery was made six years ago. The farmhouse was bought a few years ago by a speculative builder, who proposed a hotel and was then bankrupted. The receiver held it for months and months during which its listed buildings deteriorated. It has now been sold by the receiver to another anonymous buyer, probably another speculative builder: at any rate he will not divulge his identity. And during all these months—years now—English Heritage, though of the opinion that the new archaeological discoveries should be scheduled (as who would not be?) has not got round to persuading the Government to schedule them. Moreover, the boundary of the world heritage site cuts right through these circles, and no steps have been taken to extend that boundary.
All this indicates a certain confusion and laxness. First of all comes the question of how, within government, such things are handled. At the moment, it is a cat's cradle of ownerships and responsibilities. English Heritage answers to the Department for National Heritage; planning inquiries are run by the Department of the Environment; local planning authorities are instructed by the planning policy guidances which I have just mentioned which come from the Department of the Environment and the Department for National Heritage; trunk roads belong to the Department of Transport, and local roads to the highway authorities and thus to local government. The Ministry of Defence owns important bits of land at Stonehenge and elsewhere, and different official bodies designate the various areas of special scientific interest and so on which also exist hereabouts. The National Trust holds land inalienably, and the Secretary of State for National Heritage—or is it the Secretary of State for the Environment; I have not been able to find out—holds land for the Crown and delegates its management to English Heritage. At Stonehenge, the National Trust is even more tightly committed by the terms of its original public appeal for money to save parts of the Stonehenge estate: both "the plough", which must surely include "the bulldozer", and seaside-type jollification in general would be precluded for ever under the terms of the appeal, and solitude and silence restored.
This means that there is very great difficulty in devising a joint management structure for the whole Stonehenge area which many, including, I believe, both English Heritage and the National Trust, would like and which they are trying to devise. The idea is a management trust, perhaps "leasing" from the Crown and the National Trust. But it will be difficult to decide to whom the trust is responsible. We must wish them well in their attempts to sort this out. It will be the first time that such a thing has been tried and it will not be easy. In short, it is absolutely right that the noble

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Baroness answering on this occasion should enjoy interdepartmental status. If I may say so, that is a great advantage of her position.
At Stonehenge, it is certainly necessary to get something better than what there is now, which is awful. But even more important is to get it right. Many plans and changes of plan over the last decade have emerged from English Heritage. Earlier this year the Department of Transport came up with some proposals for "improving" the A.303 trunk road which runs right through the world heritage site. Each of the department's two proposed routes is entirely unacceptable, and I understand that English Heritage and the National Trust have told Ministers this—so, I expect, has the relevant international body which invigilates world heritage sites.
I wonder whether the officials devising the routes were aware that the Department of Transport is just as much bound by the 1972 convention as is any other part of the Government. For that part of the A.303, the only thing that can make sense is a long tunnel from east of King Barrow Hill to west of Longbarrow roundabout. That, I hope, is what English Heritage and the National Trust have told the Department of Transport. It will of course be expensive, but that is something upon which they cannot scrimp. This is one of the very oldest and grandest things in the world. The cost of tunnelling is coming down all the time. The Department of Transport is spending, it says, £1,509 million on new construction this year and next, which is 64 per cent. of its total expenditure. The rest relates to the improvement of older roads. So the money is there—it really is—if the priorities can be got right.
Now as to sustainable tourism, monuments can be worn out. The Parthenon is closed because it was being worn away by visitors; the Lascaux Caves are closed because visitors' breath was destroying the painting; Snowdon is protected from being overrun by having a very small carpark, which is a clever idea; and the National Trust rightly carefully omits to advertise certain of its vulnerable properties.
It is the control of numbers that is the key to sustainable tourism. What is the sustainable number of tourists at the stones of Stonehenge themselves and over the whole, equally important, green, associated sites around it? A figure of 1 million tourists a year has sometimes emerged. That was absurd. My impression is that it might well now have been abandoned. I hope so.
