Lords Sitting of 7 December 1994

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

Life Prisoners: Tariff
The Earl of Longford The Earl of Longford asked Her Majesty's Government:
What prisoners, if any, have at any time been informed that a life sentence in their case would mean life.
The Minister of State, Home Office (Baroness Blatch): My Lords, no prisoner has been so informed; but the exercise in tariff disclosure has not yet been completed. All mandatory life prisoners will have been informed of their tariff by early in the New Year.
The Earl of Longford: My Lords, the noble Baroness makes total nonsense of the remark made by the Minister on an earlier occasion. However, I am not involved in debating aspects. Is she aware that I am full of sympathy for her at the moment? I have paid repeated tributes to her as a good Christian, and here she is defending some absolutely obscene proposal that a number of people should be confined to prison and rot in prison for life.
Baroness Blatch: My Lords, I am not absolutely certain what the noble Earl means by his first remark. I think he could save his energy in being sorry for me at the moment; I am not sure that I can be defensive or over-defensive of my position. I believe that disclosure of tariffs to prisoners is a good thing.
Lord McIntosh of Haringey: My Lords, of course, the Minister's first Answer to my noble friend was, as always from her, entirely correct. She answered the Question properly. However, what she did not indicate was whether the tariffs which are now being prepared and will be announced to prisoners, as she said, by early next year will ever include the provision that a prisoner should stay for life. That is, in other words, until death, without release on licence.
Baroness Blatch: My Lords, there are some people who are serving a mandatory life sentence who are subject to life meaning life. What will happen as a result of the Doody judgment and the Government's commitment to honour it is that all life prisoners will be informed of the original recommendation by the judge, the recommendation by the Lord Chief Justice and the decision of the Home Secretary at the time. That information will be made available to prisoners and then the prisoner's comments, the responses to them and the
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historical information will be presented to my right honourable friend the Home Secretary. He will then review the tariff in the light of all that information.
The Earl of Longford: My Lords, what does the Minister mean by saying that some prisoners are subject to a decision that life means life? They have not been informed of that, so in what sense are they subject to it?
Baroness Blatch: My Lords, there are prisoners serving mandatory life sentences about whom previous Home Secretaries have said that life should be life.
The noble Earl says from a sedentary position, "Not publicly"; no, of course not publicly. What I am saying now is that in reply to a Question for Written Answer, the new procedures will be laid later today, therefore all noble Lords will be able to see what the procedures are. What is in process at the moment is that as a result of the Doody judgment, prisoners will be informed not only of what the tariff is but also of what the historical decisions were; what the tariff was at the time it was recommended by the judge; what the Lord Chief Justice's views were at the time; and what the recommendation and determination by the Home Secretary were at the time. In addition, the historical data will be coupled with the response of the prisoner to that information. That will be presented to the Home Secretary at the time, who will review it and either confirm the tariff or modify it.
Lord Hylton: My Lords, will the noble Baroness undertake to look again at those cases where prisoners were retrospectively affected by Sir Leon Brittan's decision that life would normally mean 20 years? Will she look with particular care at the cases of those prisoners who have been of good behaviour during their term of imprisonment?
Baroness Blatch: My Lords, we need to make a distinction here. We are talking about people serving mandatory life sentences at this moment. Those serving mandatory life sentences can ask for a review of their tariff at any time. It is up to any Home Secretary in office to consider that.
What is changing now is that that information will be made available to the prisoner with all the historical information. The Home Secretary in office will make a determination either to confirm the original tariff, with life meaning life, or to modify it in the light of a great deal of information. As to the decision about a minimum of 20 years, the present Home Secretary and his predecessors take the view that for very serious crimes of murder a minimum of 20 years is probably appropriate.
Lord Wigoder: My Lords, is there not therefore a possibility that some prisoners will be told that they will be kept in prison for the whole of their lives?
Baroness Blatch: My Lords, I am saying just that. There are prisoners whose tariff states that life should mean life as a result of previous decisions. It is possible for my right honourable friend the Home Secretary to

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confirm that or in the light of all present information—including the response of the prisoner himself to that information—to modify it.
Lord Tebbit: My Lords, will my noble friend confirm that at the time of the abolition of capital punishment it was widely suggested by the abolitionists that life imprisonment should mean life imprisonment? Have we not moved a long way since then?
Baroness Blatch: My Lords, I was not party to that debate, so I am not able to answer very specifically. I cannot respond in any pedantic way. What I can say is that the particular consideration for any Home Secretary is what is the appropriate time that would properly address retribution and deterrence. That is uppermost in the mind of the Home Secretary when he makes that determination.
Lord Ennals: My Lords, will the Minister accept, from one who was involved in the matter in 1967, that there really was no such suggestion as has been referred to by the noble Lord, Lord Tebbit?
Baroness Blatch: My Lords, of course I have to bow to the noble Lord if he was present. As a Home Office Minister, I can say that when somebody has been convicted of a very serious crime—for example, murder—which carries a mandatory sentence, there is a great deal of concern that sometimes the period served in prison does not properly address retribution and deterrence. It is up to my right honourable friend to make sure that those issues are properly addressed in determining the tariff.
Lord McIntosh of Haringey: My Lords, the Minister has given a very important and to some extent welcome announcement today that there will be an Answer to a Written Question later today. Will she communicate to her side of the usual channels what I am sure will be a universal wish on this side of the Chamber; namely, that there should be an early opportunity for a full debate on this issue as soon as the process of notifying prisoners has been completed?
Baroness Blatch: My Lords, whether there is to be a debate on this matter is very much a question for Members of this House, and of course the usual channels. I believe that there is a misunderstanding which I ought to put on record at this moment. We do not have an official policy of making these decisions public. If we are asked for this information, once the disclosure process has been gone through, then the department has an obligation to answer such questions. The prisoner will know; but we will not make public statements at the time of disclosing to the prisoner what the tariff is to be.
Lord McIntosh of Haringey: My Lords, perhaps the House will forgive me for coming back on this point; it is really a matter for information. Nobody would suggest that the details, with names, should be made
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public. But can we presume that the Government will wish to issue some statistical review of the announcements that have been made to prisoners?
Baroness Blatch: My Lords, I am not sure whether they are included in the statutory statistics. But certainly if that information is called for or asked for we will reply publicly.

Buses: Construction Standards
2.45 p.m.
Lord Pearson of Rannoch Lord Pearson of Rannoch asked Her Majesty's Government:
Whether they will invoke the principle of subsidiarity or otherwise secure the future of the London double-decker bus and of the British midi-bus in the current negotiations on European Community draft vehicle harmonisation directives.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, these proposals are designed to form one of a number of directives designed to harmonise vehicle construction standards. We cannot accept this as an issue on which the doctrine of subsidiarity should apply. We shall, however, need to ensure that United Kingdom manufacturers will be able to accommodate the eventual standards, particularly in respect of double-decker buses and midi-buses.
Lord Pearson of Rannoch: My Lords, I thank my noble friend for that reply, which I fear will not bring much comfort to the British bus industry. Could I remind my noble friend that our bus industry is privatised and deregulated, unlike its European competitors, and it therefore needs to be able to respond to international and national market requirements without being fettered by red tape from Europe? In this context, is my noble friend aware that the British and Irish members of the Vehicle Working Group in Brussels are isolated from the other Community countries, so the proposed annex to the draft directives, which seeks to alleviate the position, does not in fact meet our requirements at all? Finally, could I ask my noble friend if he is aware not only that the annex would prevent our buses from circulating in Europe, but also that it would prevent them from being sold in the Far East, where at the moment they are doing extremely well in the interests of this country?
Viscount Goschen: My Lords, I quite agree with my noble friends that there are clear benefits from being able to operate double-decker buses and midi-buses in this country. They are popular, and we feel that they should be able to continue. We aim to ensure that the eventual standards that do come forward will take that fully into account. Progress is being made on this issue, but indeed there is a long way to go in order to convince the Commission and other European countries of the value of our position.
Lord Stoddart of Swindon: My Lords, can the noble Viscount tell the House what on earth the sort of buses we run in London and elsewhere in this country has to

