Industry and the Environment

HL Deb 20 April 1994 vol 554 cc193-234

3.2 p.m.

Lord Williams of Elvel rose to call attention to industry's responsibilities towards the environment, and in particular to the role of technological advances in improving environmental practice and the quality of life; and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I will allow for the traditional moment during which certain noble Lords who are not interested in the debate wish to leave the Chamber.

We have moved this Motion because, in our view, first, there is a growing realisation that the environmental problems of our country and the world are, and indeed should he, at the centre of debate about national and international business activity. Secondly, we believe that the free market, which for many years has been so beloved by noble Lords opposite, will by itself no longer be able to cope with those problems. There must be a much closer relationship between government and the corporate sector if those problems are to be resolved. Thirdly, we believe that there are opportunities for British business to exploit in what I might call the environmental sector which, if we are successful, will bring great benefits in terms of revenue to this country and to employment, and, by extension, to our quality of life. For those three reasons, our Motion appears on the Order Paper.

I hope that there is little argument about the first proposition. The days when we could consider industry in purely profit and loss terms, without also considering environmental side effects, are over. The experience of the environmental desert in Eastern Europe after the collapse of communism has had its effect. Furthermore, even if after that there are doubts about the political awareness of the environmental effects of uncontrolled industrial activity, any doubter needs only to look at the literature, both academic and governmental, that has developed during the past few years.

Any remaining doubters might then look at the European Community Green Paper, issued in the late 1980s, which was analysed and commented upon by your Lordships' Select Committee in a report published in March last year. The House has also seen reports on the implementation and enforcement of EC environmental legislation and on the fifth environmental action programme. Furthermore, and I hope finally for the doubters, there have been any number of reports by other bodies, culminating in the recent government post-Rio White Papers and the "Marrakesh Declaration" that was issued last week by the signatories to the GATT Uruguay Round, which specifically emphasised the importance of further work on the impact of international trade on the environment, in particular on third world countries.

There is a further dimension. It is no longer possible to overlook the ever more critical role of the consuming public. And from this further questions arise, in particular about information that could and should be available to the consumer for consumer protection. It is not just a matter of 100,000 or so inhabitants of Worcester being deprived of drinking water by an apparent leakage of solvent from a chemical plant. Plainly, that is illegal without a special permit. What is of greater anxiety is that although discharges are monitored it is a criminal offence to disclose information from the records so obtained without the consent of the water company, making it illegal to pass on or publicise findings other than under the privilege of a court. Perhaps I may take one admittedly rather unpleasant example. The effect on rats of drinking sewage-contaminated water has been studied for eight years. However, the results were deemed "unsuitable for publication". More and more the consumer is demanding access to this kind of information and, as usual, the consumer is right.

The questions I wish to ask, and to which I wish to offer a response, are as follows. Are we doing enough to alert industry across the whole spectrum to its responsibilities towards the environment? Are we enforcing the higher standards of environmental practice that those heightened responsibilities entail?

In looking at those two questions, perhaps I may first look at some of the positive sides. It is not my purpose to claim that everything is gloomy. The responsible care initiative of the Chemical Industries Association has been widely commented upon with approval, as has the introduction of British Standard 7750 on environmental management systems. The CBI has established a cross-sectoral Environment Business Forum, which I believe to be a leader in its field. It is widely praised. Undoubtedly, those are matters for congratulation.

However, the Environment Business Forum of the CBI—just to take that example—for all its worthy aims has only 250 members out of 20,000 businesses in the United Kingdom employing more than 200 workers. Furthermore, some 95 per cent. of all businesses in the United Kingdom employ fewer than 50 people. As far as I know, there are no umbrella bodies for them in respect of environmental matters. The Federation of Small Businesses is silent on the matter. Therefore, it can hardly be said that within industry itself the voluntary campaign has got very far, however worthy—and I wish to stress that—it may be.

The problem is quite obvious. Company environmental action plans, or whatever one likes to call them, can be expensive. They can be expensive to set up and expensive to implement. Funds going to support them come out of profits and even dividends. It is all too easy for a company to plead that its aim is to maximise the return to its shareholders—and that is the beginning and the end of it. Indeed, directors of companies of such a nature tend to go on, "We believe in a free market in which we are able to operate in whatever way we wish provided it is within the law. The City demands no less".

Here, of course, I come on to the more political matters. Let me make the statement quite plainly. It is our argument that companies are not free-standing entities operating in a kind of social vacuum but are part of society itself. If that sounds "corporatist"—a dirty word, as your Lordships will remember, during the 1980s—I am not ashamed of that in the least. It means that the Government must take the lead in persuading the corporate sector, in so far as the voluntary effort —and I emphasise that expression—is inadequate, to embark on the environmental action plans which society demands.

If that has to be enforced through a reporting mechanism on environmental practice built into the Companies Acts, then so be it. But if it comes to that, and I know not whether it will, I would add one note of caution. There is one area where we have to be particularly careful; that is, the small business sector. As our own European Communities Committee pointed out last year, small businesses need particular help. Any environmental legislation needs to be translated into a form which is easily understood by small businesses, and does not impose too heavy a burden on them.

At this point in the argument about the centrality of the environmental factor to the future of industry I would assert that it is possible, by close co-operation between government and industry—much closer co-operation than we have had under this Government —to solve what I would call the domestic problem. But we are a long way from solving the international problem. It may well be that the recently completed Uruguay Round (assuming that the treaty is ratified in all countries) however welcome it is in other respects could actually work towards damaging the environment. The new treaty could be used to challenge international environmental agreements such as the Montreal Protocol or the Rio conventions. Quite bluntly, that must not be allowed to happen.

Our party has put forward proposals for the GATT working party on trade and environment which would meet those concerns. We believe not only that that is a matter of urgency—the GATT working party should report within a year—but we believe also that the GATT treaty itself should allow for states to take action to protect their own or the common environment, and that such action can be applied to processes which damage the environment, as well as the end products.

I realise that up to now what I have said might be seen as somewhat on the negative side. Critics may say that I am asking for too much regulation: too much emphasis on the green and not enough on the necessity to create the growing wealth that we accept—and I accept it without compromise —is necessary to support a better environment. So I would like to turn now, if your Lordships will allow me, to the positive opportunities which high environmental standards offer us; in other words, to the technological advances to which my Motion refers. In fact, as your Lordships will be aware, there are technologies in existence already which, if properly harnessed, could create thousands of jobs—simple ones like energy efficiency, the replacement of lead piping, or land restoration projects; very simple, easy technologies. But the more exciting technologies are still developing. Pollution abatement will, in the short and, indeed, the medium term, constitute the larger part of the environmental industry.

The global market for pollution abatement technologies is already worth some 200 billion dollars, and by the end of the decade it is variously estimated to be worth between 300 and 600 billion dollars. This, I need hardly say to your Lordships, is very big business indeed—and very lucrative.

Sadly, the record of the United Kingdom is in this, as in so many other things, rather depressing. We are, to put it in a nutshell, falling badly behind. In air pollution equipment, for instance, our exports in the early 1980s were eight times our imports; now we are net importers. In sewage handling equipment, 15 years ago we exported more than all other European countries; again, we are now net importers. In total market terms, for all pollution abatement equipment, 50 per cent. of the market is shared between Germany, the United States and Japan. The United Kingdom market share is negligible.

Whatever the short term about pollution abatement, the greatest opportunities in the future lie in the development of what are called "clean technologies". Let me give your Lordships the DTI definition of what is meant. It is: technologies which focus on reducing demand for raw materials and energy and on the prevention as distinct from the treatment of pollution and wastes". That is a complicated definition. Let me give one example: the ozone-friendly fridge. Conventional fridges use CFCs as coolants and in the insulation. CFCs are to be phased out under the Montreal Protocol. The commercial opportunities for the manufacturer who develops and markets a fridge that does not rely on CFCs are quite obviously enormous. What has happened? The German Government stepped in and there are now two German companies making hydrocarbon fridges which are totally ozone-friendly and highly efficient—German companies, my Lords.

And this example is only one among many. In every sector where there is a polluter—motor car, aeroplane, domestic heating and so on—in every sector there is a similar story to tell. But, alas—and I have to say this to the Minister—it does appear that the United Kingdom is falling behind in almost every sector.

So my last question is: what could or should government be doing to rectify the situation? In answering that question I think we should first look at what industry itself wants. It is no good me, from this Dispatch Box, or any other noble Lord prescribing any remedy unless it is what is required by industry.

Lord Harmar-Nicholls

My Lords, is the noble Lord suggesting that compared with Germany, British industry is a deliberate polluter?

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord, Lord Harmar-Nicholls, for asking me to clarify what I said. The answer is, no. I am not saying that we are more deliberately polluting than any other country or company in the world. What I am saying is that, in trying to develop industries which will clear up that pollution (technologies that will deal with the pollution) we are behind the others. That is the argument that I am advancing. If I may say so, it is an argument which is proved by the facts. Just to digress for a moment, because the noble Lord has provoked me into this, I think that we are quite good at services but I do not think we are very good at manufacturing—my noble friend says "anything"—pollution abatement equipment. I believe that we have a big problem.

What does industry want? Here I quote from a recent survey of the environmental technology industry carried out by Environmental Policy Consultants. It found that 68 per cent. of respondents thought that there was not enough government support for their sector and that only 7 per cent. thought that it was enough. But, of course, they would say that wouldn't they? What is much more surprising —and, in my mind, more interesting—is that when asked what were the main barriers to growth in their business, nearly half replied "lack of government incentives for investment", and a third cited weak legislation and enforcement. When asked what factors improved sales, the majority cited United Kingdom and European Community legislation.

The answer, therefore, is becoming clear. Higher regulatory standards can be, in the technical term, "technology forcing"; in other words, regulation produces the advances in environmental technologies to generate the wealth, the jobs and—dare I say it?—the quality of life that we are all looking for. As confirmation of what I am saying, I need to look no further than paragraph 51 of the report of your Lordships' European Communities Committee, to which I referred earlier, which says: Early adoption of strict environmental standards can give `first mover' advantages". That early adoption of strict environmental standards is the responsibility of government—not random deregulation.

The Minister of State, Department of Trade and Industry (Lord Strathclyde)

My Lords, perhaps the noble Lord could produce some examples of where he thinks our environmental record is lacking in the United Kingdom. It would certainly be most helpful in order to speed the debate along.

Lord Williams of Elvel

My Lords, I am in no hurry because there is no time limit. However, if the noble Lord would like to read the report of his own—that is of our own—European Communities Committee he will see many examples from the evidence of where, in the view of the evidence submitted and of your Lordships' committee, we are falling behind. We are falling behind particularly in the aspect which I just mentioned where Japan and Germany were cited in that report as having applied strict regulatory standards which gave them "first mover" status. They developed the technology. If the noble Lord would like to send for a copy of the report, he will be able to read that in black and white.

I believe that that proves the case. It is not a question of random deregulation that the Government are moving forward with. The responsibility of government is to regulate properly. The responsibility of industry is to follow-up with ingenuity and commercial acumen in precisely those markets which regulation generates. That is what we should be looking for, and that, I hope, is what we will get. I beg to move for Papers.

3.24 p.m.

Lord Ezra

My Lords, the noble Lord, Lord Williams, is quite right to raise this issue. I fully agree with his reasons for doing so. In his normal vigorous style, the noble Lord has stimulated what I am sure will be a most interesting debate. I am pleased that the noble Lord referred to the report of Sub-Committee B of the European committee because I have some connection with it. It was most unfortunate that, due to pressure of other parliamentary business, we did not have the occasion to debate it. However, we now have that opportunity. I should like to add to some of the comments made by the noble Lord on that report.