Stonehenge has absolutely to be protected. The convenience of today's mass tourism organisers has to come a very late second to that. English Heritage has to work out very carefully what number of visitors throughout the Stonehenge estate is sustainable. If it does not do so, it will get its plans wrong.
How do we interpret "protection" and "conservation", which is the language of the 1972 convention? When does necessary development—for instance, a new visitors' centre as at Stonehenge—become exploitation or indeed provide a visual rival to the monument itself? Is any new touristíc development within the world heritage site permissible? At Fountains Abbey, most regrettably, the new visitors' centre has to be described
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as exploitation in its own right: its whole scale and character seem aimed at rivalling the abbey ruins and wiping them out of one's mind as one returns to leave the site through the visitors' centre. Its huge cost is reflected in high entrance prices that visitors so strongly resent. "Isn't this our monument?", they write, again and again in the comments book. "We cannot afford to come again".
At Stonehenge we have the question of the new visitors' centre. I hope we get the long tunnel road (at least 4 kilometres); and the carpark set way back at Amesbury at the Countess Road roundabout. I hope that visitors will then approach the stones themselves by a little railway (part of the track is still there from the First World War) which is very unobtrusive and largely underground. The only question outstanding is whether the visitors' centre should be built wholly underground, under the site of the then closed A.303, so as not to damage any more archaeology, or whether it could not be safely sited back at the Countess Road roundabout where it could be built in the fresh air. Nothing would happen except that one would go on the tiny train, emerge through a modest hole in the ground and spread out over the whole green space of Stonehenge.
I believe that no substantial exploitative development in a greenfield site at Stonehenge can any longer even be contemplated, and I believe that English Heritage now shares that conviction.
7.4 p.m.
Lord Montagu of Beaulieu: My Lords, all those interested in our heritage should be grateful to the noble Lord, Lord Kennet, for giving us once again an opportunity to question government policy on world heritage sites. I well recall the debate we had in February 1989 when the noble Lord raised the specific question of government policy towards Avebury which had recently become a world heritage site. He rightly pointed out then that there was little point in giving such sites special status if they received no treatment such as additional planning protection and financial help. He also called for a special commission to report on the problem.
The Government were not too receptive or enthusiastic about that idea, and felt that due to the diversity of sites and the existing powers to control areas of outstanding natural beauty and SSSIs they had all the powers that were necessary. As chairman of English Heritage at the time, which was the statutory adviser to the Department of the Environment on such matters, we nevertheless decided to take the initiative, and in the debate I announced that we would be setting up a working party, not just to study the Avebury world heritage site but, in co-operation with the National Trust, local authorities and other interested parties, to produce a management strategy plan which could in some cases be relevant to other world heritage sites.
I am glad to say that the working party was duly set up, and a management statement which had been agreed by all the interested bodies represented on it was launched formally in the council chamber of Kennet District Council at Devizes in September 1992. The statement recommended that the working party should

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continue to take forward the various specific areas of work that needed to be done in a proactive way, within the overall framework of the management strategy.
The working party has now appointed two practical sub-groups, one to address the question of traffic and visitor management and the other to concentrate upon the historical and archaeological aspects of the site. Both of those groups have produced useful reports which I understand are currently out for consultation with the interested bodies with a view to their implementation, subject to the results of any comments received. Such work needs to be ongoing, but I have been assured by my successor at English Heritage that he is reasonably happy about the level of thought, effort and attention that is going into the world heritage site at Avebury at present.
There is, as every visitor knows, a confusing overlap in the National Trust and English Heritage curatorship of Avebury. In my time I initiated discussions with the National Trust to explore the wisdom and practicality of the four monuments there currently looked after by English Heritage passing to the National Trust under some form of guardianship agreement. I am delighted to hear constructive discussions have continued, and that there is a good chance that the National Trust will curate the whole of Avebury from 1st April next year—an excellent step forward.
With regard to the more general question of world heritage sites, they are of widely differing kinds. Blenheim is, for example, a single historic site, whereas Bath is a complete city. Durham is a great cathedral in a city, whereas Stonehenge is a site set in an archaeological landscape. It is therefore impossible to lay down specific rules for world heritage sites as different forms of approach are needed for each management plan.