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do with the interfering busybodies in Brussels? Is this not a case of Europe interfering in the nooks and crannies of our national life, which the Foreign Secretary said would not happen, particularly after the passing of the Maastricht Bill and the Maastricht Treaty? Will the Minister give the assurance that, if possible, any suggestion of doing away with our double-decker buses will be vetoed, or that at least the European Commission will be told that it will not be implemented?
Viscount Goschen: My Lords, I do not agree with the noble Lord at all. We aim to establish a single market for vehicles. That will be to the benefit of manufacturers. It will be to the benefit of the United Kingdom bus and coach industry. I simply do not accept that this is a matter of subsidiarity.
Noble Lords: Oh!
Lord Stoddart of Swindon: What is then?
Viscount Goschen: However, we will put forward the case very strongly to ensure that our double-decker buses and midi-buses will be able to continue to be manufactured and sold.
The Earl of Lauderdale: My Lords, why can this not be treated as a matter of subsidiarity?
Viscount Goschen: My Lords, the directive, when adopted, will be one of a number under Article 100a of the treaty designed to harmonise construction standards for motor vehicles. That will complete the single market for vehicles to the benefit of manufacturers. That is the reason why it is not an issue of subsidiarity.
Lord Monson: My Lords, does the noble Viscount agree that Continental manufacturers wanting to sell into the British market are far more handicapped by having to convert from left-hand to right-hand drive than they are by having to adapt to the characteristics of the traditional British double-decker bus, and that therefore that particular argument is a totally spurious one?
Viscount Goschen: No, my Lords, absolutely not. But I agree that there is clearly a left-hand drive/right-hand drive problem. That is obvious. We wish to see proposals which are not design restrictive, which cope with the safety requirements but are not over-prescriptive in terms of comfort and design of the interior of the vehicles, for instance.
Lord Bruce of Donington: My Lords, is the noble Viscount aware that the only reason why this duff draft directive has come about is because the French and the Germans do not have the expertise to produce a double-decker bus? Will he accept that they have no capacity to deal with it at all and are well aware that they cannot compete with us in either South America or Asia? Does he agree that that is the reason why the whole issue has arisen?
Viscount Goschen: My Lords, I agree with the noble Lord to the extent that the United Kingdom is the leader in the double-decker bus field.
Lord Cockfield: My Lords, does the Minister agree that a degree of harmonisation is absolutely essential,
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otherwise the Germans or the Italians, for example, would be able to block the export of buses from this country? Does he further agree that the lack of harmonisation in the case of motor vehicles was one of the grounds on which the French, Italians and others tried to obstruct the export of Nissan motor cars manufactured in this country?
Viscount Goschen: My Lords, my noble friend's question has given a clear explanation of the benefits of harmonisation in the industry.
Lord Carmichael of Kelvingrove: My Lords, I should like to emphasise that I am not by any means anti-Europe. But will he accept that such regulations and directives test the patience of the British public? So far as I remember, the one that most nearly approached this case was the directive on Arbroath smokies. Can the Minister tell the House whether we have a bus industry which is capable of meeting all the requirements of the British bus fleet? Will these directives be an excuse to allow big imports from Europe of buses from Italy, Germany and perhaps France?
Viscount Goschen: My Lords, I cannot answer the noble Lord on the matter of Arbroath smokies. But we do indeed have a very good bus industry in this country. It is well capable of producing buses to the highest specification. The important point is that we and the industry see the clear benefits of harmonisation. We are trying to achieve that without at the same time being over-prescriptive.
Lord Tebbit: My Lords, will my noble friend not simply give the assurance which would satisfy everyone in the House that under no circumstances will Her Majesty's Government allow the Germans, Italians, French, Greeks or others to cook up a set of regulations which will prevent us from manufacturing, using and exporting double-decker buses? Will he accept that, if he were to say that, he would have the support of the whole House?
Viscount Goschen: My Lords, I believe that I said very clearly that our aim in these negotiations is to produce proposals which our bus industry will be able to fit in with and that any moves which will require major design changes to our buses without taking into account safety considerations will be resisted.
Lord Peston: My Lords, will the noble Viscount accept that I find his answer very strange? Is he aware that, quite independently of whether one is for or against the Community, if ever there were a case in which a directive was not needed and competition was needed, this is it? All that is required is open competition, is it not? Why does he not agree, since I understand that that is part of the Government's policy anyway?
Viscount Goschen: My Lords, open competition is a major plank of the Government's policy. Yet we still see the very clear benefits that will come from harmonisation of this industry within the European Community.
Lord Teviot: My Lords, I can speak for the industry and the industry is supportive of the Government in

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what they are doing. Are not all these questions hares in relation to the issue of double-decker buses? Contrary to what my noble friend Lord Pearson said, the industry regards this hare about double-decker buses as being a Euro-myth?
Viscount Goschen: My Lords, I agree with my noble friend that we are keeping in very close contact with the bus industry on this point and will continue to do so.

British Rail: Privatisation Expenditure
2.55 p.m.
Lord Taylor of Gryfe Lord Taylor of Gryfe asked Her Majesty's Government:
What is the total expenditure incurred in consultancy, legal and accountancy fees in the privatisation of British Rail, including Railtrack, and the anticipated expenditure on franchising.
Viscount Goschen: My Lords, total expenditure on external consultancy fees for railways privatisation, including legal and accountancy fees, incurred by the Department of Transport, the Office of Passenger Rail Franchising and the Rail Regulator between 1991–92 and 1993–94 was £19 million. Consultancy costs incurred by BR and Railtrack are a matter for them, but I understand that they were in the order of £30 million up to March 1994. Total planned expenditure by the Office of Passenger Rail Franchising for 1994–95 is £7 million.
Lord Taylor of Gryfe: My Lords, will the Minister accept that I was very interested in the figures quoted? I understand from the annual accounts of British Rail that it has taken 50 per cent. of those costs and the 50 per cent. in its accounts represents £40 million. That suggests that the total amount of fees that I mentioned in my Question are in the region of £80 million. Even if we accept the Minister's figures, does he consider it a reasonable contribution to an efficient railway system when, at the same time that those substantial fees are being incurred, the investment budget of British Rail last year was reduced by 21 per cent.? The public service obligation, which is the subsidy for the day to day running of the railways, apart from investment, was also substantially reduced. Can he justify the expenditure on consultants' fees while there is a reduction in investment in new rolling stock, etcetera, which will make the railway efficient?
Viscount Goschen: My Lords, it is extremely important to put these sums in the context of the major transition that is taking place in the railway industry. It is a major privatisation and we simply do not believe that it would be good value to maintain the kind and level of specific expertise within the department for what is a short-term transition period. That is why these moneys have been spent on consultants. We see them as being good value.
Lord Marsh: My Lords, will the Minister address his mind to the extent to which British Rail, or Railtrack, will have to carry the cost of these consultancy fees—
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which arise wholly and solely out of government policy—in their accounts, which presumably will have a direct effect upon levels of subsidy that have nothing to do with this exercise? Alternatively, can he give the House an assurance that those very large sums in regard to either Railtrack or British Rail will not be taken into account in any way when addressing the levels of subsidy in those companies?
Viscount Goschen: My Lords, the noble Lord is right and the levels of subsidy are another issue. They will be based on the services that the franchising director will require, which will be based broadly on the existing timetable and the contracts made with the train operating companies. The consultancy fees represent the provision of very specialised services, which we do not believe exist within the department or within Railtrack, British Rail and the Office of Passenger Rail Franchising. That is why we brought them in and why we feel that they are good value.
Lord Ewing of Kirkford: My Lords, will the Minister answer a simple question? Who will pay the consultancy fees? Will it be the British taxpayer or the railway companies?
Viscount Goschen: My Lords, at the moment, of course, the taxpayer pays everything for the railways. That is the historic position. As the noble Lord knows, we are now going forward to a position where we are putting the railway companies into the private sector. Once those companies are in the private sector they will be responsible for their own costs.
Lord Clinton-Davis: My Lords, is the Minister aware that the figures he put forward seem to coincide more with Disney World than with reality? It was reliably estimated that the total costs of actual and projected expenditure in relation to privatisation, including the costs borne in the City, are nearer £1,000 million than the figure he stated. Whatever the position, does he agree with the statement made by the chairman of British Rail, Sir Bob Reid, on 4th December that the Government would have to make a long-term commitment to subsidise the railways if Railtrack is to be saleable at all? Is it right that the taxpayer should provide this life support machine for the franchisees?
Viscount Goschen: My Lords, the figure quoted by the noble Lord totally misrepresents the situation. He was talking about the total cost of privatisation, which is by no means the same as the total cost of consultancies. The larger figure includes the smaller, but I dispute vigorously his assessment of the larger figure. It is grossly overstated. The noble Lord then asked a supplementary question which had nothing to do with the consultation cost. We stated that we will provide a

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subsidy to the railway industry, as long as it is needed, to provide the services required by the franchising director.
Lord Clinton-Davis: My Lords, if the Minister disputes my figure, what is his view of the total cost of privatisation?
Viscount Goschen: My Lords, British Rail estimates that it has incurred reorganisation costs of £102 million up to March 1994 and that includes £30 million consultancy costs.

Territorial Army: Restructuring
3.1 p.m.
Lord Richard Lord Richard asked Her Majesty's Government:
Whether, as part of the proposed restructuring of the Territorial Army, the two TA battalions of the Parachute Regiment are to have an endorsed role as reserves in support of 5 Airborne Brigade; and whether they are to retain their support weapons.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley): My Lords, as we announced yesterday, the support weapons platoons of TA infantry battalions will be concentrated in four fire support battalions. The two TA battalions of the Parachute Regiment will restructure on a three rifle company basis without support weapons. On mobilisation, both battalions will be available to meet NATO or national requirements; in other circumstances they will, like the rest of the TA, serve as a general reserve to the Army. This may involve the battalions or parts of them augmenting the Regular Army on operations either in support of 5 Airborne Brigade or other formations, or independently.
Lord Richard: My Lords, I am obliged to the Minister for that Answer. I do not have a direct interest in this matter since I am not a member of the TA. I have never jumped out of an aeroplane either with or without a parachute. But this is a matter which was brought to my attention and is causing anxiety, particularly in those two battalions.
Can the Minister give us a specific statement this afternoon that the role of those two TA battalions is to act as reserves in support of the 5 Airborne Brigade? If he can say that, he will quell a great deal of anxiety. If that is not their role, presumably they have some role other than that of teaching men to jump out of aeroplanes with parachutes on, and perhaps he can tell us what that is.
Lord Henley: My Lords, I suspected that the noble Lord would not have an interest to declare. I thought it unlikely that he jumped out of aeroplanes either now or in the past. My first Answer gave the noble Lord the assurance he wanted. I was trying to make clear that those battalions do not have a specific endorsed role in support of 5 Airborne Brigade. If 5 Airborne Brigade needed reinforcement, it may come from those battalions or it may come from others. But, like other
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TA infantry battalions, they continue to have an important role in the restructured TA as part of the general reserve for the Armed Forces.
I understand that the changes can cause some anxiety. We looked at other alternatives, possibly re-roling one battalion of the TA paras as a fire support battalion. But that would cause even greater anxiety because it would reduce the number of parachute trained soldiers in that the establishment of a support battalion would be 336 as opposed to 519 for an ordinary battalion.
Lord Mason of Barnsley: My Lords, the Minister said in a written reply in the Official Report that,
"The 8th Battalion, the Light Infantry, will re-role as a National Defence Reconnaissance Regiment in the Royal Armoured Corps, taking over the current role of the Royal Yeomanry which will become the Army's Nuclear, Biological and Chemical Defence Regiment".—[Official Report, 6/12/94; col. WA 76.]
Though I accept that the 8th Battalion, the Yorkshire Light Infantry, is to be given a new role, can I take it that its members will be able to maintain their present cap badges and titles?
Lord Henley: My Lords, I can give that confirmation to the noble Lord. They will be able to retain their cap badge and title.
Viscount Ridley: My Lords, is the Minister aware that the great majority of the Territorial Army will welcome yesterday's statement about its future, not least as an end to a long period of uncertainty? Is he further aware that what is needed now is a long period of stability to implement these sensible changes?
Lord Henley: My Lords, I am grateful for the noble Viscount's comments. I agree that the vast majority of the TA is happy with the changes. It is obviously difficult, when announcing a restructuring of this sort, to avoid any disturbance whatever. We tried to avoid any excessive disturbance. As I said, some units will find their role changed but I hope that the vast majority of units will be happy without their existing role or in the new role to which they have been assigned.
Lord Gisborough: My Lords, can my noble friend say why the recce role, which is essentially that of the cavalry, was given to an infantry regiment rather than to one of the cavalry regiments?
Lord Henley: My Lords, in the restructuring we were reducing the number of infantry units and increasing other corps. To retain the loyalties and cap badges that have been built up it was necessary to restructure on that basis.
Lord Molloy: My Lords, bearing in mind the magnificent history of Britain's Territorial Army, particularly in times of need, can the Minister say that there will be no serious change in relation to our Territorial Army without a debate in this House?
Lord Henley: My Lords, if a debate is necessary I am sure that the usual channels will note what the noble Lord said. I shall be more than happy to debate the role and future of the TA on some future occasion.