I should, first, remind the House that the report was drafted in response to a Commission document which I found to be very positive. It was a document which sought to demonstrate that industrial competitiveness and the protection of the environment could go together; in other words, that protecting the environment in industry was not necessarily harmful and that it could lead to positive results. We found that there was much substance in that contention, although in some aspects of environmental protection there were undoubtedly substantial costs which could not be compensated for.

The noble Lord referred to the "prime mover" situation which we emphasised a good deal. We found as the noble Lord indicated; namely, that in those countries—notably Germany and Japan—where at an early stage they applied strict environmental controls, that stimulated the response from industry to produce the machinery, the equipment and the processes to deal with the situation. In my own sector (the coal sector) the treatment of sulphur emissions was a case in point. Unfortunately, in this country we delayed considerably before we accepted the proposition that there were undue SO₂ emissions from the burning of fossil fuels. Therefore, we did not subscribe to the view that special scrubbing processes should be adopted and developed, whereas in Germany they went into it straightaway. The equipment now used in Britain in that sector has very largely to be imported. That is an illustration of the way in which, in some instances, we have fallen behind.

I was impressed with the document which the DTI issued earlier this year entitled The European Environmental Industry—Succeeding in the Changing Global Markets. I found it to be a very practical document. It analyses the various sectors in the new environmental market and indicates where the leading exporters and competitors are and what might be done from this country. It is a helpful and practical approach to the issue.

As the noble Lord, Lord Williams, pointed out, we are extremely good on consultancy services. When preparing for this debate, I was surprised to learn that there are no fewer than 700 firms in this country which provide an environmental consultancy service. They are almost falling over one another. Fortunately, they do not concentrate only on British industry; some of them operate very successfully abroad. Therefore, we lead in that area.

Another area in which I believe we lead is in the treatment of water generally and of water effluents. The water companies are to be congratulated on the initiative that they have taken in that respect. However, those successes are relatively few. Much more needs to be done. I hope that it will be stimulated by the DTI document to which I referred.

The noble Lord, Lord Williams, raised the issue of the degree to which there should be regulation and the degree to which there should be voluntary action. That is an issue at which we looked carefully in the report. My opinion is that the Environmental Protection Act 1990 just about lays down as much regulation as we could reasonably cope with. Some would feel that it even goes too far. I remind your Lordships that it introduced three fundamental concepts: the concept of integrated pollution control; the concept of the duty of care, particularly in the disposal of waste; and the famous BATNEEC concept; that is, the need to adopt the best available technology not entailing excessive cost.

I think that those are all good concepts. The trouble with the last, however, is that it is capable of a wide interpretation. I am not surprised that at an early stage the Government had to issue guidelines on the subject. What is the best available technology not involving excessive cost? The concept of excessive cost is something which is very subjective. One company's excessive costs could be very different from those of another. I think that this imposes a particular role on the regulators, and on the people—in this case the pollution inspectors—who have to apply these regulations. Where I agree with the noble Lord, Lord Williams, is not so much that there should be more regulatory legislation, but that we should make sure that the legislation is properly and effectively applied. I think that this is an area of importance not only here but also, almost more importantly, in some member countries of the Community where they are pretty lax in their application of the regulations.

I am a great believer in having legislation and regulation buttressed by voluntary action because voluntary action can take the whole issue much further and generate much more enthusiasm. The noble Lord referred to some aspects of this. He was right to refer to the responsible care initiative of the chemical industry. The Chemical Industries Association described this to us in our sub-committee and I was very impressed. There were two noticeable points of interest: first, that it started here but, secondly, that it has spread to a large number of countries and now 20 major countries have adopted the system. It is backed by codes on employees' safety; pollution protection; what is called "product stewardship", which is a lifetime analysis of products; community awareness and emergency response. I am glad to say that the CIA—I would point out to avoid confusion that that is the Chemical Industries Association—has decided that this should be a condition of membership. Therefore it has taken pretty strong action and it should be congratulated on that, particularly as the action has been taken in a sector where the problem of pollution has been very noticeable.

The noble Lord referred to the CBI's initiative and I agree that there are not many companies yet who have adopted it, but it is all there and I know that the CBI is pressing ahead very hard. Again I think that the British Standards Institute is to be congratulated on the major standards which it has introduced in recent years, particularly the well known BS 5750 which deals with quality systems and which it has now followed up with the environmental management standard 7750 to which the noble Lord referred. I am glad to note that that standard is now to be incorporated as an international standard. That is an area, again, in which we have shown a successful initiative.

But apart from these general initiatives of a voluntary nature I have found that there is a large and growing number of companies who are taking their own initiatives. The concept of environmental management is spreading and I was struck in particular with what has been done by the National Westminster Bank. One does not normally associate a banking institution with environmental concern, but it has taken the matter seriously and it has worked hard to create an environmental awareness within its group. What has interested me particularly is that it has sought to influence its suppliers and its customers, particularly small firms.

The noble Lord referred to the problem of small firms. Small firms have a great difficulty in the first place in understanding the environmental legislation and then in actually carrying it out and surviving having done so; they need a great deal of help. We suggested in our report that environmental legislation should have special sections relating to small firms and that existing legislation should be explained in terms which could be reasonably applied to small firms. What I am glad to see in connection with the initiative by the National Westminster Bank is that it has put itself out to help its small firm customers in this area. I think that is much to be commended.

The noble Lord referred to some aspects of environmental improvement which can be entirely beneficial and I am personally involved in one; namely energy efficiency. I am associated with a company which is concerned with energy management and I can say that as a result of our operations in the past year we have reduced CO₂ emissions to the tune of 85,000 tonnes. That is quite a lot of CO₂ which is not going into the atmosphere. Your Lordships may be interested in specific cases because this is an area of environmental improvement which brings undoubted benefit—not a net cost, but a net benefit. I wish to refer to the case of a group of 50 hotels where the application of energy management principles has led to a saving in energy of 15 per cent., to an annual financial saving of £170,000 a year compared with what the group was spending before, and it has reduced the group's CO₂ emissions by 2,500 tonnes per annum. That is something which is in every respect desirable.

I give another illustration of 25 blocks of flats, mainly in central London. The energy saving in this case was 29 per cent. and the financial saving was £400,000 per annum. The reduction in CO₂ emissions was 5,000 tonnes per annum. I was very glad to see, in the third report of the Advisory Committee on Business and the Environment, that special emphasis was put on energy efficiency as contributing to the improved environment.

To sum up, I would like to make three points. First, I think there is plenty of evidence now to suggest that industry is well aware of its environmental responsibility. There have been notable voluntary initiatives which have been mentioned. Of course more needs to be done and the noble Lord was quite right there. Secondly, much environmental action can be of considerable benefit in terms of cost and efficiency. I gave the example of improved energy efficiency and there are others. Thirdly—this is where I think that we are probably weakest and I share the view of the noble Lord on this—we need to develop what has been described as "prime mover" initiatives. In other words, from now on we should take a lead in anticipating environmental developments rather than being drawn along, in some cases reluctantly, by them. I think that in this way we could not only improve environmental practice at home, but we could also improve our balance of payments, and above all we could assist emerging economies who need this kind of help and are unable to develop it themselves.

3.39 p.m.

The Earl of Lindsay

My Lords, I am grateful to the noble Lord, Lord Williams, for raising this important and timely subject. The Government published their Agenda 21 strategies about three months ago and more recently they have issued the annual report required for next month's meeting of the UN's Commission for Sustainable Development in New York where environment ministers from all over the world will be reviewing progress on a wide range of issues. These events and issues are not insignificant. They ultimately affect us all, as they will also ultimately affect future generations; hence the relevance of the noble Lord's carefully focused debate today.

Many of industry's most fundamental responsibilities to the environment are well recognised in the UK through such policy concepts as the three mentioned by the noble Lord, Lord Ezra; namely, integrated pollution control, the duty of care and BATNEEC. There are also BPEO (the best practical environmental options), environmental assessments, eco-audit and management systems, and the development of British Standard 7750, which the noble Lord, Lord Williams, mentioned. This basic framework of environmental responsibility is vital. That so much of it is already established is an achievement of policy and practice which is, justifiably, acknowledged by a wide range of interests.

Few would deny that much more remains to be done and that the decisions which lie ahead may well be difficult. However, if one looks at the progress of some of our neighbours and competitors one realises why many of them currently credit us with developing a commitment to the environment by industry which is coherent, sensible and largely cost-effective. I have had first-hand experience of that external assessment recently. Within the past few weeks I have been to a conference in Paris on waste management and attended a committee in Geneva studying the Agenda 21 issues. At both events impartial critics gave UK policy fairly good marks for quality and credibility.

That deserves to be pointed out, not so much for the benefit of my noble friend the Minister who, being a naturally modest man, I would hate to embarrass, but because if we can identify those ingredients which can produce coherent and credible policies, and promote those ingredients, we have a better chance of achieving a good deal more.

Undoubtedly one of the successes in this country, which we must continue to promote and which has attracted attention elsewhere, is the fundamental contribution made towards sustainable practices when industry and government develop their environmental responsibilities together as a team. It is through the co-ordination of their respective responsibilities and skills, and liaison on the assessment of problems, objectives and methods that sustainability can best be delivered. Environmental policies which are neither commercially viable nor operationally practical are unlikely to be sustainable. Equally unsustainable are policies which are driven purely by political sentiment rather than by the realities of economic and environmental cost-benefit analysis, life cycle analysis or a sound scientific base.

To take an example, the waste recycling policies of countries such as New Zealand, Germany and Canada illustrate how policies based on sentiment and assumption rather than on viability and analysis can produce both an economic mess and net environmental penalties which are sometimes worse than the very penalties that they were seeking to mitigate. In their headlong rush into prescriptive policies those governments failed to assess or consult on the complexities and practicalities involved. For example, they failed to assess the true cost of separating out and collecting plastics, given that they comprise just 8 per cent. by weight of municipal waste streams. They failed to appreciate that a plastic bottle represents the equivalent of just one seventh of a car mile in energy terms. That has significant implications for the environmental viability in terms of resource use and emissions of some recycling schemes given the transport and reprocessing costs involved. It may be better environmentally to landfill that plastic bottle than to recycle it. In pursuing those famous policies governments failed to check with industry whether there was even a market for what was being collected. That has produced a range of economic and environmental problems way beyond those countries' domestic market.

Turning to recycling in the UK, one will find a significantly different approach being pursued. Here the, Government identified the need for action but then invited the relevant industrial sectors, in the shape of producer responsibility groups, to propose solutions. By asking industry to formulate its own analysis and choice of sustainable policies one effectively gives it considerable responsibility for delivering results. This is not a case of the Government seeking to avoid environmental responsibilities which should be their own. Government can and must identify problems and set standards. It is more a case of responsibility being shrewdly co-ordinated to reflect the inherent skills and abilities and incentives which are available in the market place.

In terms of the detail required for more sustainable industrial practices, for instance, it is industry which has an intimate understanding of the circumstances in which environmental improvements are sought. It is industry which has the greatest vested interest and the greatest experience of pursuing accurate analysis and cost-effective solutions. It is industry which has realised that environmental innovation can contribute to profit and survival. To paraphrase Frances Cairncross, it is industry's inventive energy which governments must seek to harness for the sake of the environment. The UK Government have been quicker than many to grasp those truths and to expand industry's responsibilities to the environment so that they include the analysis, formulation and delivery of appropriate policies.

There is one further aspect of this whole question which needs to be addressed. The general success of the commitment of industry to the environment may owe much to industry's involvement in and government devolvement of policy making. However, it also relies at critical junctures on governments' willingness to step in rather than to stand back. That is especially the case where necessary improvements in practice are temporarily or fundamentally unsustainable or unachievable if left to the private sector alone, or, as the noble Lord, Lord Williams, put it, where the voluntary effort is inadequate.