To talk about Stonehenge in particular, one of the first actions I took as chairman of English Heritage in 1984 was to set up a working party on Stonehenge, which reported in 1985. The report was well received in that it suggested how Stonehenge could be isolated in its archaeological environment by closing the A.344, which virtually goes through the site, and removing the unsightly tourist facilities from their present position to one three-quarters of a mile away from the stones themselves. They are all measures which a world heritage site such as Stonehenge surely deserves.
Unfortunately, the plan suffered frustrating delays due to the inability of the Department of Transport, the Ministry of Defence, local authorities and certain local individuals, to agree upon a solution. It was not helped by the Department of Transport telling us categorically that there were no plans for extending the dual carriage-way on the A.303 any further west in the foreseeable future. My preferred solution of a tunnel was thought desirable, but viewed as too expensive.
It was with great pleasure that I recently learnt that there has been a miraculous change of heart at the Department of Transport and a serious study is at present underway into building an even longer tunnel of four kilometres, and that interest in the two routes to the south has considerably waned. This is just the kind of special consideration that a site like this deserves.
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I further understand that the present Chairman of English Heritage has had the very practical idea of building the new visitors' centre underground as part of the tunnelling operation, which would do even more to restore a sense of openness to the landscape. I welcome this plan with great enthusiasm. Of course, we all know that tunnels are expensive but so are new roads. I cannot believe that the difference between the cost: of a tunnel as envisaged and the proposed alternative road is so different as to make the Government, indeed any government, wish to ignore the tremendous advantages of the tunnel solution.
What I am certain of is that whichever government restore the reputation of Stonehenge to one of the world's greatest archaeological sites will deserve much praise and respect. Indeed, the reputation of the whole country with regard to all our historic sites will be measured and judged internationally by the way in which we look after our world heritage sites. There is no doubt in my mind that special policies and measures have to be adopted as owners of such sites, be they government, local authorities, ecclesiastical or private, have unusual responsibilities and unique liabilities, I know that my noble friend the Duke of Marlborough is very proud that Blenheim is a world heritage site. Nevertheless, as he rightly points out, the grants that English Heritage has been able to give him have been woefully inadequate for such an enormous set of buildings. Even, apparently, rich men are daunted by the scale of the problem.
I am confident that world heritage sites are now becoming increasingly respected, and are looming larger in the preparation of local plans. What I am pleading for tonight is that they should also loom larger in the minds of government departments., and I hope that my noble friend Lady Trumpington will be able to reassure me on this point.
7.12 p.m.
Baroness Park of Monmouth: My Lords, my noble friend Lord Montagu of Beaulieu and the noble Lord, Lord Kennet, have put forward most cogent arguments. I speak as the chairman of the Royal Commission on the Historical Monuments of England, which is the national body of survey and record of the historic environment. I wish to confirm the great importance that: it attaches to the status of the world heritage sites. For instance, it has only recently carried out the first modem archaeological ground survey of Avebury Stone Circle and its associated sites and it has revised the mapping of Hadrian's Wall and other such sites.
The commission's records and expertise are available to those who directly care for and manage such sites. We hope that those records and expertise can help the decision-making process when new developments affecting world heritage sites are proposed. 'Thus, English Heritage will be using our extensive information on Hadrian's Wall in its monuments protection programme. With particular reference to this debate, our information on sites identified from the air is informing the choice of the route of the A.303.
In addition, the International Council on Monuments and Sites (ICOMAS UK) is assessing our information as

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it produces short monitoring reports on each of the world heritage cultural sites in England. In the light of the ICOMAS UK report, the commission in its turn will be assessing what further records of world heritage sites will be desirable to assist in the long-term preservation of world sites.
I am grateful to the noble Lord, Lord Kennet, for bringing these important issues before the House.
7.14 p.m.