Business
3.6 p.m.
Lord Strathclyde: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lady Chalker of Wallasey will, with the leave of the House, repeat a Statement that is to be made in another place on the situation in Bosnia.

National Health Patient Accommodation Bill [H.L.]
Lord Stoddart of Swindon: My Lords, I beg to introduce a Bill to provide a right to single sex accommodation for National Health Service patients. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Stoddart of Swindon.)
On Question, Bill read a first time, and to be printed.

Manufacturing Industry
3.8 p.m.
Lord Trefgarne Lord Trefgarne rose to call attention to the importance of increased output from United Kingdom manufacturing industry, with particular reference to the contribution made by small and medium sized enterprises; and to move for Papers.
The noble Lord said: My Lords, in rising to move the Motion standing in my name on the Order Paper, perhaps I may start by quoting from the Government's White Paper on competitiveness published in May 1994. At that time they said:
"A competitive manufacturing sector is essential for our long term prosperity. The share of manufacturing in total output has fallen over time in the UK and in other major economies. But manufacturing is a major employer and its output, more than any other sector, is tested on international markets".
Let me emphasise that if our manufacturing companies are to compete successfully there is an urgent need for improved efficiency in the areas of manufacturing production, marketing and sales. At its simplest that is ensuring that we have the right product at the right price available in the right markets. In order to achieve those aims there is a vital need for sound and stable financial policies, leading to investment in plant, people, the infrastructure and, above all, education and training.
One area where government support is of importance is in the promotion and support of exports, both in European and world markets. Thus the work of ECGD in long and medium-term credit guarantees is of continuing and vital importance. Shorter term facilities are now provided by the privatised NCM company which appears to be going pretty well. But even in that market a continuing element of government involvement continues to be essential, if only in relation to political risk.
Turning to the position of our companies within the European Union and hence the single European market, I warmly applaud the position taken by Her Majesty's
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Government, not least in their rejection of the social chapter of the Maastricht Treaty which I believe would lead to reduced employment opportunities in the United Kingdom and greater difficulty for employers in other ways also. I should mention in parenthesis at this stage that I am the Honorary President of the Mechanical and Metal Trades Confederation and I know that my views are almost universally shared by METCOM members.
Within the broad scope of manufacturing, I should like to draw your Lordships' attention to the significant role played by small and medium-sized enterprises. These firms are defined as employing fewer than 500 people and are generally known as SMEs. It may come as a surprise to learn that more than half of all people employed in the United Kingdom work for such companies. Many of these firms employ only one or two people and empirical evidence gathered from research carried out at Warwick University suggests that such tiny organisations tend to stay small. But, of course, just one more employee for all of them would make a huge difference to our unemployment figures. The Smaller Firms Council of the CBI has estimated that there are some 100,000 firms employing between 20 and 500 people. Of those, 25,000 have been identified as expecting to grow substantially. These surely are the companies which need help and support.
What are the characteristics of these companies and what kind of support do they need? First, there must be motivational and entrepreneurial drive by the owners and the key managers. This must come from within the business itself. Without it nothing can be achieved.
Secondly, there must be a carefully planned product policy which requires both R&D and market research which is often beyond the resources of smaller companies. It has to be said that these smaller companies sometimes eschew this approach to business and, rather than focusing on becoming winners and leaders in their chosen field, become diffused in their efforts and end up "Jack-of-all-trades and master of none"! Clearly, that is wholly undesirable. One of the very important services provided over recent years by the DTI has been the availability of consultancy services, especially to smaller companies, for the purposes to which I have referred. I believe that these arrangements have made a most valuable contribution to improving the competitiveness of companies in this sector, and I hope that they will continue.
Thirdly, there is a need for professional marketing and selling of the product and, again, small companies often lack real experience and training in these areas. This is a matter on which consultants can no doubt offer some guidance, but perhaps more importantly—particularly in overseas markets—is the selection of appropriate agents in the countries concerned. Here I wish to applaud the work of our missions overseas which are able to identify suitable local partners and bring them together with British exporters. I should perhaps remind your Lordships at this point that much of the work of small companies is very often as sub-contractors to larger enterprises, so the fact that I am, on this occasion, focusing on the needs of the smaller companies should not blind us to the important consideration that their health is equally dependent upon

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that of their larger cousins. So much, if not all, of the encouragement I seek for SMEs should apply equally to the larger enterprises.
Fourthly, finance is the lifeblood of any business and is especially vital as small and medium-sized companies strive to grow, especially when operating in the export field. I am not sure that the range of sources of finance available to SMEs is adequate—too many rely almost solely on their bank—but let us discuss that on another occasion.
Perhaps the most important area in which the Government can assist in the creation, growth and continued health of smaller companies is in the reduction of bureaucracy and regulation. Here I must applaud the various initiatives which have emerged recently from the DTI from the personal spur, we understand, of the President of the Board of Trade himself. There is still a long way to go, not least in containing the plethora of directives, rules and regulations which emerge from Brussels—we had a flavour of that at Question Time—but I urge my right honourable friend to redouble his efforts in this area. It is, in my view, the single most important aspect of government oversight of business generally and small businesses in particular.
I now turn to the vital area of training and education. I quote my right honourable friend the Prime Minister who, in the introduction to the White Paper to which I referred, said:
"I believe we must give our young people the highest standards of education and training. These skills will be the key to our future".
Perhaps I should say, in parenthesis again, that I have recently been appointed chairman of the Engineering Training Authority, so clearly I must take the Prime Minister's words closely to heart.
To compete effectively in international markets, the United Kingdom must address the immediate issue of skills training. In the longer term, we need to examine how our education system must develop to bring about greater levels of achievement. Compared with our main international competitors, the United Kingdom is consistently shown to be well behind in this area. This is the case in all levels of skills but especially for the intermediate levels—those traditionally described as craft, technician and supervisory skills.
Recent research carried out by the Engineering Training Authority shows that an encouraging 80 per cent. of engineering sites with 500 or more employees are implementing the new national vocational qualifications. Equally promising is the significant interest employers expressed in using NVQs at the higher levels—the very levels appropriate to the crucial intermediate skills, to which I have referred. But there is some evidence that smaller companies are not in the vanguard of these welcome developments. I hope that they will be in the future.
Investors in People is an important mechanism for employers to develop workforce skills and competence as an integrated part of the organisation's business plan. The importance of this initiative was underlined in the White Paper, to which I referred, and rightly so. There is, however, a risk that smaller companies may tend to dismiss these ideas as irrelevant to their needs. I do not
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agree. No company is too small to benefit from the proper management of its human resources, and Investors in People helps them to do just that.
The Government's firm commitment to modern apprenticeships is to be applauded. Prototype schemes are currently running in 17 sectors, the largest of those being engineering manufacturing. The Employment Department has pledged further major funds over the next three years to support launches in other sectors. Let us hope that they do not fall foul of whatever changes my right honourable friend the Chancellor of the Exchequer may announce tomorrow, following his "little local difficulty" in the other place last night.
Modern apprenticeships are an excellent means of giving quality training, providing young people with a foundation on which to develop a career or a route to higher education. Whatever the chosen path, modern apprenticeships, with their educational and core skills components, offer a sound basis for life-long learning which is so necessary in helping young people to adapt to change and cope flexibly with varying demands.
In an industry which has seen the number of trainees fall by about a third in fewer than three years, this initiative is an excellent opportunity to reverse this trend and to raise our intermediate skills levels to international standards.
Turning now to education, as distinct from training, the United Kingdom's failure to rank high in the industry league can, in part, be attributed to a comparatively poor output from our nation's schools. A study showed that in 1991, only 27 per cent. of 16 year-olds in the United Kingdom achieved GCSE grades A to C in the national language, maths and science, compared with 62 per cent. in Germany and 66 per cent. in France. United Kingdom pupils achieving two A-levels or equivalent numbered only 28 per cent. compared with 68 per cent. and 48 per cent. in the same countries. This country's highly selective approach to education, together with its emphasis on academic study, serve the minority well, no doubt, but the majority poorly. A fundamental cultural change is needed to bring about the acceptance of vocational courses. This change is crucially important if the manufacturing industry is not to lose out.
My Motion calls attention to the importance of increased output from all sectors of UK manufacturing industry including, in particular, smaller companies. But this vitally important increased output depends crucially upon our companies increasing their efficiency and hence their competitiveness if they are to compete not only here at home but more widely across Europe and the world. We have made enormous strides in the right direction in recent years as our economic recovery now demonstrates. But there is still much to be done. I believe that the main thrust of government policy is in the right direction and I commend the enthusiasm and drive of Ministers in this regard. But in the end our