Governments can and do—and this Government certainly do —sponsor research where appropriate. They can revise specification standards where appropriate. Governments can issue credits, tax allowances and loans on appropriate equipment. They can reduce sales tax on appropriate goods. Governments can lead by example and use their own considerable purchasing power to create the right markets for the right goods. In the UK, for instance, national and local government authorities purchase half the extracted aggregates every year. That is considerable purchasing power, which can be used for environmental gain. They are also major purchasers of paper, another industry which needs environmental improvements.

In addition, governments should publicise successful and innovatory techniques. The motor trade is an example. There is a very good new technique which few people know about. Those who do know about it are unlikely to broadcast it because it is commercially profitable. In this country alone millions of tonnes of waste motor oil are generated every year. It takes just one litre of that oil, if carelessly dumped, to pollute one million litres of water. Yet too few people know that waste motor oil can be profitably recycled to produce fuel oil for power stations and furnaces. It also results in reduced sulphur dioxide emissions compared with the traditional heavier fuels.

With reference to the second aspect of the debate relating to technological advances, the active participation of government in promoting or enabling improved technologies to secure better practices can be essential. My noble friend's department has done fairly well. I welcome the new DTI project to encourage innovation in environmental performance which is to be launched this summer under the title The Environmental Technology Best Practice Programme. It is designed to disseminate information on best practice in clean technologies.

I also welcome waste minimisation schemes such as the DTI's Aire and Calder project which has saved participating companies some £2 million in two years, at the same time reducing their water use and pollution. I believe that there is a similar Merseyside project called Project Catalyst for which similar savings are projected.

I especially welcome the philosophy behind the non-fossil fuel orders and their Scottish equivalent, the SRO. They enable young technologies which show potential in terms of environmentally sensitive energy generation to gain market access. Such enabling mechanisms can stimulate commercially promising and environmentally preferable technologies, helping them to become competitive and free-standing. They can be the trigger and incentive for substantial private sector investment in the UK market, both by our own industries and in terms of inward investment from overseas companies. That last point should not be underestimated. Attracting industrial expertise and investment from elsewhere can benefit both our environment and employment.

As a footnote to the non-fossil fuel order issue, it is always worth remembering that non-fossil fuel orders cover a wide range of technologies and generation sources. Your Lordships may have seen the recent publicity relating to the 25 million tyres which are scrapped in this country each year. We are now burning approximately one quarter of them to produce electricity.

We have also set up the world's first scheme for the generation of electricity from chicken litter. I believe that two projects exist. Poultry litter spread locally has caused environmental problems and there have been worries about nitrate in the water supplies, about methane, and about salmonella entering the food chain. Now, thanks to non-fossil fuel orders, that waste is being used not once, to generate electricity, but twice. After electricity generation the resulting ash, which at that stage is harmless, is sold to farmers. It is high in potash and phosphates. I believe that governments must inspire and guide with such information.

Could the Government be doing more? Yes, I believe that they probably could. There may always be technologies lurking in the private sector which need to get off the ground but are having difficulties. Perhaps the most notable of those "victims", as it were, relates to the technology and infrastructure developed in the United Kingdom by British Gas for natural gas vehicles. I cannot understand why that technology has not received more help. The potential is there but the reality is not, because the level of excise duty levied on natural gas as a vehicle fuel is currently four times the levy set for petrol and diesel. That defies logic. Natural gas is one of the cleanest fossil fuels available. As a vehicle fuel it is virtually free of lead, sulphur, particulates and the hydrocarbons which cause pollution at street level. Its CO₂ emissions are 30 per cent. lower, which is relevant to our international obligations. The CO levels are 70 per cent. lower than those of petrol vehicles. Yet despite the environmental advantages of natural gas as a fuel for vehicles, I understand that Treasury policy favours petrol and diesel. If the duty on gas as a vehicle fuel is reduced to the EC minimum—that is the level at which petrol and diesel are treated in this country—it could become more competitive and begin to develop its market potential. That is an exception, but it is an example of government policy hindering a technological advance which would otherwise improve the quality of our life.

In conclusion, I believe that across the board the UK has made good progress on these issues. Industry's responsibilities to the environment are well established in a strong framework of basic responsibilities. Those responsibilities have been expanded to improve access to policy formulation, analysis and the delivery of objectives set at a national level. Where that has occurred, it has worked well. I know from first hand experience that that response is admired by other countries. Therefore, Government must continue to encourage that involvement, and continue their own strategic involvement in specific areas. To date the issue has had a good record; long may that continue. At present we all benefit from a good start to the Agenda 21 process.

3.55 p.m.

Baroness Nicol

My Lords, I am grateful to my noble friend for giving us the opportunity to develop this important subject at this point. I wish to develop two strands from his rather complex presentation. The first relates to the commitment of industry generally to address environmental problems associated with its own operations—and I include in that the agriculture and fishery industries, both of which have important impacts on the environment—and to keep us informed about what it is doing.

My second strand refers to research and development to which my noble friend referred, and the manufacture of the technology necessary to effect environmental improvements and to take British innovation abroad, not only to the industrial but also to the developing world.

Those of us with environmental interests receive a considerable number of documents drawing attention to efforts being made by various industries to meet environmental considerations during or after their operations. Yet in the CBI News published only this week, the director general finds it necessary to urge more businesses to publicise their performance. He states: Public reporting is absolutely essential to the credibility of any business, but some firms are thinking twice before committing themselves. It is therefore important that those which do operate a programme of environmental best practice gain the credit for it". I commend that view. I go further. I suggest that the absence of a public declaration of such a programme can and will be construed as the absence of a positive attitude to environmental matters. It is important that credit is given where it is deserved.

What is needed is not a glossy brochure full of platitudes about general environmental worries—we receive some of those—but a genuine recognition of the problems which can be associated with the particular industry and an honest statement of any efforts made to mitigate or overcome their effects. In the present climate, where environmental considerations are much in the public eye, I believe that honesty is good business.

The second strand is the development of technology to avoid problems or to deal with them after they have arisen. My noble friend referred to the value of the market for environmental technology which he put at 200 billion dollars. It has been estimated that by the end of the decade that specific market will have grown to 600 billion dollars. That is serious money by arty standards.

In March 1991 the then Secretary of State for the Environment, a certain Mr. Heseltine, speaking at an RSA Better Environment Awards for Industry ceremony, stated: There are enormous opportunities for those British companies willing to attack markets at home and abroad. These markets are not just for clean-up or pollution abatement technology, they are also increasingly for clean technologies. The shift from 'end-of-pipe' techniques towards the use of fundamentally cleaner processes means that opportunities will fall to process designers and operators as well as to identifiable environmental technology sectors. Reconciling economic growth with the protection of the environment will be one of the central challenges for the 21st century. It is not an exaggeration to say that the survival of civilisation depends on our success in meeting that challenge". I believe that the Government have not moved away from supporting that statement by the then Secretary of State for the Environment, at least in words if not in deeds.

The United Kingdom has a proud record of innovative technology. I am not as pessimistic about it as my noble friend on the Front Bench. I believe that the expertise and enterprise still exist. Yet a recent survey, to which my noble friend referred, concludes that the British environment technology is not a world player. My noble friend referred to the survey and gave figures that 70 per cent. of the companies taking part in the survey earned less than 25 per cent. of their sales from exports. That is not a happy situation.

It is true that within the United Kingdom the driving force behind the investment by industry in environmental technology is the need for industry to meet UK and European legislation. That driving force in this country is weakened by the UK Government's failure to enforce environmental regulations. They make a great deal of noise about it in some circumstances; but when it comes to enforcement, we are very slow. I appreciate that in the Government's eyes there may be a conflict between the enforcement of regulations which would benefit the innovative technology for clean-up and the existing industries which create the problems. But there is a huge market to be developed and it is of environmental benefit to us all. Yet the Government seem to lack the will or vision to create the right background for the market to develop.

I referred earlier to the report of Environmental Policy Consultants. The author of that report states: The new commercial goldmine for environmental technology manufacturers is in danger of being lost to foreign competitors unless the British Government strongly supports British companies by providing investment incentives, financial support for R&D, and by enforcing legislation properly". That is absolutely true. My noble friend drew attention to the fact that it is in large measure the small businesses in this country which lead the field in the subject. It is small businesses which are most in need of government help and encouragement. Perhaps I may remind the noble Lord on the Front Bench opposite of the old chestnut that so many small businesses fail because of the difficulties they have with cash flow and the need for the Government constantly to try to ensure that bills, including government department bills, are paid on time.

There is a rare opportunity here for the aims of industry and of the environmentalists to coincide. That does not happen often, and I hope that the Government will not miss this opportunity.

4.1 p.m.

Lord St. John of Bletso

My Lords, business is business. While it is true that the needs of the environment have been brought sharply into focus over the past decade, it remains accurate to say that the overwhelming majority of businessmen will do as much to preserve the environment as the law demands and yet as little as possible in that respect in order to preserve their profits. That is the harsh business reality. We all know it and we cannot wistfully wish it away.

What we can do, however, is to encourage a greater sense of responsibility for the environment among industry which will motivate action not just because the legislation demands it, but also because it is right. In that context, I am grateful to the noble Lord, Lord Williams of Elvel, for raising the matter in the debate this afternoon. Indeed, it follows upon the Motion of the noble Lord, Lord Beaumont of Whitley, last month on sustainable development, as well as the recent establishment of the Select Committee on Sustainable Development, all of which show clearly that your Lordships' House attaches great importance to environmental matters.

Some noble Lords, I am aware, may take issue with my opening remarks and I happily acknowledge that there are exceptions. But in the main, precious few companies are prepared to invest more than they have to on environmental initiatives, particularly if less environmentally responsible firms in the same industry can save costs and gain a competitive edge on them. It is the harsh reality, particularly during the recent global recession.

The ideal state of affairs—which I regret some countries appear closer to reaching than Britain—would be for instinctive environmental concerns to be shared by all companies in the market place. It is often understandable that some companies are wary of pursuing expensive environmental measures for fear of being left exposed and uncompetitive in their market sector. Such hesitation is not unreasonable.

There is, however, a marketing edge to be gained, often by companies showing their commitment to fulfilling their environmental responsibilities. But I repeat my assertion that business is business and, in general, companies cannot always be expected to demonstrate some kind of missionary zeal in protecting the environment when it conflicts with their prime responsibility of protecting their own market share. Here again, I share the concerns of many noble Lords who have already spoken about smaller companies needing more protection from being too heavily impeded by environmental legislation.

The chemical industry has made major inroads into cleaning up its tarnished public image, with initiatives such as the responsible care initiative already mentioned by the noble Lord, Lord Williams. However, with many chemical companies struggling against overcapacity, poor demand growth, declining margins and tumbling profits, they are often stretched to invest more in furthering their commitment to fulfilling their environmental responsibilities.

Clearly, it is primarily the role of government to create a climate where it feels entirely natural for businesses—that is, all businesses—to take an active line on environmental matters. The Environmental Protection Act 1990 certainly took a step in the right direction, although some have expressed concern that the Act took a more remedial than preventive approach. However, it was a positive start.

On an international level, the Government contributed in a major way to the success of the Rio Summit when more than 800 billion US dollars was committed to environmental projects globally. Yet almost two years have passed and much of the heady euphoria which surrounded the Earth Summit seems to have evaporated. Other issues have seized the spotlight and disillusioned pressure groups have started to question whether anything was truly gained.

The progress has been slower in developing countries than in under-developed nations, largely because of the ever present conflict between expensive environmental measures and industry's natural urge to remain competitive. Perhaps this delicate balance will best be found by joint action between government and industry, with the Government creating the climate, both by introducing legislation and the use of economic instruments and initiatives and with industry en masse being receptive to broader concerns for the environment. The noble Lord, Lord Ezra, has already mentioned a number of voluntary environmental initiatives taken by several major companies.