Lord Cobbold: My Lords, I too am grateful to the noble Lord, Lord Kennet, for raising this subject and to other noble Lords for participating in the debate. The question of the Government's policy towards world heritage sites raises the subject of their relationship with UNESCO. Although the world heritage sites come under the World Heritage Convention, to which we are a party, we must consider the Government's present policy on UNESCO. Two debates which took place earlier this year considered the matter. The noble Lord, Lord Henley, and the noble Baroness, Lady Chalker, said that the Government approached the question of renewal of membership of UNESCO with a genuinely open mind. Will the noble Baroness indicate whether the Government are closer to reaching a decision? Is our membership, or non-membership, of UNESCO likely to affect the attitude of that body towards the provision of financial support for our heritage sites? Have the Government taken that into consideration?
I turn to the sites and to Stonehenge in particular. I do not claim to have any special knowledge of Stonehenge but I have first-hand experience of trying to preserve an historic building and of managing large-scale public access. I am well aware of the problems of balancing conservation with the access of tourists to the site. I have another tenuous connection with Stonehenge; in the 18th century my wife's ancestor, William Stuteley, played a major part in the exploration, surveying and preservation of Stonehenge. As it happens, I was driving along the A.303 last Sunday and was able to update my knowledge of Stonehenge.
All of us who have visited and know this magnificent and ancient site agree that something needs to be done and that the existing arrangements for visitors and the road configuration are unsatisfactory. We all support action, and action soon, but the difficulty is agreeing on what should be done. Everyone agrees that the visitor facilities are inadequate and that the A.344 should be grassed over and the visitor centre moved elsewhere. The difficulty, as expressed by the noble Lord, Lord Kennet, is to decide how far away the tourist facilities should be, how large they should be, whether tourists should be encouraged, the degree of tourism that can be maintained and so forth. Those extremely difficult questions cause and have caused endless argument and tend to prevent anything from being done.
I understand that the main problem with the English Heritage preferred site at Larkhill is the considerable expense of building a long approach road. Therefore, I was pleased to hear the suggestion put forward by the noble Lord, Lord Montagu, for new positioning perhaps in connection with a tunnelling operation for the A.303.
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A cheaper solution would be to use the Fargo Plantation site, which is the solution favoured by my party's representatives on the Salisbury District Council. However, there are disadvantages and problems associated with the architectural value of the area. I recognise that the problem is very difficult. I hope that in an attempt to create too grandiose a scheme we do not continue to do nothing.
I wish to make a final and perhaps controversial point. I believe that this country's heritage should not be totally dead. In managing an historic property one is conscious of the compliments which are often received indicating that one of the valuable aspects of the property is that it is lived in, used and alive. Clearly, that does not apply to Stonehenge but, nevertheless, it is an important living symbol to many people. Admittedly, some of them have a reputation for antisocial behaviour. I have sympathy for those who wish to celebrate the Summer Solstice in peace at Stonehenge. I hope that any future arrangement will be so structured as to make possible the use of the stones by members of the public so that they can play an ongoing living role in the enjoyment of those visitors.
That is all that I wish to say tonight. Once again, I should like to thank other speakers for participating in the debate. I look forward to hearing the Minister's response.
7.20 p.m.
Lord Donoughue: My Lords, I should, first, like to take the opportunity to welcome the noble Baroness, Lady Trumpington, to her new ministerial post. It is my first opportunity to do so. I can say with conviction that I believe her knowledge of, and support for, the very central part of this portfolio—which, of course, is horse-racing—demonstrates her excellent qualifications for the job. We look forward to working very much in amity with her on various major policy issues of that kind.
As other speakers have said, I am also very grateful to my noble friend Lord Kennet for instigating the debate on a matter of great cultural interest. He introduced the debate with his considerable knowledge, with the aid of his former ministerial experience and his local expertise. My noble friend has certainly given the Minister, the Government and, indeed, all of us something to consider.
The debate was enlightened by several high level and very expert interventions, with a level of expertise which I cannot aspire to match. It seems to me to have focused on two main issues which were there in the basic proposition—the more general question of planning procedures for important heritage sites and the specific problems of Stonehenge. I shall say a few words about each, bearing in mind that it is getting late on a Thursday night.