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future depends not upon Ministers, regardless of their political complexion, but on the companies themselves. My Lords, I beg to move for Papers.
3.20 p.m.
Lord Haskel: My Lords, I start by apologising to the House for the fact that I may have to leave before the end of this debate in view of the delay that will arise from the Statement which is to be made. I shall read the Minister's response and the last few contributions in Hansard with great interest.
I am most grateful to the noble Lord, Lord Trefgarne, for moving this Motion because in it he states precisely the objective of the Department of Trade and Industry. It is to increase the output from United Kingdom manufacturing industry while maintaining and expanding the wealth of every citizen. The short answer is to produce more world-class products in the United Kingdom and for the small and medium-sized enterprises to become suppliers to those companies producing them, if they are not end-producers themselves.
We must start from the point of view that international comparisons indicate that there is plenty of under-performance by our manufacturing sector, particularly among the small and medium-sized enterprises, and we must catch up. How are we to achieve that objective?
Much research shows that most manufacturing small and medium-sized enterprises are single product companies often supplying niche markets. Their future is often tied to the life cycle of their product, or to where the economy is in the economic cycle. When their product becomes obsolete, or the market moves on, everything depends on the owner or manager. Does he or she have the ability, the money, the vision or the wish to move on also?
Again, research has shown that the small and medium-sized enterprise will progress if at this stage it is a supplier to a world-class manufacturer, or to a major original equipment manufacturer or to an important retailer. The close association with such a company will have forced the small and medium-sized enterprise to progress. Their customers will have forced the company to introduce new technology, new best practice, to innovate and to become competitive. These relationships are extremely important. We have all read about retailers and manufacturers cutting back on the number of their suppliers. They do this to concentrate on improving the performance of their suppliers. The hope is that these suppliers become world class and continue to be world class. This culture of buying by developing relationships and not purely on price is becoming more important in UK manufacturing. Not only in the private sector but also large public-sector purchasers, such as the Post Office and the National Health Service, are playing an important role in this.
Of course, the customers of small and medium-sized enterprises can be in the United Kingdom, in Europe or anywhere in the world. In manufacturing it is developing these relationships which is important, and if we wish to increase the output from the United
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Kingdom manufacturers it is up to the DTI to encourage this activity. Perhaps the Minister will tell us what plans his department has to speed up this work.
If one believes in that scenario, as I do, a number of things follow. First, it is long term. The main element for a successful long-term strategy of this kind is for government to get away from the stop-go roller coaster economy that we have experienced during my business life. I hear what the Government say about the current positive economic outlook, but many believe that nothing fundamental has changed and that we are at the start of a period of go after a long period of stop. Perhaps that is why the current levels of investment are disappointingly low.
A second principle that follows from my scenario concerns the people working in manufacturing. My experience is rather different to that of the noble Lord, Lord Trefgarne. To create a prosperous manufacturing sector we must move away from the casualisation of the workforce. A modern manufacturing economy demands more training, skill, versatility, commitment, education, and initiative from its workforce. But you do not achieve that by punishing people with fewer social benefits than their colleagues in the rest of Europe and by casualising the labour market.
Thirdly, the relationship between government and industry changes. Most successful manufacturing nations have governments which have developed a partnership with industry to the overall benefit of the nation as a whole. This partnership provides investment in the infrastructure necessary for manufacturing to be competitive. Between 1980 and 1990 the Japanese Government invested 5.1 per cent. of their gross domestic product and their growth rate was 3.8 per cent. We invested 1.9 per cent. of our gross domestic product and our growth rate was only 1.7 per cent. I leave your Lordships to draw the conclusions.
Another element of this partnership is that government should welcome the desire of purchasers to improve their suppliers rather than to continually shop around for alternative sources. Even though this leads to customers and suppliers becoming interdependent, it is nevertheless the task of government to encourage a vigorous competition policy. At present they are failing to do this.
Part of this partnership is also for government to discourage unrealistically high expectations from returns on investment and to deter short-termism in investment in manufacturing industry. I was pleased to see in the Financial Times of 5th December that the investigation into why UK companies need to pay higher dividends than companies elsewhere is being reinstated after it was cancelled earlier this year because the noble Lord, Lord Hanson, wrote to the Financial Secretary to the Treasury and accused him of acting like a socialist.
A word about inward investment. This is a welcome addition to our weak manufacturing base. It has brought jobs, new technology, and raised standards, but it is not an alternative and it is expensive in grants. Remember that the employment created is dependent on continued support from overseas investors. If we become too dependent on overseas investors, then our own ability to create manufacturing businesses will decrease.

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In 1993, £9.5 billion was invested in Britain by overseas companies, but UK companies invested £17.2 billion overseas. UK manufacturing needs investment. Perhaps the Minister can say how we can redress this balance.
There are thus many elements in increasing the output of UK manufacturing and the balance is changing all the time. It is essential to get the balance right. If we improve training and fall down on quality, then all we will do is end up with a better educated army of unemployed. I welcome the research being carried out by the Warwick Business School and the Federation for Manufacturing Industry in this area.
Growth in UK manufacturing depends on our ability to produce world-class products. We will do it by the methods I have outlined which we on these Benches call "an active modern industrial policy". We do not seek intervention for intervention's sake. We see it as a means of working in partnership with manufacturing to make the market economy really dynamic.
3.29 p.m.
Lord Weatherill: My Lords, we are all indebted to the noble Lord, Lord Trefgarne, for initiating a debate on the very important subject of the contribution that is made by small and medium-sized businesses. I am pleased to return to the subject of my maiden speech not only in this House but also, incidentally, in another place many years ago when I spoke about the youth employment service. It is a plain fact that important though big businesses are in the manufacturing sector, it is to small firms and, in particular, new businesses that we must look to provide the jobs of the future and at the same time to make a vitally important contribution to solving many of our country's social problems which arise undoubtedly from unemployment.
I seek to intervene today on behalf of new businesses. I trust that I am qualified to do so from personal experience. I was apprenticed to the business that had been started by my father way back in 1912. I was not apprenticed in 1912, although some people may think so! My father had led the last successful strike of tailors. He was crippled and unemployed. I regularly go round schools these days talking about the good old days; but they were not so good if you were poor and had very little education. As my father was unemployable, he therefore had to set up on his own account. We still have the bicycle with a small wheel at the front and a bigger wheel at the back on which he used to cycle out to take the orders and then cycle back and deliver the clothes when he had made them. I entered a business which started in South Ascot and which, I am proud to say, is now in Savile Row. It is not a big business, but it employs a considerable number of people, and two-thirds of our turnover is in overseas markets.
Self-employment offers a way out of unemployment, particularly for those who are made redundant, and especially for young people for whom the inability to find a job breeds a cycle of alienation which is a threat to the quality of life in our country. No organisation knows more about those problems than the Prince's Youth Business Trust, of which I am proud to be a trustee. The trust started through the personal initiative
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of His Royal Highness the Prince of Wales and can claim to be the biggest—the No. 1—youth start-up organisation in the country. If a Japanese company comes to our country and creates 1,000 jobs, we lay a red carpet half way down the M.1 to congratulate it, yet the Prince's Youth Business Trust has established 24,000 new businesses since its inception, with 3,000 being created in the past year. Of those new businesses, 40 per cent. were started by females; 15 per cent. by the ethnic minority communities; 5 per cent. by the disabled; and a number were begun by former young offenders. It is a remarkable success story which should be better known, more widely appreciated and more positively supported.
The trust provides "soft" loans, small grants and post-start-up advice to those between the ages of 18 and 29, who the banks will not consider. However, no one is given money without being assigned a business adviser. That has ensured that two-thirds of the new businesses started in the past three years are still trading today. That is a much higher success rate than any of the banks can claim. Those who assist as business advisers do so voluntarily. They are all experienced people. Some are retired, but others are still working as managers in large firms and successful businesses.
The average net cost of taking someone off the unemployment register and putting him or her to work in this way is £2,500 per annum. That is far far less than the cost of a year of unemployment. The trust is able to be so successful and cost-effective because a high proportion of its staff are seconded from the private sector, and because some 6,000 people give their time voluntarily to support its work. One of them is the noble Lord, Lord Mason of Barnsley, who has been chairman of the South Yorkshire Board of the Prince's Youth Business Trust since its inception. He is one of 38 such chairmen throughout the United Kingdom. It must be true that the Prince's Youth Business Trust is the largest free consultancy service in the world.
I am also patron of Croydon Business Ventures, an enterprise agency in my former constituency of Croydon, North-East. Some 13 years ago, shortly after I was chosen as Speaker of another place, I attempted to attend a party on the ground floor of the House of Commons. I was dragged into a room by the honourable Member for Bow and Poplar who, pulling me in, said, "I am very anxious to introduce you all to our new Speaker, Sir Jasper More". I said, "I suppose that I ought to know your name". The name of that organisation was the Tower Hamlets Enterprise Agency. I went to visit it and resolved that we would have such an agency in my constituency. I wrote a letter to 12 friends saying, "Please send me £1,000", and giving a telephone number. All of them rang me up, asking why I wanted the money. I said, "To finance your future competitors". We have been in business now for 10 years, during which time we have established 1,170 new businesses and provided, we estimate, 5,300 new jobs in Croydon. Despite difficult times, three-quarters of those businesses have survived. We estimate that Croydon Business Ventures generates £100 million turnover per year. Some of those businesses, which started from