There are other factors at work within the environmental cause. As a trustee of the Television Trust for the Environment, I am keenly aware that increasing public awareness through environmental television programmes plays a crucial role in educating and influencing not just the public but also corporate opinions.

There is an ever increasing number of consultative agencies which advise companies in Britain on their environmental responsibilities. I understand that in 1986 there were fewer than 50 such agencies, and now there are well over 500.

Furthermore, certain initiatives pursued by the European Community are helping to stimulate a fresh approach in the market. Here I refer specifically to the Eco-labelling system as well as the Eco-audit legislation. All those have moved the debate in the right direction.

As environmental awareness and concern grow, an immense global market for environmental technologies and services has been created. Many noble Lords have already mentioned that it was worth well over 200 billion dollars worldwide in 1992 and it is due to grow substantially by the end of the decade. Happily, it seems that the United Kingdom is particularly well placed to take advantage of this growth. The environmental agency Ecotec was appointed by the Department of Trade and Industry to assess the export opportunities for United Kingdom suppliers of environmental goods and services. They found that this was an area where: the United Kingdom is very much in the black". Exports in 1992 totalled more than £700 million. Nearly half those exports went to European Community countries and a useful 7 per cent. to East and South-East Asia. This is one of the growing markets in the sector. It is expected to grow from 2½ per cent. of the global sales at present to more than 10 per cent. by the year 2010. Nevertheless, as the noble Baroness, Lady Nicol, has already mentioned, there is huge scope for there to be more growth in the export of environmental technology from Britain.

The United Kingdom's position in water and waste water treatment is particularly strong and the privatised water companies appear to have made substantial investments in such technology. There is, however, scope for more investment in air pollution control equipment, where an uncertain domestic market has disadvantaged United Kingdom companies. The approach to contaminated land remediation has been found to be technologically unsophisticated. Again, the lack of a proven track record has been a handicap to the prospects of British firms.

In the waste management field the Ecotec report says that the United Kingdom's strong dependence on landfill—I believe that 90 per cent. or more of all British waste is disposed of in landfills—and relatively lax environmental standards have reduced the scope for operators to develop innovative techniques. The United Kingdom is performing successfully in niche markets such as landfill gas. But it appears to be missing out in the growing market for integrated waste management services.

Noble Lords may be aware that the Labour Party, in criticising the Government's present policy of deregulation and the use of economic instruments, has suggested that progressive legislation at home can create a springboard for sales of environmental technology abroad. There seems to be some evidence that this may be—and indeed is—the case. Several world leaders have emerged through tough domestic legislation. I refer to Germany, with its desulphurisation technology; the United States, with its catalytic converters; and Sweden with its incinerator emission abatement systems.

In conclusion, it is evident that the market—

Lord Williams of Elvel

My Lords, will the noble Lord allow me to intervene? He said that the Labour Party had put forward certain proposals, and he was quite right. Will he also accept that the idea that regulation can be the prime mover in developing technology is not simply a Labour Party idea; it is an idea that has been generated elsewhere, and in particular by your Lordships in Select Committee.

Lord St. John of Bletso

My Lords, I certainly take the noble Lord's point. I agree that those initiatives have been issued not just by the Labour Party but also by your Lordships' Select Committees.

It is evident that the market in environmental technology is growing at a ferocious pace. The competition is great. But so are the rewards. Even in a world of environmental technology, business is business. We all know that. The challenge is to convince industry at large that business can still be business, but with a responsible concern for the environment.

4.12 p.m.

Lord Haskel

My Lords, during the past few years none of us has escaped the effects of pollution caused by business. However, we are hesitant about the measures to be taken because of the need to earn our living. Therefore, I too should like to thank my noble friend Lord Williams for giving us the opportunity to debate this dilemma by calling our attention to industry's responsibilities towards the environment.

The Government have started to act by laying down standards with the Environmental Protection Act 1990 and the waste disposal regulations. As the previous speaker said, business is business. But there are pressures on business to go much further than that basic minimum. I should like to speak about how business is reacting to the pressure to accept more responsibility. I should also like to suggest what government can do to help business, and how, with care, that can help to make British industry more competitive.

Business can cope with the financial, marketing, economic, employment arid technical pressures. But pressure is felt by companies from various groups which have a direct interest in their environmental performance, and that is different. Those pressures do not come only from environmentalists. Investors wish to know what level of capital expenditure is needed to meet possible compliance criteria. They want to know what the actual or potential environmental liabilities may be for cleaning up waste or pollution. Bankers holding a business's land and buildings as security are anxious to find out whether pollution is diminishing the value of their security. The pollution could go back over 100 years. Local communities want to know the effect on their environment of site operations in regard to effluent, waste disposal, transport, and air emissions. Customers want to know about the environmental impact of the products that they buy, because they in turn are under the same pressures. Employees want reassurance that the company for which they work is not exposing them to any health hazards and that the company itself has a good environmental record. Employees often form part of the concerned local community.

Business has responded to those pressures by voluntary action, which other noble Lords have described, and by introducing environmental policy statements and reports. It is now considered good practice to show responsibility by issuing an environmental report at the end of each year. My noble friend Lady Nicol quoted a recent appeal from the CBI which urged precisely that. KPMG Peat Marwick recently did a survey of the top FT 100 companies in the UK. That survey showed that 70 of those companies produced an environmental policy statement in 1993, compared with 42 in 1992. However, company environmental reporting is in its infancy so there is no agreed approach. Because of the growing voluntary and regulatory pressures, the level and nature of the environmental information being disclosed varies. In the survey only 12 companies gave bad news as well as good; though most were one-off references to some publicly known misdemeanour. However, the number of companies which both published an environmental policy and gave details of their plans for its implementation doubled.

Because company environmental reporting is a comparatively new concept, there must be a need for an agreed approach. Several groups have published their opinions on what environmental information should reveal and how this should be disclosed. At least one of the accounting bodies lists various criteria in judging which reports are good. The 100 Group of Finance Directors has published a statement of good practice. The CBI has set up a forum. Those different approaches make comparisons difficult. Naturally, businesses pick the style of reporting that shows them at their best.

Nevertheless, it would not pay any company to adopt a casual approach to this subject, since environmental reporting could become a necessity. That is definitely the long-term aspiration behind the European Union's Eco management and audit scheme, for which environmental reporting is a key requirement. In addition, one aspect of the Community's fifth action programme aims to get companies to reflect the full cost to society of the production and conservation of their goods and services. In the Netherlands the government are drafting a Bill that will require companies to publish detailed annual reports of their environmental impact and improvement plans. That will break new ground in Europe and could set the trend.

This area is where government leadership is required and looked for. In spite of the Government being in deregulation mode and in spite of their ambivalent attitude towards the European Union, perhaps the Minister can tell us what plans the Government have to regulate environmental audits and reporting. That is important because those audits demonstrate that a company is engaged in a process of self-assessment and is alive to its responsibilities in the environmental debate.

A business's responsibilities to the environment also extend to the product that it makes. Here there is a difficult balance to achieve because although environmental considerations are gaining ground the ecological superiority of a product is not its most relevant selling point. Price and user satisfaction are more important. But environmental considerations are catching up. Ecological detergents are gaining ground over traditional ones. That is an aspect of competitiveness which seemed to have escaped the Department of Trade and Industry when it published its Factors Affecting Competitiveness in June 1993. Perhaps the Minister can tell the House whether the new paper, expected next month, will take that into consideration.

Rising environmental standards can lead to products becoming unacceptable and being replaced by imports. New profitable technologies must have a reduced environmental effect. Dr. Robert Wheelan, the chief executive of the Centre for the Exploitation of Science and Technology, put it rather well when he said: Solutions to future environmental issues must enable firms to operate green while remaining in the black". Companies whose products fail to address the environment as a competitive issue will soon be in trouble with their financial backers, their insurance companies and their key customers and can suffer much adverse publicity.

Business must seek to make technological advances which are environmentally sound and combine those advances with remaining competitive. Legislation and government have an important role to play. First, there is the much discussed level playing field, which will define the lowest acceptable environmental standards and perhaps set targets to be achieved.

Secondly, legislation plays a role in creating a market. As my noble friend Lord Williams pointed out, perhaps the best known market created through environmental legislation is the waste disposal market. That is a hi-tech industry with huge potential and has provided important opportunities for the UK economy. We seem to have done quite well in that sector, partly because we have some stringent waste disposal regulations. The same effect can be seen in Germany, where stringent pollution abatement regulations apply. As the noble Lord, Lord Ezra, pointed out, because of those regulations, flue gas desulphurisation has been refined and marketed by German companies, even though it was invented in the UK. The two British power stations with that technology had to buy their equipment from overseas.

Perhaps the greatest future opportunities lie in the prevention of pollution and waste as distinct from their treatment. Together with energy efficiency, that can dramatically improve a company's competitiveness. Other noble Lords have pointed out that, happily, it also coincides with the responsibility of business to the environment. That was clearly demonstrated by the Aire and Calder project. By applying both clean and lean technology to the 11 companies which discharged into the Aire and Calder river basin, savings of £2.3 million were achieved from an initial outlay of £400,000. Further savings have been identified.

If industry spends less on waste and energy, there will be more for investment and employment. Therefore, there is a distinct relationship between competitiveness and clean and lean technologies. Quite rightly, the Government encourage waste minimisation, but unfortunately the recently announced joint DTI and Department of the Environment's environmental technology best practice programme, which helped to make the Aire and Calder project a success, will not provide further funds for projects of that kind. That is yet another example of that special type of government short-termism, whereby a good idea is started but the money is cut off before it is properly finished and the full benefit obtained.

The need for regulation is also recognised by the CBI, which calls for a clear and consistent regulatory framework—not a free for all. As my noble friend Lord Williams pointed out, a recent report from your Lordships' House concluded that: early adoption of strict environmental standards has given Germany and Japan a head start in the environmental market. Unless we are careful, those technologies will have to be imported, resulting in the diminution of our competitiveness owing to lack of regulation. That is why the DTI's plans are important.

The Government can help in other ways. They are a major purchaser and should deal only with contractors and suppliers with good environmental practice. They could also lay down mandatory limit standards on such matters as energy efficiency and waste. That does not mean that there are only high-tech requirements. It can mean achieving energy efficiency through low-tech businesses which can put thousands of or unemployed people to work.

The Motion of my noble friend Lord Williams speaks of technological advances improving the quality of life. I feel that people see that very much in terms of the impact of business on human health. Transport is central to that, particularly road transport. The first major UK environmental foresight project at the end of last year identified that very issue. It forecasted that concern about air pollution would generate a demand for new technical solutions to eliminate the emission of toxins into the air. That forecast looks accurate. Only today we have had a report on the bad effect of ground ozone on breathing. Recently it has been found that the number of children in our cities suffering from asthma has doubled. The cause of both problems was identified as being intimately linked to petrol and diesel fuel toxic emissions. That must lead to further regulation of motor vehicle fuels. There will have to be new planning for transport. Vehicle speeds may have to be reduced, to reduce both pollution and noise. There is little doubt that one of business's responsibilities to the environment is to minimise road transport because it is a hazard to human health and a cause of acid rain.

Concern about the quality of life is another pressure on business to develop environmentally sustainable technologies and products in the future. Incidentally, they are all matters dealt with by the Transport Research Laboratory. The Minister will remember that those points were raised during the debate about the break up and privatisation of that laboratory at the very time when its work is becoming crucial to British industry. Perhaps that is another example of the Government's short-termism.

The responsibilities of business to the environment are expressed in their environmental audits and reports. They must be encouraged. Even though the Government are in deregulation mode, they must overcome that dogma and set about regulating the environmental standards and not be afraid to set them high. Experience has shown that it stimulates new industries and. technologies which can be sold to countries with less high standards. It also stimulates competitiveness.