Both of those issues—and, indeed, the related issues which have arisen or which could be introduced—contain basic factors and dilemmas in common. The root dilemma is that those problems involve a number of genuine, legitimate but conflicting interests. In nearly all of the questions concerning Avebury, Stonehenge, and so on which involve heritage sites, there is a

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fundamental heritage issue. In this case, it is mainly archaeological but there may be broadly architectural and historical aspects. There is often an environmental issue linked to the particular heritage issue. Moreover, there is usually a local community interest—that is, the basic concerns of the people who live and work in the area—and often a transport issue, as is the case here with the A.303 across Wiltshire. The interests of transient citizens are also legitimate but may or may not coincide with the interests of the local community. Finally, there is usually a separate economic interest, especially in terms of tourism.
Those different interests often point to more or less, to bigger or smaller constructions on the site and more or fewer roads to, from or across the site (or facilities for visitors); or, greater access, controlled access or limited or less access to the site. Preserving the historical entity usually means inhibiting modern demands. There is also an underlying aesthetic dimension—that anything that is done should be done well and beautifully.
It is not easy to achieve a consensus on the latter. Therefore, I shall begin by humbly acknowledging the dreadfully difficult task which all decision makers face in the field. Ultimately. in the real world, there must be concessions and compromises. The challenge is to get a fair balance between those legitimate and conflicting interests. However, for me that does not mean an equal balance. I should say at the start that I personally give top priority to the need to respect the historic personalities of the sites and, therefore, the archaeological considerations in the case of Stonehenge.
All other considerations, especially tourism and transport, should be subordinate to the historical and archaeological dimension. The archaeology of Stonehenge—and, indeed, Avebury, as was mentioned—is finite and unrepeatable. Once damaged or destroyed, it cannot be recreated or re-invented. Decisions which damage or destroy it are permanent and irrevocable. By contrast, the purposes of, say, tourism and transport can to some extent be replicated elsewhere. In any event, their priorities may change over time. We should certainly not grovel to tourism, important though it its economically, because it is the nature of tourism to overwhelm and destroy the very objects of its greatest desire. That is certainly a danger for Stonehenge over the coming years.
I should now like to move a little closer to the specifics of the debate. As regards the planning issue, I listened with great interest to the speech of my noble friend Lord Kennet regarding the policy guidances and our treaty obligations. I shall also listen carefully to the Minister's response. I believe that my noble friend demonstrated convincingly the terrible tangle of responsibilities cutting across so many departments and institutional boundaries when looking at such a problem as Stonehenge. If that can be simplified or rationalised, I think that it would be a great help.
My main concern in the area is with the adequacy of current planning procedures in relation to all sites of heritage and cultural interest. Such sites need great and special care so far as concerns planning, bearing in mind those conflicting cultural, community, environmental, transport and tourist interests to which I referred. We
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must also remember that we are considering heritage sites of great world historic importance—classified as such in treaties. We know that Stonehenge and Avebury are surely the most important prehistoric sites outside the Mediterranean.
I question whether the planning committee of the local district council or the metropolitan borough, with all respect to those local dignitaries, is on an appropriate scale to deal with issues of such complexity and international cultural importance. I believe that the recent threats to Avebury, which have been mentioned, and the great neolithic site linked to Stonehenge, from proposed hotels, theme parks and so on underline that point. Would it not be better to have a statutory system of referring all applications affecting world heritage sites—or, perhaps, a wider range of sites—automatically to the Department of the Environment, with an obligation on the department to involve the heritage, environment and local community interests?
I turn now to Stonehenge. We seem to be on the edge of some critical decisions. English Heritage and the National Trust have given the matter immense thought and have commendably consulted a wide public opinion. However, I would urge them not to be too influenced by the polls. We should remember that crucial prehistoric bones do not have a vote in such matters. I believe that the Government would be wise to consider what English Heritage and the National Trust jointly propose in a very positive manner. They should certainly not allow the short-term or the cheapest solutions of the Department of Transport to prevail.