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scratch, have grown into quite big firms. The average turnover is £76,000, and 37 per cent. of the firms have a turnover of between £100,000 and £500,000.
It is good that the Minister who is responsible for small firms is a Member of your Lordships' House because I should like to address a number of concerns directly to the noble Earl, Lord Ferrers, who is to reply to the debate. First, both the Prince's Youth Business Trust and Croydon Business Ventures, like other enterprise agencies, are concerned about the business start-up scheme, which was previously known as the enterprise allowance. The latter seemed a good phrase and it is a pity that it has been dropped. Many small enterprises have depended on that allowance to help them through the crucial start-up phase. I hope that the noble Earl will be able to reassure the House that that crucially important allowance will not be neutered, let alone done away with.
A further worry is the trend to focus TEC and the Business Links support on firms with between 20 and 200 employees. Few firms start with 20 employees, and to reduce support from the very small enterprises and new businesses that have been nurtured by the PYBT and the enterprise agencies is to cut off at source one of the key features of healthy industrial and commercial birth. I must tell the Minister that there is considerable concern that local enterprise agencies, which as I have sought to prove have been highly successful in helping to establish new businesses, may themselves not survive if, as seems possible, TECs and Business Links put a lower priority on the future of small enterprises. For many small businesses, the loss of the business start-up scheme would be a major blow; but the loss of the associated start-up training would, if anything, be worse leading inevitably to a higher rate of business failure. I hope therefore that the Minister will intervene on their behalf to ensure that those important sources of funding are not cut off.
Napoleon never did say that we were a nation of shopkeepers. What he did say was that we were a nation of merchant adventurers. Britain's prosperity in the past, and also in the future, is, and will be, dependent upon trade, and in particular upon a healthy manufacturing base. We must not be simply a nation of shopkeepers selling other people's goods. Of course, as other noble Lords have said, big businesses, as major employers, must be the concern of the Government; but employment in that sector has declined steadily since 1980, while employment in small and medium-sized enterprises has grown steadily.
The figures have been quoted already; but it is worth repeating them: firms with fewer than 10 employees comprise 90 per cent. of all enterprises and contribute 25 per cent. to our GDP. It therefore seems inevitable that we must look to small firms to provide jobs for the future, and in doing so, that sector will be making a vital contribution towards the solution of social consequences—the social consequences of unemployment which besides costing millions of pounds a year is a source of deep frustration which is potentially a threat to the life of us all in this country.

Bosnia
3.40 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, with the leave of the House, I shall now repeat a Statement on Bosnia which is being made in another place by my right honourable friend the Foreign Secretary. The Statement is as follows:
"The situation on the ground deteriorated over the last month. Around the Bihac pocket, Bosnian Government forces launched an attack but were then forced back by the Bosnian Serbs. The Bosnian Serbs, with support from Croatian Serb forces and rebel Bosnian Moslems, have taken the fighting into the United Nations safe area. The contravention of Security Council resolutions led the commanders of the UN force and NATO to call for and carry out air strikes to deter attacks against the safe area.
"The fighting has also intensified in central Bosnia with Bosnian Government forces making gains against the Bosnian Serbs. In the safe areas of Sarajevo, Gorazde and Srebrenica the civilian populations and the UN contingents are short of supplies as convoys have been held up. Over 400 UN troops had their movements limited by the Bosnian Serbs. Some were effectively held hostage.
"That was the situation which faced the ministerial meeting of the Contact Group on 2nd December. The Contact Group countries—Britain, France, Germany, Russia and the United States—united in calling for an immediate ceasefire in the Bihac pocket, including the withdrawal of Bosnian Serb and Croatian Serb forces from the safe area. We also called for talks to begin on a comprehensive agreement to cease hostilities throughout Bosnia. The Contact Group supported UNPROFOR's mission and demanded immediate freedom of movement for UNPROFOR and for humanitarian supplies throughout the country. Only once these steps have been taken and the Bosnian Serbs have accepted the Contact Group plan as the basis for a settlement can negotiations continue.
"The Contact Group reaffirmed the plan adopted last July. Under this plan the integrity of Bosnia-Hercegovina would be preserved. The Bosnian Serbs would hold 49 per cent. of the territory, the Bosnian Federation of Croats and Moslems 51 per cent. We reiterated that the territorial proposal—that is, the map of the 51 per cent. and 49 per cent.—can be adjusted by mutual agreement between the parties. Constitutional arrangements agreeable to the parties will also need to be drawn up which preserve the integrity of Bosnia-Hercegovina and allow equitable and balanced arrangements for the Bosnian-Croat Federation and the Bosnian-Serb entity. The Contact Group agreed that its officials would help the parties reach a settlement on these issues. We did not discuss the lifting of the arms embargo or any change in the arrangements for the use of NATO airpower in support of the UN.

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"The purpose of the Contact Group meeting was to help relaunch the political process following agreement, which we hope will come soon, on a ceasefire.
"To carry this forward, I travelled to Belgrade with my French colleague, M. Juppé, for talks with President Milosevic. Mr. Milosevic welcomed the clarifications we were able to provide. He said that they would help him to put again to the Bosnian Serb Assembly the case for accepting the peace plan. The next day over 20 members—more than a quarter of the Bosnian Serb Assembly—saw Mr. Milosevic in Belgrade. They issued a statement saying that in the light of the clarifications made to the Contact Group plan, the Pale Assembly should consider accepting it and entering negotiations on the map and the constitution to reach a final settlement. This is an encouraging step forward, but not enough. The Bosnian Serb leadership has yet to accept the plan.
"At the summit of the Conference on Security and Co-operation in Europe, which my right honourable friend the Prime Minister and I attended in Budapest on 5th and 6th December, I met President Izetbegovic of Bosnia, President Tudjman of Croatia and the Secretaries-General of the United Nations and NATO.
"The three presidents—Milosevic, Izetbegovic and Tudjman —all support the Contact Group plan for Bosnia and the continued presence of the UN force. They are all willing in principle to agree to a ceasefire throughout Bosnia, as are the Bosnian Serbs, though there remains a disagreement over its duration. We hope that the UN special representative, Mr. Akashi, will be able to make progress on a ceasefire this week.
"The British Government want the UN force to be able to continue its mission and the British contingent to continue to play a major part. But we must be clear about its role. It is not there to impose solutions on unwilling parties. It cannot fight on one side. It does not defend one army's territory against the attacks of another. It is there to support the impressive aid effort, much of it British, delivered by ODA teams, to buttress ceasefires where they exist and, within its limitations, to underpin the safe areas and exclusion zones designated by the United Nations and NATO.
"Withdrawal would be a difficult operation in itself. The consequences for the civilians whom the force are there to protect would be severe. But UNPROFOR can only continue its mission if it can do so without unacceptable risk and if it can continue to fulfil its mandate. As with all military operations, planning is in hand to cover a variety of eventualities, including withdrawal. These are constantly updated. The Government are not considering unilateral withdrawal of the British contingent. We are working with our partners in NATO and the United Nations.
"The Government's preferred way forward is clear: first, a ceasefire in the Bihac safe area and throughout Bosnia; secondly, agreement on the free movement of UNPROFOR and for aid convoys; thirdly, resumption of urgent negotiations for a peace settlement on the basis of the Contact Group plan; and, fourthly, once
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agreement has been reached, withdrawal by the Bosnian Serbs from the land they hold to the new lines agreed.
"Before I end, I should also record welcome progress between the Croatian Government and the Croatian Serbs. Last week they signed an economic agreement which provides for the resumption of oil, water and electricity links between the Serb held areas of Croatia and the rest of the country and for re-opening the highway between Zagreb and Belgrade. I pay tribute to the months of patient and persistent diplomacy by the noble Lord, Lord Owen, and Mr. Stoltenberg which was needed to achieve this. I hope the agreement can be implemented soon. It improves the prospects for negotiations leading to a lasting political settlement in Croatia and for normalisation of ties between Croatia and Serbia."
My Lords, that concludes the Statement.
Baroness Blackstone: My Lords, I am grateful to the Minister for repeating the Statement. I welcome the progress that has been made in negotiating at least a modicum of agreement between the Croatian Government and the Croatian Serbs. I share with the Minister our gratitude to the noble Lord, Lord Owen, and Mr. Stoltenberg for their work in achieving that. I also welcome the decision to maintain British troops as part of the UN forces in Bosnia. While lives continue to be saved and while humanitarian aid is provided as a direct result of the presence of UN troops in Bosnia, we on this side of the House hope that members of the British Armed Forces will continue to be part of that presence.
There has been in the press a great deal of loose talk about the withdrawal of our troops without sufficient consideration of the effects on the Bosnian civilian community. Many more lives would be at risk if UN troops, among whom British troops play such a crucial part, were to be withdrawn. We also accept, as the Statement makes absolutely clear, that the role of British troops is not to fight on one side or the other or to defend one army's territory against another. We agree that, provided that their future safety is not seriously threatened, they are there to monitor the cease-fire and to ensure that UN resolutions on the exclusion areas and the safe havens are implemented. However, what has happened in Bihac during the past couple of weeks has shown only too clearly that, as we predicted, the safe haven policy has not worked and it is still not working.
Will the Minister tell the House how the United Nations and NATO intend to ensure that what happened in Bihac during the past two or three weeks is not repeated elsewhere in the near future? Will she also tell the House what steps will be taken to stop other Bosnian Serbs taking more UN troops hostage? Surely it is totally unacceptable that Bosnian Serbs, with the support of rebel Bosnian Moslems and Croatian Serbs, should have mounted an attack on one of the designated safe havens. That attack had considerable success and led to 400 United Nations troops being denied basic supplies and the ability to move freely.