It is the reduction of transport pollution which is important. The environment is a "quality of life" issue and pressure of public opinion is causing business to face up to its responsibilities. Perhaps nowhere was that more dramatically expressed than in the recent "Horizon" programme on BBC television about the worrying effects on human fertility of minute amounts of hormone-like chemicals which have recently appeared in our water. My noble friend Lady Nicol mentioned the survival of civilisation. That is absolutely true.

4.27 p.m.

Lord Ashburton

My Lords, I should like to add my thanks to those already offered to the noble Lord, Lord Williams, for the opportunity that he has given us this afternoon to discuss industry's environmental responsibilities. It is a huge, important and topical subject and one on which it is not easy to speak cogently in the time which I thought had been allotted to the debate. I discovered that it had been made "timeless", as it were, too late to expand on the subject. It may be to your Lordships' advantage that I shall not be speaking for as long as I might have wanted. I hope to be more to the point, if less comprehensive.

I hope that what is said today will provide a useful if modest contribution by this House to the wider debate already taking place outside and indeed throughout. the world. I am a little surprised and saddened by the relatively small number of Members of your Lordships' House taking part in the debate. In my view it deserves a rather wider audience. We have heard much good sense. If I had to cite any contributions, I would say that I found a good deal with which I agree in what the noble Lord, Lord Ezra, had to say.

I doubt whether there are many in industry today who seriously question the reality and importance of industry's environmental responsibilities. To the extent that there are any such people, the level of interest shown in the subject by society at large would disabuse them of their view. What is not always obvious is how best those responsibilities are to be discharged. I have a personal interest in the environmental debate as one brought up to be something of a naturalist and, indeed, with one hat on, as a farmer. I know that many people in this country regard the farming community as being in the vanguard of environmental depravity. I do not feel quite like that.

Clearly, I must remind your Lordships also of a particular interest in the subject arising from my chairmanship of British Petroleum, although of course, I do not venture to speak on BP's behalf. In my years on the board of BP I learnt much from its experience of approaching and managing environmental issues. I have no doubt that BP's experience is not untypical of that of many other companies, not only in the oil business but over a broad range of industries. It is on the basis of that experience that I believe there is no inherent conflict of interest in rewarding shareholders, serving customers and improving environmental standards. I believe the noble Lord, Lord Ezra, mentioned that a committee of this House came to much the same conclusion.

It is a mistake to suppose that somehow industry has a vested interest in doing the minimum necessary in the environmental field. On the contrary, good environmental practice is usually good business. I realise that any assertion made in this debate is open to challenge, and the point I have just made is no exception to that rule. Given sufficient time it will be possible to debate the issue in much greater depth than is possible this afternoon. Let me explain briefly, therefore, why I believe no fundamental conflict exists between commercial and environmental considerations—I say "briefly".

First, people who work in business breathe the same air and have the same concerns for their children as everyone else. The employees of Britain's companies have a selfish interest in ensuring that their firms do not behave irresponsibly. Secondly, cutting environmental corners to save money is a dangerous option. It can lead to greater expense later on and may well incur competitive disadvantage. Many companies now see environmental performance as a source of competitive strength rather than weakness. That point has already been made. Customers often demand higher standards. Finally, to put it bluntly, an environmental disaster is inevitably a public relations disaster as well. A company's reputation for honesty, integrity and responsibility can be gravely impaired if—through negligence, incompetence or neglect —a major environmental accident takes place. Disasters can happen in the best run companies. But there is no doubt that what in business jargon is sometimes known as a company's "licence to operate" is absolutely fundamental to its interests. Its importance cannot be exaggerated.

As I say, I realise that each of those assertions is open to debate. It is clearly possible to think of circumstances where firms deliberately hope to get away with poor standards. That is why there is an important role for some level of legal safeguards and penalties. But essentially I believe that my proposition is sound. Where the difficulty arises is in knowing what needs to be done and where the priorities lie. The subject we are discussing is immensely complex. In many respects the most necessary, obvious and easy environmental improvements have already been identified and implemented—at least in the OECD countries. Close to home one thinks of the effective cleaning up of the Thames and the elimination of the London fogs which were killers. I recall, as will many other noble Lords, the 1953 fog which killed thousands of sufferers of bronchitis and allied lung diseases.

The debate now centres upon options which are much more costly and uncertain in their effects. I shall not spend too much time on costs. Clearly, a balance must be struck between what would be ideal and what society is willing to pay, either directly by way of higher prices for goods or indirectly through centrally incurred costs of government. We are all guilty in our own way of employing double standards. We deplore the noise made by aeroplanes but want to go on cheap foreign holidays. We complain about road congestion but like driving our cars. Customers are by no means always willing to put their money where their mouth is when it comes to greener products. However, profitable companies and prosperous countries spend more upon the environment than businesses and economies in decline. That is not a coincidence; it is a warning. A poor economy is often a dirty economy, as demonstrated by the state of affairs in the former Eastern bloc countries to which the noble Lord, Lord Williams, referred. Anything which impairs the strength of an economy will, in the long term, tend to have a negative impact upon the environment as well.

A greater problem is not merely the cost of doing something but its effect. We have now reached the stage where it is easy to prescribe costly so-called solutions which are at best unnecessary and at worst harmful. They can also contradict one another. Perhaps I can take one example from the oil industry to illustrate the point. First, in order to reduce CO₂ emissions from refineries —that is, from the actual manufacture of petroleum products—but principally because it made good economic sense anyway, the oil industry invested in energy conservation measures throughout the past decade. Between 1980 and 1990 an underlying 30 per cent. energy efficient improvement was achieved. That is a good example of what new technology can bring about.

However, there was another environmental demand to satisfy at the same time. While demanding lower CO₂ emissions, society also demanded lighter and cleaner fuels. That meant that the self-same efficiency improvements were offset by increases in refinery fuel consumption. The net effect of both was that actual fuel consumption remained broadly constant at 5 to 6 per cent. of crude oil input; in other words, no net improvement in CO₂ emissions after all. With regard to the future, an escalating requirement for cleaner and lighter fuels is likely to cause an increase in refinery fuel consumption, which means that CO₂ emissions will also rise. That example vividly illustrates the dilemmas facing both industry and legislators when it comes to environmental policy.

There is no doubt that technology has a vital role to play in helping industry to improve its environmental performance. Changes become possible which would have been impossible before. But technology must be closely linked to the problem in hand and it does not absolve either business or legislators from the need to face up to certain basic questions. To cite but one example: what environmental damage will result from an absence of action and how certain is the scientific evidence for that? That question is especially pertinent in the context of global warming. I make no claim to expertise in that area. But no observer of the debate can fail to notice the conflicting expressions of respectable scientific opinion upon the subject. Clearly, there are some who believe that it is not necessary to act precipitately in this area. What is certain is that large-scale action on this or any other subject will be extremely expensive to society, will inevitably divert resources from other desirable goals, and may leave future generations with other onerous problems. That is why it is so often right to give priority to those matters which are both scientifically and economically justified and which can produce a discernible benefit.

There is a legislative approach which I believe could enshrine this principle. First, we must identify the issue to be tackled. Secondly, we must identify the goal to be achieved. Thirdly, we must assess the method under consideration. Clear answers to all three of those points seem to me to be essential. They involve looking at the cost implications and benefits of each proposal as well as asking whether the proposal is capable of sensible implementation.

This is where technology is often a key factor. There is no point in prescribing a detailed policy if consumers or industry lack the means of changing or adapting their behaviour. Some regard must be paid to the availability and cost of competitive technology before introducing economic instruments whose purpose is to wean consumers from environmental practices which society judges to be harmful. But where the technology exists, it can be crucial. In the oil industry, for example, horizontal drilling, developed very recently, has meant that much less landspace is now taken up in drilling for oil. That is of enormous environmental importance in places like Dorset where Wytch Farm—by far the largest onshore field in the UK—lies and where it is now possible, although it was inconceivable only two or three years ago, to access pools of oil which lie under Poole Bay from sites which are completely hidden from view around Poole harbour.

In the chemicals industry, a simple and inexpensive modification to valve packings has contributed to a significant reduction in hydrocarbon emissions to the atmosphere. New technology for polyethylene production has reduced hydrocarbon emissions by 96 per cent. and solid waste by 70 per cent. And these measures have an additional factor in common. An enterprise which thrives, earning a sufficient return to update its plant and the technology employed within it and to invest in research and development, will have both the incentive and the wherewithal to improve its environmental performance.

I should add that environmental policy in business is increasingly the province of top management and is an important yardstick for assessing performance throughout organisations as a whole. The objective of effective environmental management is to reduce risk and to minimise the detrimental impact upon the environment from a company's operations. And that is now becoming in many companies one of the criteria by which management rewards are set each year.

In conclusion I repeat a warning I made earlier. It is possible for environmental policies to either conflict with, or even to undermine, each other. And while in many respects I acknowledge the effectiveness and indeed the necessity to society, of those organisations which campaign most vigorously for higher environmental standards, I feel that sometimes they harm their cause by not being as responsible as they could be with their use of statistics and, on occasion, by ignoring facts which may not fit the argument they wish to advance.

In that context, it is worth drawing attention to the balanced approach to environmental issues so effectively articulated recently by the European Round Table in its charter for Europe's industrial future. The charter emphasises the need for consultation, for clear priorities, for a rigorous analysis of costs and benefits, and for closer international co-operation. It makes the point that sustainable development is an objective which needs a businesslike approach.

The noble Lord, Lord Williams, has introduced a subject to which I hope your Lordships will return again. There is no doubt that industry's responsibilities in this area are great and increasing. But so is the potential for legislators to undermine its ability to discharge those responsibilities. That is what we in this House, and in another place, need to remember.

4.44 p.m.

Lord Howie of Troon

My Lords, I begin by saying that I agree with every word spoken by my noble friend Lord Williams of Elvel. That is not a usual situation, but I agree with him entirely today and thank him For introducing the subject. I agree with virtually everything said by the noble Lord, Lord Ezra. I intend to stop complimenting people there because I found this debate to be faintly depressing not because the speeches were not thoughtful or well informed—because they were —but because, as I saw it, it seemed to me that the assumptions of the "environmentalists", as I might call them, seem to have been taken more or less for granted by most speakers so far with the possible exception of the noble Lord, Lord Ashburton, whom I thought was more sceptical about the environmentalists than others. I shall not press him on that.

That caused me to wonder what we are talking about and what we mean when we use the word the "environment". It is a very glib word which is used very frequently in the media and in this House to mean whatever people want it to mean. I had occasion to question a witness at a hearing some months ago (perhaps little less than a year ago) of the Select Committee on Science and Technology of this House. I said to the witness: "What do you actually mean by 'environment'? Do you mean perhaps 'nature'?" The witness said yes and that the environment was nature. In her view, nature was the environment and man the despoiler and that he betrayed nature and changed it. That is an extreme view which I do not believe would be taken by most speakers today; but it is a view on the environment. When most people use the word "environment", they are referring to something which is being done which is causing harm to the environment which means "nature". I do not accept that and I sincerely hope that the Minister does not accept it either. He, being a well-informed Scotsman, will not believe anything so silly.

Perhaps I may put the matter at its bluntest: nature is the enemy. If you turn your back on nature, you are overgrown. The natural state of nature is the wilderness. There are environmentalists who are very keen on the wilderness. I remember a colleague on these Benches who is now a noted environmentalist. He used to talk constantly of the wilderness, and how good it was; and how we should keep, improve, enhance and expand the wetlands. That is an extraordinary idea. Nature is the enemy, and if we turn our backs on it we are overgrown.

The real state of nature is a place like Burma which consists almost entirely of jungle and lost cities. Noble Lords will remember the Israelites and how they spent 40 years in the wilderness. Noble Lords will also remember how unhappy they were and how, as soon as Moses died, they headed straight for the land of milk and honey. They got out of the wilderness as quickly as possible and headed for the land of milk and honey—that is to say, they headed for civilisation. They had had enough of nature and the environment in that sense and they headed for civilisation.