In the latter context, I should like to make a few final specific points on the proposals that have been aired. The present situation is unacceptable and unsustainable. The present roads—namely, the A.303 and the A.344—destroy the unity and sanctity of this great site. The present visitors' centre is ugly, with totally inadequate facilities. Therefore, the roads must be moved and hidden and the visitors' centre replaced and hidden. The two proposals from the Ministry of Transport for grey and yellow routes for the A.303 should be rejected, as English Heritage rightly concluded. The A.303 should be buried in the longest possible tunnel, thus preserving the landscape and the archaeological site. The visitors' centre should be considered in tandem with the tunnel solution and with the new A.303 and, like it, hidden (possibly in the bed of the old A.303) so that there is no more damage to any new sites.
The visitors' centre should also be of good architectural design so as not to intrude on the site landscape and—this is very important—it must be adequate to the needs of the next 30 or 50 years because we must not have this matter dug up all over again. On a more general point, Stonehenge must be seen, restored and preserved as part of that wider landscape of the heritage sites to which it is historically linked.
Will Her Majesty's Government ensure that all planning applications affecting world heritage sites go direct to the Department of the Environment, with an obligation to involve heritage expertise? What other proposals do Her Majesty's Government have to provide greater protection for world heritage sites? With specific regard to Stonehenge, will the Minister assure

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the House that the Government will look favourably on the longest possible tunnel for the new A.303; on incorporating the new visitors' centre into that plan; and above all on giving priority to heritage and archaeological considerations which involve the least possible disturbance to this unique site?
7.31 p.m.
Baroness Trumpington: My Lords, I thank the noble Lord, Lord Donoughue, for his extremely kind remarks. Did he say that it was his first appearance here?
Lord Donoughue: No, my Lords. However, it is my first appearance in the daunting shadow of the noble Baroness.
Baroness Trumpington: My Lords, I was awfully glad to see that "Lady Donoughue" ran rather nicely a week or so ago. It seems to me to be particularly appropriate that my first speech as the new spokesman for national heritage should concern the Unstarred Question of the noble Lord, Lord Kennet, on ancient monuments. I am grateful to the noble Lord, Lord Kennet, for the advance notice he gave me of the points that he wished to raise.
I can assure your Lordships that the Government are fully aware of their obligations under the World Heritage Convention and of the importance of all the UK world heritage sites. We are particularly concerned to ensure that the sites are adequately protected.
The noble Lord, Lord Cobbold, asked me about the position with regard to UNESCO. The question of whether the UK should rejoin UNESCO is a matter for the Foreign and Commonwealth Office. All I can tell the noble Lord is that the matter is still under consideration. We fully comply with our obligations under the World Heritage Convention despite not being a member of UNESCO. Far from being paid money we have contributed to the World Heritage Fund £100,000 this year.
Under the terms of Article 5 of the World Heritage Convention, we are required to,
"endeavour, in so far as possible, and as appropriate for each country:… to set up, where such services do not exist, one or more services for the protection, conservation and presentation of the cultural and national heritage with an appropriate staff and possessing the means to discharge their functions".
We believe we have complied with Article 5. These services do exist in the UK and, in our view, the sites are adequately protected. Clearly, world heritage designation of a site is something which should be, and is, taken into account in UK planning procedures. And the main vehicle for ensuring the protection and preservation of our world heritage sites is through the statutory development plan and development control systems.
It is for each local authority, taking account of world heritage site designation and other relevant statutory designations, to formulate planning policies for these sites and to include these policies in their development plans. Different policies will be appropriate for different sites, but policies should reflect the fact that all these sites have been designated for their outstanding
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universal value. Great weight should therefore be placed on the need to protect them for the benefit of future generations as well as our own.