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It is not clear what political steps are being taken to deal with that in the ongoing negotiations with the Bosnian Serbs. Does the Minister agree that in such circumstances it is entirely wrong to make concessions to the Bosnian Serbs? In offering an association between the Bosnian Serbs and the state of Serbia, is not the international community making just such a concession? Moreover, will not this concession jeopardise the long-term independence of Bosnia and the future of the Bosnian Moslem community.
The Statement indicates that at the recent meeting of the Contact Group there was no discussion on the lifting of the arms embargo. Will the Minister confirm that there are to be no further changes to the current position on the arms embargo? Does she agree that to provide American, British or French arms to the Bosnian Moslems at this delicate stage will serve only to inflame the military situation and to damage progress towards a political settlement?
The Statement strikes a note of optimism about the Contact Group's planned basis for a settlement which is difficult to share. The Minister has given no assessment of the chances of the Bosnian Serb leadership accepting it after the Minister's right honourable friend the Foreign Secretary and the French Minister for Foreign Affairs visited Belgrade. Perhaps she is now able to give such an assessment.
I wish to pay tribute again to the brave and courageous role played by our troops in Bosnia. As I said earlier, they have saved many lives. We hope that the international community will be more successful in obtaining the political settlement which will allow the troops to return home safely as soon as possible.
Lord Thomson of Monifieth: My Lords, I join the noble Baroness, Lady Blackstone, in thanking the Minister for repeating the Statement. I, too, pay tribute to the noble Lord, Lord Owen, and Mr. Stoltenberg for the patient efforts that they have made on the Croatian Serbian front. Useful progress has been made and we hope that that will contribute to a wider settlement.
The Statement is one of some gravity. The situation has deteriorated and the implications of a further deterioration are serious indeed. Against that background, we wish to pay tribute to the patience and persistence of the Foreign Secretary and his efforts to try to arrest that deterioration. Clearly, the first step is to try to bring about a cease-fire in the Bihac area. We would be grateful for any further information that the Minister can give us on that matter.
I echo the words of the noble Baroness, Lady Blackstone, that what happened in Bihac was an ominous event as regards the possibility of the same deterioration taking place in other safe havens. We would all like to know what steps the Government believe can be taken by the Contact Group, the NATO forces and the United Nations to try to prevent that possibility. It is unacceptable that 400 United Nations soldiers should, in effect, be turned into hostages.
Finally, we welcome the statement that the Government are not contemplating any unilateral withdrawal of the British contribution to the United
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Nations contingent and that they are dealing with the problems collectively with our colleagues and allies. At the same time, all our thoughts are with the British Armed Forces and civilian aid workers in Bosnia. They are doing fine work in terms of humanitarian aid in alleviating suffering. I too pay tribute to the role that they are undertaking in Bosnia, but we need every possible reassurance that their safety and security is paramount in the mind of Her Majesty's Government.
Baroness Chalker of Wallasey: My Lords, I thank the noble Baroness, Lady Blackstone, and the noble Lord, Lord Thomson of Monifieth, for the tributes that they paid not only to the noble Lord, Lord Owen, and Mr. Stoltenberg but also to my right honourable friend the Foreign Secretary. I assure your Lordships that the British Government—and, I believe, the French Government, too—will not cease in their efforts to stop the extension of the terrible situation that we have seen in Bihac. We will use every means at our disposal to stop its spread.
Of course, the spread can best be stopped by the agreement that President Milosevic is seeking with some members of the Bosnian Serb Parliament. I mentioned in the Statement that more than 20 members had issued a statement and we believe that there may be more. There is a total of 83 members of that Bosnian Serb Parliament in Pale. The majority would have to be convinced to achieve acceptance of that plan. That is quite clearly what everyone hopes will happen because only when there has been an acceptance of the Contact Group plan can we begin to see the beginning of real progress.
The noble Baroness said that safe havens are not working. She knows that if you do not give support to the implementation of safe havens it is very difficult for the safe areas to work in the way that was first envisaged. Although Britain has more than played her part as one of the main force contributors among the 39,000 or so troops who are there, there are countries which have not played a role in UNPROFOR. From what I have seen on the ground, I am firmly convinced that you can make safe havens really safe only when you have people on the ground so to do.
The noble Baroness asked how we could prevent the Bihac tragedy being repeated elsewhere and how we could stop Bosnian Serbs taking servicemen and, indeed, others hostage while making no concessions. A very active role is being played not only by Mr. Akashi who secured the release of 160 troops last week, 60 of whom were British, but also work is going on to secure the release of the other 350 UNPROFOR troops from France, Russia, the Ukraine and Canada and the UNMOs who are being held to ransom. That can be done only through patient negotiation and not through concessions because they would indeed jeopardise the future.
I assure your Lordships that there are no changes with regard to lifting the arms embargo. Although it was not discussed at the meeting none of the members of the Contact Group, with the exception of certain members of Congress in the United States, is envisaging a lifting

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of the embargo. I believe that that is absolutely right because putting more arms into an already febrile situation would do nothing to help the people of Bosnia.
I close by thanking the noble Lord, Lord Thomson of Monifieth, for the tribute that he paid to the aid workers. There are many from non-governmental organisations as well as our own ODA personnel who are there on the ground. If they cannot get into one area, they will deliver to another area. They are keeping men, women and children alive and giving them some hope for the future. Without UNPROFOR and without the aid workers, that simply could not have happened.
4.2 p.m.
The Earl of Lauderdale: My Lords, perhaps I may ask my noble friend about the assembly at Pale. She gave us the interesting information that some 20 out of 83 members went to Belgrade and issued a statement. Do we know when the assembly will meet and when it will reach a decision? Do we know whether the Russians are actively helping to encourage those members of the assembly to agree to peace?
In addition, will the Minister say something about the unhappy plight, which we read about, of the Bangladeshi troops. Apparently they have one rifle to five men and are shivering in an unfamiliar climate.
Baroness Chalker of Wallasey: My Lords, I thank my noble friend for his questions. The answer to his first question is that I cannot give him any more detail about when the discussion will take place in Pale. We believe that the Russians are helping but I am not privy to exactly how that is being done, so cannot pass on that information to my noble friend.
My noble friend asked about the 1,400 brave Bangladeshi troops. They are in the Bihac pocket. I am glad to say that a convoy of rations and fuel arrived for them on 4th December. They are doing a very valuable job under the most difficult conditions. There are a number of problems for them in the area but we are quite determined that they, as well as the ordinary people in Bihac who are suffering too, should have supplies. I assure my noble friend that we shall play a full role in helping to ensure that they are so supplied.
Lord Taylor of Gryfe: My Lords, one of the most, helpful aspects of the Statement and the recent developments in Yugoslavia has been the role of Mr. Milosevic. He has supported and endorsed the Contact Group's plan, despite the hostility of many of his fellow Serbs. As a result of that, there has been some relaxation of the severe sanctions—the opening of the airport and the resumption of cultural activities, including football matches, is now permitted. However, most pressing of all is the need for medical supplies. I was recently in Belgrade and I visited hospitals in which doctors had to make a decision on which child to save because they had supplies for only one. Will the Minister give me an assurance—and it would be a useful gesture in the light of the role of Mr. Milosevic—that the question of sanctions as applied to medical supplies might be reviewed?
Baroness Chalker of Wallasey: My Lords, we have made it clear that medical supplies are certainly to be
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sent and they are not caught by the sanctions provisions. It is true that doctors have to make difficult decisions in any country where there is war and conflict. But there is no way in which we stand in the way of medical supplies. Medical supplies are indeed going into Belgrade and some are travelling on from Belgrade with the convoys into some of the areas to the east of Bosnia-Hercegovina where there is much need.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that we all hope that the present proposals referred to in the Statement will bring about a satisfactory result? But is there not some risk in stating categorically that British troops should not be removed, because uncertainty with regard to the possibility of that happening may have played some part in creating an atmosphere among people who at present are intransigent on meeting any reasonable request?
Baroness Chalker of Wallasey: My Lords, I thank my noble friend for allowing me to make clear once again, as I did in repeating the Statement, that British troops, or indeed UNPROFOR as a whole, can continue their mission only if they can do so without unacceptable risk and if they continue to fulfil their mandate. That is why we have made contingency plans for a withdrawal, if that had to happen. We hope sincerely that it will not because the troops are carrying out a most valuable role. But we have never said that we shall not withdraw them if they faced an unacceptable risk or if they could not continue to fulfil their mandate.
Lord Mackie of Benshie: My Lords, is it not true that the whole treatment of this crisis has been an absolute disgrace to Western Europe and to the countries of the United Nations? Is it not a fact that the Serbs have played up Western Europe and NATO in the most disgraceful manner and that we have retreated from saying that no territory conquered by force would be held but are now proposing to let the Serbs get away with the vast majority of their conquests?
Is it not a fact that we have threatened force with overwhelming air power at our disposal but failed to use it? Is not what is happening today similar to what happened to the League of Nations? The UN resolve and the political will of the governments of Europe is at such a low ebb that we shall probably go on to further disasters because potential aggressors in their own territory will know that the governments of Western Europe will never use force to stop them?
Baroness Chalker of Wallasey: My Lords, the mandate does not entitle UNPROFOR or NATO to use force to stop one party against another. The mandate is absolutely clear. I believe that the noble Lord was most unfair in what he said. It is very easy to be an armchair critic of this highly complicated situation. It is not simple because one is not even talking—for example, in the Bihac pocket—of Bosnian Serbs fighting Bosnian Moslems; one is talking of a third group, a breakaway group, and of the complexities of the Serbs in Krajina. Indeed, the situation is continually changing. That does not make it easy to carry through the mandate in the first place.