I see the hand of man in nature as the hand of the improver, as the word was used in Victorian times. Man's business is to improve nature and to make it livable. That is hard lines on certain wading birds, and so forth; but they have ways of their own for getting along. The environment that we see is almost entirely man-made. As was said earlier by, I think, the noble Lord, Lord Ashburton, it was largely made by farmers, architects, engineers and landscape gardners. It is not something that has happened; it was made. The hand of the improver lay upon it. It is important that we set on one side of the balance the worries of the environmentalists, with their sentimental attachment to the wetlands, with the more sensible notion of civilisation and improvement on the other side.

I think, for example, of Switzerland which is a country with an environment, if ever there was one. Switzerland's mountains are lovely as they stand, but think how much Switzerland has been improved by the bridges of Robert Maillart, which punctuate the ravines and valleys and give the environment a sense of purpose and reality, bringing them to civilisation. Think, too, of the great motorway there. I use the word "motorway" particularly because people in this country get very worried about motorways. That is not a double-plus good word. The word "motorway" brings out the worst in many people in this country. But those who are interested in motorways should go to Switzerland and stand at the Chateau de Chaillot which, as your Lordships may remember, so excited Byron. When one looks up from there, one sees a great big motorway. And there is nothing more beautiful on this earth—not even the M.6, and that is pretty good. Of course, I grant that mistakes have been made. The road which is being taken through Twyford Down should have gone through a tunnel, regardless of the cost. That was a silly mistake brought about, no doubt, by some accountant.

As most of your Lordships will have realised by now, I was not quite sure what the title of the debate meant, but when we talk about the impact of technology on the environment, I think of the seas around this island. It so happens that I spent last weekend at a symposium in Edinburgh to commemorate the centenary of the death of Robert Louis Stevenson, the author and writer. The symposium was not really about him, but about his family who were lighthouse builders. It struck me while thinking about this debate that Robert Louis Stevenson's grandfather, Robert Stevenson, built a pioneering lighthouse on the Bell Rock off Arbroath; and his uncle built a lighthouse at Skerryvore off the Western Isles. There is no doubt at all that those two lighthouses, which were improvements and the work of man, impacted upon the environment in a way that would be questioned today. I am sure that if those lighthouses were built today, there would be lengthy public inquiries. People would no doubt go out to Bell Rock or Skerryvore and chain themselves to those rocks. That would not seem such a good idea when the high tides rose above the level of the rocks.

The way in which that technology impacted on the environment was harsh. The nature of Bell Rock and of Skerryvore was changed totally. However, the lighthouses were wholly useful, and although some sea-birds no doubt took off for somewhere else, birds are mobile and can actually get about. That is why I have no doubt that if birds are chased out of Cardiff Bay, they will find some other mudflat not far away.

I should now like to say something briefly about one aspect of technology which impacts on the environment. I refer to the provision of golf courses. I mention that because the provision of golf courses in this country has been seriously attacked by environmentalists as though golf courses were harmful things. It so happens that I have a peculiar experience of golf courses because I was born and brought up in a place called Troon on the Ayrshire coast where everybody is born with a massive niblick in his mouth—and most of us keep it there. Troon is roughly a semicircular town. Its boundary on the west is the estuary of the Clyde. On the inland side, it is surrounded entirely by golf courses. It is ringed —it is besieged—by golf courses. I was 26 before I realised that that was not the countryside. I thought that the countryside consisted of golf courses because they have everything that the countryside demands. They have butterflies, bees, roses, sand, and gorse bushes. They have everything, yet the environmentalists think that they are an intrusion merely because they are man-made. In fact, they are usually an improvement on what was there before.

I turn now to the speech of the noble Lord, Lord Ezra, with which I very much agreed. He spoke about emissions from fossil fuels and said that a great deal of money has been spent on scrubbers, and things of that nature—and no doubt rightly so, except for one fact. It is not entirely certain that the major culprit in the production of acid rain is the power station. It might well be the motor car. It is possible that that money had to be spent on scrubbers at power stations in the sense that if there is a problem, we have to try to do something —even if it turns out to be the wrong thing which, in this case, it might very well be. Who can tell? Can we be sure that global warming is caused by fossil fuel emissions? Is it caused by CO₂ emissions, NOx or sunspots? Questions are asked, but have not as yet been answered.

I very much agree with what the noble Lord, Lord Ezra, said about energy management. If I understood correctly what he was saying, I took him to mean energy audits, whereby one examines a building or factory, determines its thermal capacities and so on, and decides whether it is using fuel efficiently. I think that that is what the noble Lord was talking about. As I understand it, the Government are about to do something about that. I thought that I saw an announcement the other day that the Government were engaged in some exercise along the lines of an energy audit. If I am wrong, I have no doubt that the Minister will tell me; and, if I am right, I have no doubt that he will take the credit for it. At any rate, it is not before time. I first came across energy audits in Denver, Colorado, in 1976. It is taking us a little bit of time, but no doubt we shall get there in the end.

I come now to almost my last point. I refer to the question of replacing fossil fuels by technological improvements of one kind or another because of the alleged deficiency of fossil fuels as a result of their emissions. We are asked to consider windmills as an alternative. I think that I am right in saying that the Government have abandoned all other alternative types of energy production, such as wave energy and tidal barriers, leaving the windmill as the star in the ascendancy. Windmills are all right—I have nothing against them—but they do not produce much more than a teaspoonful of electricity. They are not big producers of electricity.

I remember telling the House long ago—I am not quite sure when it was but it was so long ago that I think that I was sitting on the Benches on the other side of the House; that shows how long ago it must have been—that at one time I was involved in the construction of Pembroke power station. It was an oil-fired power station with a capacity of 2,000 megawatts, which is quite a lot. That is about as big as they come. I pointed out to the House then that if Pembroke power station, or one like it, were to be replaced by windmills, each of which produces rather less than half a megawatt, at least 4,000 of them would be needed. I calculated then, although I have not checked this calculation and so it may or may not be correct, that what would be required would be a windmill 300 feet high with a wing span of 75 feet, every 100 metres around the coast from Cardiff to Liverpool. They need not be put in a straight line. They can be put in a block. The 4,000 could be in a block. There is only one problem there. If they are in a block, they get in one another's way, and more than 4,000 would be needed. If they were in a block, it would be a block of windmills at least half a mile square. We should think of that in environmental terms and visual terms.

I do not know how many noble Lords have seen the Altona Valley in California. About 4,000 windmills are spread around there. Their vanes go around very gently. They do not produce any electricity, not even a teaspoonful. It is a great deal of intrusion on the countryside.

If we are thinking of a technological replacement for fossil fuels, there is really only one, and that is nuclear energy, which has been rather quiescent for a while. I have only one question to ask about it. I was under the impression—I may be mistaken—that in answer to a Question a week or 10 days ago the Minister announced that the terms of reference for the nuclear review had not yet been settled. Was I right? That surprised me, because the nuclear review was due out this year, and if the terms of reference have not been settled, it cannot have started unless it has been working away quietly in the dark without terms of reference. That of course is possible. Are the terms of reference likely to be agreed some time reasonably soon? I do not want to rush the Minister on this. If so, will he give us a hint as to when the nuclear review will produce some sort of recommendation?

The noble Earl, Lord Lindsay, referred to natural gas. I should like to remind the Minister of an opinion that I have expressed previously in the House. I believe that it is wholly wrong to use natural gas as a secondary fuel to produce electricity, no matter how cheap it might appear to be. My reason is a wholly technological one. Natural gas is one of the country's best primary fuels. If we use it to produce electricity, we throw away about a quarter or 30 per cent. of its thermal efficiency. That is waste, and that kind of waste is wholly wrong.

I want just to refer to one remark my noble friend made in his opening speech. He asked whether we were enforcing higher environmental standards. I think we probably are; but if one looks at the higher standards, especially those emanating from Brussels, one will find that they are too high. They should be questioned. I shall end by saying that rather too much is being made of the environment and not enough about its improvement.

5.4 p.m.

Lord Beaumont of Whitley

My Lords, I know that we are all extremely grateful to the noble Lord, Lord Williams, and to the Labour Party for having introduced this debate. It is sad that we do not have more speakers, but that has at least meant that the level of speeches has been high and there has been no need to limit them, and that has on the whole been welcomed. The noble Lord, Lord Ashburton, said that he was unduly restricted by the fact that he had not learnt about that lack of restriction, but I must say that he made such a good speech in 16 minutes that I rather doubt that he would have made a better one in 32 minutes. I think that we have probably just about the right level.

I shall not rise to the many flies cast out by the noble Lord, Lord Howie, except just to say that a definition of the environment can be found in any dictionary. It is all that surrounds us; it is the natural environment and also the man-made environment. He may be right when he says that Burma is a country of jungle and lost cities, but he failed to mention that it has also produced one of the kindest, gentlest, nicest groups of people in the world. That is slightly more than one can necessarily say for South-West Scotland.

Lord Strathclyde

Oh!

Lord Beaumont of Whitley

My Lords, that is despite the noble Lord, Lord Strathclyde. I do not believe that there would be serious competition between Burma and Glasgow over the gentleness of their inhabitants. There has been a slight tendency—only a slight one—to draw up categories during the debate. The noble Lord, Lord St. John of Bletso, said that business is business. He said that twice. The first time it was a platitude, but the second time it was inclined—I think he meant it to suggest—to suggest that it can too easily mean that a company's main objective is a satisfactory bottom line, expressed in pounds, shillings and pence. We all accept, I think, that that is an important object for a company, and that if a company does not produce that it will not continue to exist. But the debate is all about providing the right climate whereby companies can do that at the same time as they can pay attention to their surroundings; be idealistic; and at last look forward to the long term, because that is what we are talking about.

We are talking about the long-term existence of industry, our country and our surroundings—in one useful and well defined word, the "environment". What is needed is the creation of a climate in which firms with good products, good methodologies and good consciences can work for the long term. That is not as good in this country as it is in one or two others. The climate needs to be created by us as consumers as voters, and therefore by our government, whichever party it may be at the time, and by us as workers —by homo faber.

Good firms are good and there are quite a lot of them, but there are not nearly enough. They are in the minority, and not necessarily an increasing one. A recent Institute of Directors' survey which has already been referred to showed that the number of companies whose boards see no reason to discuss environmental matters has risen by a third in the past year, and that only a quarter of companies has a formal corporate environmental policy. We give full marks to those firms which are showing the way.

We give full marks to BT which, for the second year running, won the environmental reporting award organised by the Chartered Association of Certified Accountants. Full marks too to the association. However, only ICI was given full marks by the judges of the competition. It made the only attempt at financial integration of the environmental report with its main report. That is tremendously important.

The global action plan was launched recently in this country, although it is thriving in other countries. Companies are encouraged to build up their resources to help groups of their employees to green their own lives in groups. An interesting development is the idea that we do not act only as companies and as individuals. Companies and individuals can interact in this respect because companies have the resources to help individuals to do what they want. That is a worthwhile initiative, and full marks to British Gas which has taken it on. It is the first company in this country to start such a scheme.

As regards the European stage, we must help our fellow governments and try to follow the example of the countries which are further ahead, as a result of which some are more profitable. We must also help our fellow European member countries which need help in matters such as the destruction of the wetlands at the mouth of the Acheloos River in Greece. At another time, I could return to the argument about wetlands with the noble Lord, Lord Howie. This is not the moment.