The noble Lord, Lord Donoughue, asked me about planning applications. Mechanisms are already available. As I am sure the noble Lord is aware, the Secretary of State can call in any application for his own decision. Inclusion of a site in the world heritage list is not therefore, by itself, a direct instrument of planning control, but it does signal the importance of the site as a material factor to be taken into account by a local planning authority or by the Secretary of State for the Environment on appeal or, as I have already said, following call in. This is demonstrated by the cases at Avebury referred to by the noble Lord, Lord Kennet, and by other cases at Ironbridge Gorge and, most recently, at Hadrian's Wall.
The planning applications at Hadrian's Wall were for exploratory drilling for hydrocarbons on land 400 metres south of the wall, and for open cast coal extraction on a former colliery site just north of the wall. Both applications were called in by the Secretary of State for the Environment and, following public inquiries, planning permission was refused in both cases. The main issue in each case was the possible impact of the development on the setting of the world heritage site. The Secretary of State concluded that the impact of the developments would be unacceptable. I have visited the wall and I know that it is a spectacular site. The surrounding countryside is also spectacular. Therefore I could not agree more with the decision of the Secretary of State.
I fully understand the concern of the noble Lord, Lord Kennet, about planning protection for Avebury, and obviously all future proposed developments there should be scrutinized most carefully by the local planning authority. It must assess each proposal on its merits in the light of all material considerations, including the local plan for the area which was adopted last year, as well as other well established policies which apply to the locality. The Secretary of State for the Environment will equally have these considerations in mind when dealing with any applications and appeals that come before him for decision.
We must not, however, be complacent. My department is keeping a close watch on the situation regarding these important sites and aims to ensure that the legislation continues to provide an adequate framework for their protection. Recent changes include the strengthening of the planning and enforcement provisions in the Planning and Compensation Act 1991 and the guidance in the Planning and Policy Guidance Note on Archaeology and Planning, published in 1990, which includes a presumption in favour of the physical preservation of nationally important archaeological remains, whether or not they are scheduled, and their settings.
The noble Lord, Lord Kennet, will wish to note that my department is also including some guidance on the World Heritage Convention in Planning Policy Guidance Note 15, which was published in draft for consultation in July. This guidance makes it clear that although world heritage site status does not entail

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additional statutory controls, it is a material consideration in the planning process, which provides the main means of safeguarding the sites. The noble Lord, Lord Kennet, has commented on the draft guidance, and we will be giving very careful consideration to the points he has made. Our aim is to publish the PPG early next year.
My department is also providing grant-aid over three years for the International Council on Monuments and Sites (UK) (commonly known as ICOMOS UK) to produce, with the agreement and co-operation of site owners, monitoring reports for the English sites. These reports will record the main facts about the condition and use of the sites, the management arrangements, visitor numbers, and draw attention to current issues affecting each site. ICOMOS UK will also encourage the production of comprehensive management plans for the sites. This is an important initiative which should assist the various organisations with responsibilities in this important area. The noble Lord, Lord Kennet, will be interested to know that the boundaries of our world heritage sites will be looked at again by ICOMOS in the context of the monitoring reports.
My noble friend Lady Park mentioned the important role that the Royal Commission on Historical Monuments in England will be playing in that exercise. ICOMOS will certainly find the commission's extensive records most useful in drawing up the monitoring reports.
The exercise builds on the excellent initiative announced by my noble friend Lord Montagu in this House on 13th February 1989 of the preparation of a management strategy for Avebury. The strategy, which was produced by English Heritage in co-operation with the National Trust, the local authorities and others, was published in September 1992 and is designed to improve liaison between the various parties to ensure the proper planning and management of this internationally important site. There has been a great deal of good will among the various organisations. I should like to stress that fact in view of the remarks of the noble Lord, Lord Cobbold, about cutting down the number of organisations involved.
The working party which co-operated over the production of the management strategy has continued in existence as the report recommended, and two further reports—addressing traffic and visitor management and archaeological and historical aspects—have been produced. Those reports are currently out to consultation.