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Secondly, in no way have the Contact Group or the allies been giving in to the Serbs in the way implied by the noble Lord. There simply is no alternative to the Contact Group plan. That is why the role that Mr. Milosevic has begun to play is so important. I can say that we are certainly encouraged by the statement from the Bosnian Serb Assembly delegation supporting the Contact Group plan. It remains to be seen whether that view will be acceptable in Pale and acceptable to a larger number of the Bosnian Serb Assembly. However, that does not alter the fact that the Bosnian Serb leadership knows that it cannot return to normality until the war ends. That is why we are working so hard for a peace settlement.
I should point out to the noble Lord that anyone who had read the detail of the discussions which my right honourable friend the Foreign Secretary and Alain Juppé, and others, have had over the past five days, could not put the questions that he has just put to me.
Lord Ennals: My Lords, will the Minister accept my great satisfaction that she dealt as firmly as she did with what I thought was the grossly oversimplified interpretation of the situation presented by the noble Lord, Lord Mackie of Benshie? Looking especially at the role of the UN, with which I obviously have a particular interest as an officer of the United Nations Association, perhaps I may say how glad I am that the Minister referred to the task carried out by Mr. Akashi who has absolutely, and with persistence, sought to find a way through a very complicated situation.
Bearing in mind the Minister's words about the possibility of imposing solutions on unwilling partners—a statement which seems to me to be absolutely accurate—can she confirm that the UN is not there in order to fight a war but to do what it can mainly by humanitarian means? Will the Minister condemn some of the statements made in the newspapers, which rather reflect what the noble Lord, Lord Mackie of Benshie, said, suggesting that, somehow or other, it showed a failure of an organisation; namely, the United Nations or, for that matter, NATO? Such organisations simply cannot force people to do what they are not willing to do.
As regards the treatment of the Bangladeshi forces of UNPROFOR, will the Minister openly condemn the quite appalling behaviour of the Bosnian Serbs in treating them as hostages when, under very difficult circumstances, they have been acting in the name and in the duty of the United Nations?
Baroness Chalker of Wallasey: My Lords, it is quite right that the noble Lord, Lord Ennals, should also pay tribute to Mr. Akashi who has a nearly impossible task. He has been at the forefront of seeking the release of those troops detained by the Bosnian Serb army. As I said, his intervention on behalf of Dutch and British troops has already been successful. We hope that he will very soon be successful in securing the release of others.
Of course we unequivocally condemn the holding of all military personnel or civilians by the Bosnian Serbs. That goes back to the situation nearly two years ago when we went in to try to help. There is absolutely no
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question that the Bangladeshi battalion has carried out a very valuable job. Indeed, those troops have worked under very difficult conditions in an area of former Yugoslavia, which is very difficult to police because of its sheer terrain. But in addition, I should stress that all that is the art of the possible. That is why the work that is carried out on the ground, whether by the commander of UNPROFOR, General Sir Michael Rose, or by Mr. Akashi, needs to be viewed with great care.
There are far too many armchair critics in this country who think that they know best. As for some of the attacks in the media and by certain other people on General Sir Michael Rose, I have been appalled by what I have read. It is so far from the truth that it defies reason. Perhaps I may join the noble Lord, Lord Ennals, and repeat something that I said in a debate in the House on Monday. Where people are determined to go on fighting, it is very difficult to stop them until there is a break in that determination. What we hope we are seeing in the Bosnian Serb Assembly is a willingness to bring the fighting to an end and let the negotiation and the peace process really begin again.
Lord Monson: My Lords, in her reply to the noble Earl, Lord Lauderdale, the Minister expressed the belief that Russia was being helpful. However, does the noble Baroness agree that the Russian veto of a recent resolution condemning Bosnian-Serb aggression is an ominous sign? Does it not appear to indicate that Russia is now taking a blatantly partisan approach to the conflict and that it is effectively condoning Bosnian-Serb aggression?
Baroness Chalker of Wallasey: My Lords, it is very easy to believe that the use of the veto by the Russians indicates such a mood. One fact that is quite clear is that the Russians are asking for much earlier consultation about events and about planning. We have taken that very much on board. I told my noble friend that, while we believe the Russians were being helpful in some ways, I could not go into the detail of how they were acting.
Baroness Strange: My Lords, can my noble friend the Minister tell us whether supplies have been getting through to the troops in Sarajevo? Perhaps I may also reiterate what has been said by noble Lords on all sides of the House; namely, how very proud and grateful we are of our British forces in the United Nations. While we are going about our normal business at this time of the year, buying turkeys and tangerines, we are thinking a great deal about those who are not able to do so.
Baroness Chalker of Wallasey: My Lords, supplies do get through, but we had to suspend the airlift into Sarajevo on 21st November because neither party would guarantee the security of the aircraft. That remains the case today. I hope that we shall be able to secure guarantees from the parties; indeed, UNPROFOR and UNHCR are seeking to do so at this very moment. The United Kingdom provides some 20 per cent. of the airlift capacity into Sarajevo. UK aircraft run by my department and the Royal Air Force remain committed to the operation. We are at least in a situation at present where there are some supplies available. While the

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critical state of supplies varies from area to area, we believe that we shall get further resupply for the population across the country. The most urgent area is probably Sebrenica. However, our troops are not in danger at the moment.
Lord Hylton: My Lords, will the Government find a suitable opportunity to remind the Russians that the Croatians and the Bosnian Moslems are just as much Slays as their Serb cousins and that a substantial proportion even of the Bosnian Serbs are opposed to Mr. Karadzic?
Baroness Chalker of Wallasey: My Lords, I can assure the noble Lord, Lord Hylton, that that point has already been made. My right honourable friend the Foreign Secretary was able to spend quite a long while talking directly to Mr. Kozyrev and not one of those points was left out of the discussion.
Lord Whaddon: My Lords, the noble Baroness has rightly paid tribute to the constructive part played recently by President Milosevic. Perhaps I may also pay tribute to the balanced and delicate way that the Minister has acted in this most tricky situation. However, is it not most important that Britain should be seen to keep the spirit as well as the letter of any agreements that we make? Further, is the Minister aware that when the easing of flights to Belgrade was agreed in September by the United Nations, flights between Belgrade and Frankfurt, Zurich, Amsterdam and Paris were started within 10 days but that the flights from Belgrade to London have still not been restored, or certainly had not been a week ago? This is due to difficulties arising from a whole series of technical objections, such as the fact that the Serbs were not allowed to pay for their landing fees at London Airport. Can the Minister help to overcome those technical objections so that we are seen to be keeping the spirit as well as the letter of agreements?
Baroness Chalker of Wallasey: My Lords, I thank the noble Lord, Lord Whaddon, for his kind comments. I agree with him that the spirit as well as the letter of our intention should be kept. I will look into what he said about landing fees at Heathrow, but I am not aware 'of the problem as he outlined it to your Lordships. I shall write to him.
Lord Craig of Radley: My Lords, the noble Baroness said that we would use every means at our disposal in dealing with problems such as have happened recently in Bihac. Could she tell us whether General Rose is content with the level of forces which he has at his disposal and, if he is not, whether Her Majesty's Government would consider sending additional forces?
Baroness Chalker of Wallasey: My Lords, I have not for some time personally spoken to General Sir Michael Rose, but I believe that he considers that they can do a good job with the forces they have. If he had need for further forces I am sure that he would have asked my right honourable friend the Secretary of State
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for Defence who has been in the area recently. I am sure that he would ask my right honourable friend Mr. Hogg and myself when we are there in the weeks to come.
Lord McNair: My Lords, may I ask the Minister for a reassurance that the more helpful attitude by Mr. Milosevic towards the plan put forward by the five nation Contact Group will not win him any concessions on the stance that the British Government are taking on the situation in Kosovo?
Baroness Chalker of Wallasey: My Lords, I can give the noble Lord that assurance.
Lord Mackie of Benshie: My Lords, may I ask one more question? Does the noble Baroness consider that Mr. Milosevic's helpful attitude is due to his good nature or the effects of the blockade on his country?
Baroness Chalker of Wallasey: My Lords, I am quite sure that any sane man when deprived of resources starts to take notice and that is exactly why Britain was among the first to believe that we should have sanctions against Serbia, but we wait to see whether that is fully successful. However, I have said that medical supplies are a different matter from that of supplies which are caught by the sanctions.

Manufacturing Industry
4.22 p.m.
Debate resumed.
Lord Skelmersdale: My Lords, it seems to me that the time has come to move on. I am most grateful to my noble friend Lord Trefgarne for giving me the opportunity to speak on a subject that I have slept with for over 20 years now. Being a director of a micro family business is something that constantly engages your thoughts, even if, like myself, you no longer run it on a daily basis.
So far we have heard of the best in the small and medium-sized business sector, but I would like just briefly to paint a rather different picture. My picture is of a small, cluttered, sometimes smoke-filled room with a desk, two telephones ringing loudly, a filing cabinet, an in-tray, a pending tray, a boiling kettle, two shelves and a man with tears rolling down his face. He sits at the desk answering one telephone with one hand, picking up stamps with the other and sticking them on envelopes in front of the overflowing in-tray. With one foot he is trying to turn off the kettle, with the other he is trying, unsuccessfully, to shut an overstuffed filing cabinet. The pending tray overflows on to the floor. On the wall behind him are the two shelves. On the bottom one are four box files. The first is marked "Tax", the second "VAT", the third "Invoices" and the fourth "Receipts". On the shelf above are four bowler hats marked "Development Manager", "Marketing Manager", "Finance Director" and "Personnel Manager", and last but not least a white helmet marked "Safety".
This cartoon, which still hangs in the office at home, shows the very model of an embryonic small businessman, and something that small businessmen try very hard to get out of at the earliest opportunity.