Globally speaking, we too have a part to play because it is platitudinous that we are rapidly becoming one world, one economy and almost one set of industries. The noble Lord, Lord Williams, commented that the Uruguay Round has given carte blanche—and in some ways a freedom—to companies to do things that we must limit. Trans-national corporations (TNCs) can now move their businesses into the areas where workforces are poorly paid, inadequately protected by the law from exploitation and preferably where the government prize employment above the protection of their citizens. As a result, firms—especially chemical firms such as Du Pont and Bayer—are relocating to Shanghai, and the Mexican side of the Mexican-US border has become a dumping ground of horrific proportions. It is true that in the long term we need a well-educated and well-trained workforce, but, as Keynes remarked, in the long term we are all of us dead and—it may be added—the people in those workforces rather sooner than the rest of us.

If the international trading system is to play a positive role in improving human welfare—and it can—it cannot be administered through deregulated markets which are dominated by formidably powerful TNCs. The international community must take responsibility for imposing binding regulations on the trade and investment activities of the TNCs, which otherwise are exercising power without responsibility. That has been, your Lordships will remember, the prerogative of the harlot throughout the ages.

5.15 p.m.

Lord Peston

My Lords, in approaching the subject of the environment, I shall take a broader view than most Peers. The environment is not just the physical or the natural; it includes the economic and the social—

Lord Williams of Elvel

The quality of life.

Lord Peston

My Lords, yes. It is not only rural; it is also urban. One of the issues that most concerns me and other noble Lords is that many parts of our towns are no longer attractive places to live in. However, they could be so again.

The classical economic view is that firms create environmental costs—that is, they impose costs on others as regards dirt, noise, polluted water and so forth —but they do not take that into account. Therefore, the activities concerned are carried on on too large a scale, and perhaps they should not be carried on at all. At the same time, other firms benefit. While some firms create dirt other firms, such as the sellers of soaps and detergents, become more profitable. The fact that our water is less than drinkable enables some firms, such as the sellers of bottled water, to become more profitable. The fact that our environment is filled with noise is advantageous to the sellers of earplugs and double-glazing. In other words, the economics of this is by no means simple.

To some extent—but only to some extent—the market works, as was said in a notable speech by the noble Earl, Lord Lindsay. When it comes to the recycling of waste products, the market deals with the matter because it is profitable. However, the noble Earl alluded to cases where recycling does not take place satisfactorily because it is not profitable.

In approaching these matters, economists consider that there are two ways. The first is legislation to prevent the so-called detrimental spillovers. The second is the polluter-pays principle. I speak for myself in saying that, in theory, the latter is the better approach. But frequently the costs of administering such a principle suggest that the legislative route may be cheaper and more effective.

In that connection, the noble Lord, Lord Ezra, referred to the voluntary principle. I do not wish to decry decent voluntary action. Other noble Lords have spoken about the issue, but my position is closer to that of the noble Lord, Lord St. John of Bletso. I do not think that we can rely on the voluntary principle unless it is backed up, as it is in practice, by threat of legislation, which is why many firms behave themselves. I do not mind that, but we should not be naive about these matters.

Also in this connection, the noble Lord, Lord Ashburton, referred to the fact that we have cleaner air and, in the case of the River Thames, cleaner water. He mentioned the London fogs. I remember that I had to walk home from school in fogs so thick that I had to hold on to the walls and the railings of the houses—and I was rather terrified—in order to make sure that I got home. However, the improvements to which the noble Lord referred have not arisen as a result of voluntary actions. They have arisen from legislative actions; that is, the Clean Air Act and similar Acts. Therefore, I do not believe that we should set our face against legislation.

It is also my view that the environments of our great city and others have improved as a result of such legislation. However, I have not noticed that the UK economy has been ruined by such improvements or that businesses have not been able to flourish because they cannot pump vast amounts of dirty smoke into the environment. In other words, the notion that such legislation is ruinous for business does not stand up.

I said that I take a broader view of the environment, and therefore I wish to mention a particular aspect of the social environment that other noble Lords have not mentioned. I refer to crime. If one places crime in the economics context, it is interesting to note that it leads to a greater demand for security services and devices and is profitable for the insurance industry. As a result, insurance costs increase. It is also interesting to note that all of that is entered into GDP, a theme to which I shall return. Therefore, in a sense, if we want to see economic growth, as measured, the more crime the better. But I hope that we are all agreed that it would be much more efficient and sensible to try to control crime in the first place rather than to rely on the free market offsets of criminal activity. If, as I believe, unemployment creates opportunities and an environment for crime—the Government reject that—then again, it would be sensible to do something about unemployment rather than worry about the profitability of the security industry.

I suggest to those of your Lordships who are not impressed by the empirical evidence of the relationship between unemployment and crime that common sense should be used. The adage that the devil finds work for idle hands to do seems to me to be overwhelmingly correct in that context and I still find it astonishing that the Government are unable to accept such a proposition.

I turn now to a related matter. Of course, Keynes and the Keynesians referred jocularly to a possible full employment policy in which some part of the labour force dug holes and the other part filled them up. A more sophisticated Keynesian view, a gloss on that, was that a third group put money into some of the holes before they were filled up which would act as an incentive to dig the holes a second time, which would create even more employment.

That flight of fancy has now become a reality. If one looks at our motorways or streets in our towns and. the behaviour of heavy goods vehicles, what are they doing? They are creating the Keynesian scenario. They are creating a great many holes in our roads and streets which our construction workforce then fills up, albeit with some time delay.

Because of the time delay—and I sometimes wonder whether that is government policy too—great damage is done to motor vehicles and that creates a demand for repair services. I say that to show your Lordships not only the complexities but also the interesting aspects of the economics of the environment.

I am guiding your Lordships towards the paradox that in a sense, the more some firms damage the environment, the more the activities of other firms are demanded to offset that. Therefore, it is equally true that to prevent and discourage firms from damaging the environment, creates employment problems for certain other firms.

One aspect of that concerns the way in which we measure our gross domestic product. Once we take into account environmental harm, it is apparent that we exaggerate the scale of our welfare gain as measured by our gross domestic product. I have seen a quite conservative estimate which is still rather horrifying. The best work is always done in the United States and that suggests that if you take an economy with an underlying, long-term rate of growth of 2.5 per cent. per annum, which is something like ours, at least a half percentage point of that—that is, one fifth—really should not be there because it accounts for environmental damage, rather than anything else. In other words, the way in which we measure our GDP does not reflect fully what is happening to the quality of life.

I do not believe that we need high powered economists to tell us that. We merely have to go out into our streets and look at what has happened to the physical environment of one big city in the past 15 years. It is certainly true that in ordinary measured real terms, our standard of living has increased. But it is difficult to convince oneself that the quality of life has also increased, at least pari passu.

I reiterate the point which was made strongly by my noble friend Lord Williams and also by other noble Lords. I do not doubt that in the short term, in the endeavour to improve the environment as it is connected with industry, we are imposing costs on firms. If we prevent firms from behaving in the way in which they choose, that must add to their costs and that will be a problem for them. But I believe—and this is the point made by my friend, the noble Lord, Lord Ezra, and others—that those costs are extremely short term and that pressurising firms in that way will yield considerable long-term profits.

Many examples have been put forward but there are two obvious examples which appeal to me, as someone who lives in this city. The private sector, as a result of pressures from the public, has done an enormous amount of work to make aircraft engines quieter. That has been a boon to us all and it has also been profitable. That is the point that my noble friend makes. The same point applies to reducing exhaust pollution from motor vehicles. Again, that improves the environment in which we live and if you are in at the right time, an innovator, it is immensely profitable.

I am sorry to be doing my usual economist, "on the one hand this, and on the other hand that", but there is an interesting technical point on the environment and free trade. If our competitors ignore environmental costs and we take them into account, they will have what we might call an unfair competitive advantage. We may complain about that. I know that President Clinton has made a point about poor working practices biasing the system against American industry with its good working practices. Essentially, the developing countries would have an advantage, but the cost would be a poorer quality of life.

However, were we to retaliate against them and say that we shall break the GATT agreement on that account, they would almost certainly produce the riposte that when Great Britain was the workshop of the world and we dominated world markets, we did not worry about our own environment. In fact, we were busily destroying the environment of Victorian England willy-nilly. Therefore, those countries may take the view that they are now in the same position and are not going to be told by us about what is fair and unfair competition.

I now take an even broader view. In my judgment, this country needs most of all—the big idea—a commitment to a return to full employment. It was the great boon of the post-war era. It was what we owed to our soldiers who fought: those who returned would return to jobs and not to the dole. The betrayal of the 1980s and 1990s has been the abandonment of that gain, partly on the grounds that it is no longer feasible. But, as has been apparent from today's debate, there is work to be done and in the context of today's debate, it is obvious where it must be done: in improving the environment. But since the benefits are mostly public benefits, much of the finance for environmental improvement must come from taxation—and I say that in terms—and it must come from public sector borrowing. In return, we receive efficiency benefits because a better environment helps industry; we receive employment benefits, as I have just outlined; and we receive consumer benefits because we can enjoy our private lives better in cleaner and safer surroundings. The purpose of the debate was to draw attention to all that and to emphasise that it can be done.

5.27 p.m.

Lord Strathclyde

My Lords, it is a pleasure to take part in the debate. I have enjoyed listening to some good speeches and to some speeches that were good in parts. There was an excellent speech from the noble Lord, Lord Ashburton, which I very much enjoyed. He brought his technical expertise to bear, and I am grateful that he took part.

We heard the noble Lord, Lord Howie of Troon, at some length. Having got the environmentalists in his sight, he continued with the accountants. Whether or not he was being kind about golfers, I am still not sure. The noble lord, Lord Beaumont of Whitley, was correct in not rising to some of the flies cast by the noble Lord, Lord Howie. However, I wonder whether the noble Lord, Lord Beaumont, should not perhaps reflect on what he said about the people of the south west of Scotland and his portrayal of them in a far bleaker light than what he called the fun-loving people of Burma. It is my belief that Burma is run by the most frightful and bloody dictatorship, and that could certainly not be a description of my right honourable friend the Secretary of State for Scotland.

Lord Beaumont of Whitley

My Lords, I entirely agree with the noble Lord as regards the Government of Burma. I meant no great insult to the people of Glasgow. In fact, Glasgow is my favourite city in the United Kingdom. I absolutely love it. It is, indeed, most splendid. I merely think that its people on the whole are not as gentle as the run-of-the-mill Burmese. That is all.

Lord Strathclyde

My Lords, I am glad to have given the noble Lord an opportunity to correct his remarks. In his winding-up speech on behalf of the Opposition, the noble Lord, Lord Peston, said that he felt that the quality of life had not improved. At least, that is what I thought he said. Yet, he himself gave us the example of when he came back from school and had to do so in the fog, whereas today it is almost impossible to find the kind of fogs that existed in his childhood. I see that the noble Lord wishes to respond. I give way.

Lord Peston

My Lords, the Minister is most flattering. I went to school 40 or more years ago. I referred to the quality of life not improving during the past 10 years. I know that I look young, but I did not leave school 10 years ago.

Lord Strathclyde

My Lords, I still believe that, in the course of the past 10 years, the quality of life and of the environment has much improved. I can only assume that the noble Lord, Lord Peston, lives in a local authority which is controlled by the Labour Party rather than the Conservative Party. In the environment in which we work, one has only to walk around the Palace of Westminster to see the massive improvement to the built environment with the cleanliness not only of the buildings but also of the streets.

I was delighted to hear the welcome of the noble Lord, Lord Ezra, for the DTI's recent document. I hope that we can make it more publicly available to other noble Lords. The debate has also been blessed by the fact that we have not involved ourselves too much in the difficult detail of environmentalist language—for example, BEPEO, BATNEEC, Agenda 21, and so on. I felt that, generally, we had our feet very firmly on the ground. Perhaps surprisingly, I agree with much that the noble Lord, Lord Williams of Elvel, said. However, there is still a substantial gulf between our fundamental beliefs.

Lord Williams of Elvel

I should hope so!