The noble Lord, Lord Kennet, raised the subject of the emergency scheduling of the neolithic monuments which have recently been discovered at West Kennet Farmhouse. English Heritage's programme of work of preparing scheduling recommendations for the sites around Avebury, which is not restricted to the world heritage site and will include the West Kennet longbarrow, should be completed by next April. However, English Heritage will then need to complete a number of necessary administrative procedures, including pre-notification and responding to any objections, before any scheduling recommendations can
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be submitted to my department for consideration. English Heritage is nearing the pre-notification stage in respect of some of the proposals.
Lord Kennet: My Lords, I am grateful to the noble Baroness for giving way. Am I right in thinking that there exists a procedure for emergency or spot scheduling? If that is so, what better case could there be for the exercise of that procedure than at these great monuments?
Baroness Trumpington: My Lords, I am afraid that spot scheduling has not crossed my path in the past week. If there is information of any importance which I can give the noble Lord I shall write to him.
I am grateful to my noble friend Lady Park for drawing our attention in the context of the matters I have just mentioned to the excellent work of the Royal Commission on Historical Monuments, which provides: an invaluable contribution to our knowledge of sites and monuments and a central basis for their protection.
Turning to Stonehenge, the noble Lord, Lord Kennet, has taken an energetic interest in the proposals affecting the site and setting. It is true that many agencies are involved in determining the future of the area. That is often the case with large and complex developments, and the more so in this instance when such an important and fragile part of our heritage is at stake.
My noble friend Lord Montagu of Beaulieu and the noble Lord, Lord Kennet, both expressed a preference: for routing the A.303 through a long tunnel, as did the noble Lord, Lord Donoughue. That option has emerged from the public consultation earlier this year. The ideas of an extended tunnel under a world heritage site and an underground visitor centre at New King Barrows are major issues of practicality and cost which need to be explored. That will take some time. Your Lordships will be interested to know that the idea is being examined most seriously by English Heritage and the Department of Transport.
The local authorities have responded energetically to ensure that local interests and the wider interests in the site benefited from their close scrutiny of the proposals at an early stage, ensuring that they are fully informed in discharging their statutory duties. It is abundantly clear first, that among all the options proposed none enjoys the support of everyone. Therefore, any solution is bound to be to some extent a compromise. Secondly, the one point on which there is very substantial agreement is that the present facilities at Stonehenge are themselves inadequate and detract from the special power of the site. I agree with the chairman of English Heritage that something must be done. I can assure the noble Lord that all parties are working to make sure that the solution chosen properly respects the importance of the whole Stonehenge area to our heritage and to the world heritage.
As your Lordships will be aware, my department is responsible not only for heritage matters but for tourism policy also. It was concern about the impact of tourism on historic towns, heritage sites and the countryside which prompted the Government to launch the Tourism and Environment Initiative in August 1990. A task force was established, which found that the problems are not

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as widespread as is sometimes believed. Where they do occur they are restricted to particular places at particular times of the year. The task force also found that much was already being done to ameliorate existing difficulties and suggested a number of ways in which other problems could be prevented or remedied.
The green theme has permeated through the whole range of tourism activity, from the national promotion of "alternative" destinations to the environmental focus given to many local tourism initiatives. One such is the Wiltshire tourism project, with which the noble Lord, Lord Kennet, will be familiar, in which the impact of increased tourism on the environment is a key consideration. The project seeks to bring the economic benefits which tourism unquestionably provides without impinging on the very things that make the area so attractive to visit in the first place. One of its specific aims is to promote Wiltshire as a whole and encourage visits to places other than those which are already
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popular with tourists such as Stonehenge and Avebury. As we all know, Wiltshire has much more to offer the visitor in addition to those notable landmarks.
I reiterate that we fully appreciate the importance of these internationally renowned sites, each differing from the other, as highlighted by my noble friend Lord Montagu. However, we remain of the view that the existing statutory provisions are sufficient and provide a proper basis for the control of development and protection of the sites. We shall, of course, continue to keep a close watch on the situation and ensure that the legislation continues to provide a flexible and adequate framework for their protection. Your Lordships can rest assured that the interesting and varied comments which have emerged during this evening's valuable short debate will be carefully examined and noted by my department.
House adjourned at twelve minutes before eight o'clock.