Lord Strathclyde

The noble Lord is glad about that; so am I. However much the noble Lord wishes to convince industry that he and his friends in the Labour Party are now industry friendly and however warm the embrace and welcoming the smile, he cannot hide his gut reaction, his natural instinct to legislate and to regulate; hence the noble Lord's comments on the Government's initiative on deregulation. Of course, deregulation is all about removing unnecessary burdens on business, not the very necessary protections for consumers. I see that the noble Lord wishes to intervene. I give way.

Lord Williams of Elvel

My Lords, I am grateful to the Minister. He is quite right as regards what I said about deregulation. However, does the Minister recognise that the deregulation Bill as it stands deals with regulations, 79 per cent. of which have been introduced by his Government since 1979?

Lord Strathclyde

Yes, my Lords; that is exactly the point. There is a temptation for governments to legislate far too hastily. That is why, when the Bill comes before the House, I hope that the noble Lord and his colleagues in the Labour Party will support it.

There is the contention that the noble Lord had—at least, I think he had—that led me to believe that any old legislation was good enough because it would or it might possibly raise standards and that, in the long term, would be to the benefit of industry. The noble Lord, Lord Ezra, understood very well what the noble Lord was saying when he said that regulations should be carefully thought through.

The speech of the noble Lord, Lord St. John of Bletso, was, at least in its early stages, rather disappointing. He seemed very much to express the belief that business is business and nothing else. He said that strong legislation works and gave examples of where he thought that that was the case. However, in Germany, which has introduced draconian laws on recycling, the policy has not been a success. It has simply led to the exporting of waste products around the world and a reduced price for those markets. It has not been of benefit to anyone. Nevertheless, I welcome the noble Lord's call for industry sectors to act collectively. Indeed, it is often an excellent way of minimising the costs on individual companies.

Perhaps I may now look at the Government's responsibilities. There is nothing new in the idea that government have a role in protecting the environment. The 19th-century political philosopher, John Stuart Mill, saw the protection by government of, the inheritance of the human race "— that is, the earth, its forests and waters—as essential to a "civilised society". The idea has worn well: his very phrase, "this common inheritance", was used as the title for our 1990 White Paper on the United Kingdom's environmental strategy.

The Government have a responsibility to ensure that the environment is protected. They must ensure that minimum environmental standards are maintained. They must act internationally with other governments to tackle trans-boundary pollution and global environmental issues; and they must take responsibility for maintaining our environmental legacy to future generations, for ensuring that economic development is sustainable. The principle that the polluter must pay for environmental damage has been widely accepted both in the UK and internationally. However, the cost of environmental damage is often poorly reflected in the: price of goods and services. Therefore, government must act to compensate for that market failure.

The reasons for government action are not hard to find. Much more difficult is choosing how to act—how to achieve the balance between regulation and voluntary action. This Government are not one to rule by decree and diktat. The dire environmental record of the former communist bloc, as mentioned by the noble Lord, Lord Williams, suggests that that was no better for the environment than it was for anything else.

Regulation is only one way of achieving environmental objectives. Although sometimes necessary, it is the last resort: we much prefer to use the more flexible market-based mechanisms and to encourage voluntary action where we can. Government have a duty to ensure that environmental legislation is proportional to the problem and that it is based on good science. That applies equally to European Community legislation.

Perhaps I may turn now to the background; the effects of technological change and the impact of industry on our quality of life. From the earliest times, technological advances have had an important impact on man's quality of life, usually to improve it. Let us consider, for example, the immense benefits in the past hundred years of mains water and drainage, high-yield crop varieties and refrigeration. Over the past few years, however, environmental concerns have raised doubts about the sustainability of economic growth in the developed world. It became clear that human activity was affecting the environment on a global scale in possibly irreversible ways.

However, more recently there has been a most encouraging recognition that continuing growth can be compatible with improving the environment. The goal of sustainable development has become widely accepted. That marks a new departure but one which is most welcome. Government and industry have been working closely together on a number of environmental initiatives in recent years. First, for example, as the noble Lord, Lord Ezra, will know, more than 1,600 organisations have joined the "Making a Corporate Commitment" campaign since its launch in October 1991. Each has pledged top management support to improving energy efficiency. Secondly, there is the Climate Change Programme which was launched this January. It is based on the partnership approach. Thirdly, there is Groundwork, an environmental movement which works in partnership with companies, local authorities, community and voluntary groups, and schools on environmental regeneration. Finally, there is the Producer Responsibility Initiative which was mentioned by my noble friend Lord Lindsay. It was launched in July last year with a challenge from the DTI and the DoE to encourage manufacturers to take a share of the responsibility for what happens to their products at the end of their lives.

Last year we ran a solvents roadshow which visited all the regions of the Engineering Employers' Federation. Such examples are encouraging. But what exactly are industry's responsibilities towards the environment? Beyond obeying the law, I can see several areas of responsibility which different kinds of company management subscribe to. First, responsibilities to owners or shareholders. This is the most basic level. Every commercial business has to make a profit before it can even think of doing anything else. I hope that there is no disagreement in the House about that.

I must, however, disagree with some noble Lords, including the noble Lord, Lord Williams. The managements of British companies are interested in more than just the shareholders. They have responsibilities to their wider stakeholders; their customers, employees, bankers and insurers, and the wider communities which surround their operations. That brings me back to the desire of the noble Lord, Lord Williams, for statutory rather than voluntary solutions. However, I welcome his recognition that our small firms sector must be nurtured. The noble Lord, Lord Ezra, welcomed the NatWest initiative. I, too, welcome it. I am not at all convinced, however, by the case made by some for special status to be accorded small firms. I believe that good regulation should be applied across the board for all companies to stick to.

I wish to refer briefly to the comments of the noble Lord, Lord St. John of Bletso, and his contention that business is business. I agree with that, but business is far more than just making money. I thought that the noble Lord, Lord Haskel, for the first five minutes, made an excellent speech. However, when he entered upon the statutory role, referred to by the noble Lord, Lord Williams, I did not find the speech so interesting. I agree with the noble Lord that companies have an interest in voluntarily protecting the environment. I agree too with the noble Lord, Lord Ashburton, that there is no conflict between rewarding shareholders and protecting the environment. The noble Lord, Lord Beaumont of Whitley, talked about the exemplary companies such as British Telecom and British Gas. There are many more. Many companies feel a wider moral responsibility, reflecting the concerns of their management. Whereas perhaps 100 years ago a benevolent company might have built model workers' dwellings and temperance halls, today they consider how to use their position to address some environmental problems.

Some firms think of environmental improvements as a luxury —that is a pity—only to be addressed by a third group. Other firms have made a real commitment to the environment and have integrated environmental concerns into all aspects of their operations. There are many dozens, indeed hundreds, of examples of companies, large and small, that have specialised in bringing technology to bear to improve their environmental performance. Of course, addressing the concerns of wider stakeholders is good for business because firms and industries with a poor environmental reputation find it harder to set up on new sites or to attract good staff. Commercial customers are becoming increasingly concerned with the environmental credentials of their suppliers. Increasingly, insurers and investors are demanding higher environmental standards and consumers sway the market. For instance, it was consumer attitudes that made CFC-free aerosols a success. In other words, industry's responsibilities for the environment are now part of its responsibilities for itself.

This has been a constructive and stimulating debate. The demand for environmental improvements shows in the growth of environmental technology business ranging from water treatment, waste and energy management and contaminated land remediation to environmental monitoring. The environmental technology business was mentioned by the noble Lord, Lord Williams, and the noble Baroness, Lady Nicol. The noble Baroness said that the market was currently worth 200 billion dollars and within the next 20 years would reach around 600 billion dollars. If anyone still believes there is an inherent contradiction between environmental improvement and economic growth, those figures will surely convince them otherwise.

I disagree strongly with the view that United Kingdom industry is not doing well in this regard. For instance, it was Johnson Matthey who developed and supplied catalytic converters for petrol engine cars during the 1970s and 1980s, long before legislation made controls mandatory. The company gained a lead when converters were required in the US, Japan, and most recently in Europe. JM is now the world's largest producer of automotive catalysts, supplying among others Japanese car manufacturers in east and south-east Asia. It gained a Queen's Award for Environmental Achievement in 1993. Our recent study entitled The United Kingdom Environment and Technology: Succeeding in a Changing Market shows that overall the UK environmental industry enjoys a trade surplus of 350 million dollars.

I turn briefly to the point raised by my noble friend Lord Lindsay. There seems to be some confusion about the tax on gas, which I gather is half that on leaded petrol. However, perhaps that is an issue I can look at later in detail and then write to my noble friend.

Lord Peston

My Lords, I hope I may interrupt the noble Lord, as I meant to raise the point too. The point was so intriguing that one felt it could not possibly be right. When the Minister asks the Treasury what it thinks it is up to, will he let the rest of us know as well because this is an extremely important point?

Lord Strathclyde

My Lords, I am delighted to do so. I can shed some light on the matter. I understand that the tax on unleaded petrol is 25p per litre and on gas 15p per litre. I gather, however, that it may take more gas to make a car run for a similar number of miles, and that is where my noble friend may get his figure. I shall have to look further at the matter because I do not pretend to be an expert.

The DTI and the Department of the Environment recognise the need to work closely together to get all sorts of messages across to business, and we are doing so. The noble Lord, Lord Williams, talked about the ingenuity of business and my noble friend Lord Lindsay talked about the inventive energy of industry, although I think he referred to Frances Cairncross when he said that. The noble Baroness, Lady Nicol, said that enterprise still exists. I agree with all such statements. We have a vibrant, keen economy and clever people who are looking at environmental solutions to the problems that surround us, and are doing so successfully. I conclude with a quotation from my noble friend Lady Thatcher, who told the Conservative Party conference in 1988: No generation has a freehold on the earth. All we have is a life tenancy with a full repairing lease". Those words deserve repeating, as awareness of all our environmental responsibilities spreads. There is tremendous scope for government and industry to act in partnership to create a cleaner and sustainably managed environment for our descendants.

Baroness Seear

My Lords, before the Minister sits down, will he consider the proposition that the working environment of your Lordships' Chamber still leaves a great deal to be desired and that he might look into that to the benefit of us all?

Lord Strathclyde

My Lords, I understand that there is a committee empowered by your Lordships to look at precisely those kinds of problems.

Lord Howie of Troon

My Lords, before the Minister sits down, will he refer, however briefly, to the nuclear review?

Lord Strathclyde

My Lords, I have dealt with that several tunes at Question Time. There is to be a review but the terms of reference have not yet been worked out. It will be done as soon as possible.

5.49 p.m.

Lord Williams of Elvel

My Lords, I am most grateful to all noble Lords who have taken part in this debate. I think in many ways it has been a useful and encouraging debate and I am grateful to the Minister for his response in certain parts, as he said about other speeches.

It is a matter of regret that noble Lords were prepared to spend two days airing their opinions on which shops should open on Sunday but seem, judging from the list of speakers today, to be largely unconcerned about whether or not the planet blows up. It is a matter of regret, which I should like to record. However, that is not in my control or, indeed, in the control of the noble, Lord opposite or of the Government Chief Whip, or our own Whips on our side of the House. It is a question of the House deciding which debates noble Lords favour and which they do not.

I am sorry that the Minister lost interest—to use his own words—in the speech of my noble friend Lord Haskel when he came to talk about regulation. As my noble friend Lord Peston pointed out, pretty well all improvements in the environment since the last century, and indeed in the last century, have been brought about as a result of legislation. And legislation, I am afraid, means regulation. So I hope very much that those words, which the noble Lord the Minister may have used inadvertently, will not return to haunt him.

The Minister quoted the noble Baroness, Lady Thatcher. I had no idea that he was a Thatcherite in such an extensive manner. I now know where he stands. He is quite right in saying that he and I disagree fundamentally on certain aspects of politics, indeed probably on most aspects of politics.

I am grateful to all who have participated in this debate. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.