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Governments and civil servants, it seems, often forget what it is like out there in what we sometimes refer to as the real world. That causes them to pile on the regulations, change the rate of VAT overnight; in a word, doing things without warning. They give the impression that businessmen and women are well-educated and well-organised from the time they get up in the morning till they sink, overtired, under the duvet at night. Life is not like that. From the smile on his face I anticipate that the noble Lord, Lord Weatherill, for one, will acknowledge and understand exactly what I am talking about.
Over the years I have identified four types of small business, which the noble Lord, Lord Haskel, touched on, one of which has, I believe, all but disappeared. When I was doing my vocational education in horticulture it was still quite common for there to be businesses that were designed to make a tax loss in order to mop up excess profits made in another trade or profession. Then there is the hobby business designed to break even financially but most definitely not to pay tax. There is the business which sets out from the beginning to make money, to pay fair taxes and to grow into what my noble friend's Motion calls a "medium sized" business, and eventually a corporation. The Body Shop for example would fit this description. I believe that the conglomerate chaired by my noble friend Lord Hanson also fits that description, although obviously over a very much longer timescale. Then—this is something we sometimes forget—there are the charities in which many of your Lordships are involved in one way or another. Arguably they could be said to be slightly different but there is more than one that I could think of running an obvious business which covenants its profits back to the parent charity.
Yet we are sometimes given the impression that the DTI believes that it is invariable that from little acorns mighty oaks do grow. In that well-worn phrase from the musical, "It ain't necessarily so". Horticulturally speaking, it is comparatively few acorns that grow at all. They must be given the right conditions either in the nursery, where their chances are better—or they should be if it is a decently run nursery—or in the wild. As oily seeds they must not dry out before putting down their first root.
In fact that is not a bad analogy. Experience has taught us that of those small businesses that fail, a high proportion fail in the first year. Another dangerous time is that of expansion when the embryonic businessman delegates one or more of the hats I spoke about earlier, or when, later, he tries to execute a major expansion plan. It is small wonder that there are not many Hansons or Roddicks about.
I think that the department would do well to ponder upon this, and my right honourable friend the Chancellor too. I believe that over the past 10 years or so they have become better at this and realise that they can make life easier for business. What small and medium-sized business needs is well known. The noble Lord, Lord Haskel, summed it up in two words—economic stability. They need low real interest rates so that they can afford to reinvest; a planned pay-back time
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that the banks do not suddenly change; a steady rate of inflation, preferably a low one, so that their customers are not put off by sudden swings in prices; the minimum of regulation; easily accessible information; low taxes and achievable training as my noble friend Lord Trefgarne pointed out. They also need a constant rate of VAT. Twice now I have had a catalogue just despatched to my customers when the VAT rate changed. The hidden cost of chasing up small amounts of extra money is high and one must make a difficult assessment as to whether the business can or should bear the rise in VAT from its profits. I only hope that my right honourable friend the Chancellor will not try to recoup his missing billion pounds by a small but general hike in value added tax. I am prepared to bet that if that is the case, the rate of first year failures will increase.
That said, the Government have much to be proud of: the introduction of the single market has done wonders for exports at little cost to business; the introduction of one-stop shops which save time and effort for a busy person; the reduction of corporation tax from 42 to 25 per cent., so pegging it to the basic rate of income tax; keeping VAT stable; managing to reduce interest rates to affordable levels; and, most important of all, a low rate of inflation. I believe that when the figures come out for new businesses in 1994–95 we shall see an upturn in start-ups and a drop in failures. We all have high hopes for deregulation. I look forward to the first fruits of this policy after Christmas.
The corollary of deregulation is, of course, more regulation. Small businesses are great employers of part-time labour, sometimes throughout the year and sometimes on a seasonal basis. Many of those employees are women who are prepared to work for a lower income than men to top up the general pool of the family income. Some are semi-retired men who have taken early retirement—those whom the noble Lord, Lord Desai, might call potentially economically semi-active. Those workers represent a major part of the workforce of this country. The party opposite sneers that they are not real jobs. But they are very real for the people holding them and for the businesses who employ those workers. However, the Opposition seem to wish to damage that sector of the employment market by introducing not only a minimum wage but the social chapter, giving those workers the same rights as full-time employees. I can think of no policy more damaging to small businesses and their employees.
That brings me to charities. There are 170,000 charities registered with the charity commissioners, employing 482,000 people. That represents 2 per cent. of the total workforce, 8 per cent. more than the motor industry employs today and as many as the combined water and energy industries employ. Of the top 500 fund-raising charities, 200 are in the medical field supporting the salaries of well over 500 people in British universities. The House will be as amazed as I was to learn that the 21 cancer charities provide £120 million for research. That amounts to 70 per cent. of the total spent on cancer research in this country. If that is not a business activity, I do not know what is.

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Over and above that, we increasingly expect charities to take on work in social services and in environmental protection, and government and quangos pay them to do so. More and more of that work is by contract. It makes for enormous pressures on the charities' income because the overheads cannot normally be allocated. According to the Charities Aid Foundation, the top 200 fund-raising charities raised their income by 4 per cent. in 1992 and increased their expenditure by the same amount. The second 200 charities show a different picture: a drop of 9 per cent. in income matched by an 8 per cent. drop in expenditure. From that we can see that the smaller charities are being squeezed. Why, my Lords? I believe that, as with any other small business, charities suffer from the problems of employing part-time female labour. Increases in maternity leave and the reduction in statutory maternity pay have hit them hard. So, too, would compulsory occupational pension schemes if they were introduced.
However, I wish to congratulate the Government on two fronts; on making covenant forms both shorter and easier, and on the introduction of gift aid. Alas, the figures show that only 10 per cent. of donations are made tax effectively. However, it is as much for the charities themselves as for the Government to increase that figure. What is in the Government's hands is the ability to do something about the £350 million a year which charities pay in VAT. The amount is worked out by a very complicated formula. Essentially, it means that the charities can only claim back the input tax in the ratio provided by the proportion of VAT attracting income to their total income. In other words, if 20 per cent. of their income arises from contracts or subscriptions, or a mixture of both, and the remainder from donations, charities can claim back only 20 per cent. of the tax they have paid out. The charities tax reform group has been told by Customs and Excise that there is no technical reason why that cannot be changed. It seems that the political will is lacking.
My conclusion is that with that one exception the problems of charities are identical with the problems besetting small businesses. The Government should recognise the great value that small businesses bring to this country, whether or not in the charitable sector. I believe that the Government recognise that, but they could do more in the ways already proposed and, I am sure, still to be suggested in the debate. Above all, they should always bend over backwards not to kill the goose that just sometimes lays the golden egg.
4.35 p.m.
Lord Desai: My Lords, we are grateful to the noble Lord, Lord Trefgarne, for giving us the opportunity for this debate. Like the noble Lord, Lord Weatherill, I made my maiden speech on this very question about three years ago. I shall confine my attention to the first part of the Motion—the importance of increased output from the United Kingdom manufacturing industry.
I do not know much about actual business. I am an economist and economists have a fond relationship with the real world: they know about it but do not want to be anywhere near it if they can help it. I wish my life to be comfortable. After what the noble Lord, Lord
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Skelmersdale, said, I am glad that I am not in the real world; I am in academia. It is hard work in the real world.
I wish to talk about the general state of manufacturing industry. My points are not made in a partisan spirit. Manufacturing industry is an important part of the economy. But increasingly there is a contrast between the ability of the manufacturing sector to generate wealth and its ability to generate jobs. Increasingly, because productivity increases have had to be rather fast in this competitive world, manufacturing industry can generate wealth but cannot always generate jobs at the rate it once did.
Virtually everything that I say arises from Economic Trends. It is an excellent publication; I recommend everyone to study it. Since 1970 production industries—manufacturing and other aspects such as North Sea oil—have grown but more slowly than any other sector of the British economy. Since 1970 there has been growth of approximately a third, from 73 to 98 in index number form. The recession has meant that we have not caught up with the previous peak in output in 1989. But there has been growth in manufacturing industry.
By the same token we have to be aware that as employers of people manufacturing industry has shrunk quite remarkably. In 1970 about 8 million people were employed. About 4 million people are now employed. That means that while output has grown by about a third, employment has declined by about a half. Of course, the balance lies in increased productivity.
When considering productivity, one achievement has been noticeable—a good rate of productivity growth in manufacturing industry. I believe that increasingly that will be so. Another good feature is that since 1980 productivity growth has been very rapid. We had slow productivity growth in the 1970s and good, rapid productivity growth in the 1980s. That means that productivity growth has to be kept up. We cannot look benignly to the manufacturing sector to provide us with jobs. We have to be sure that manufacturing industry stays competitive and generates wealth, especially manufacturing exports which are absolutely vital for the national economy.
I have to point out a disturbing trend. The rate of investment in our manufacturing industry is no longer as high as it was. With proper allowance for inflation, in real terms investment in our manufacturing industry is lower today than it was in 1970. I have to admit that it reached a peak in 1989 when about £15 billion was invested. Today the figure is only about £11 billion, compared with £13 billion in 1970.
We should approach the problem of manufacturing investment much more seriously. We may differ across party lines as to methods but encouraging manufacturing investment is urgent and central for our economic future. Whether we do that by inviting foreign investment or by encouraging domestic investment, or whether it takes place in small or large firms, are matters of choice. Indeed, I believe that one should do everything across the board.
Encouraging manufacturing investment in every way we can is central to the problem of British manufacturing industry. Our outward growth is slowed

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to the extent that our manufacturing investment is not rapid. Of course, by the same token, we get more out of our investment than other countries. We are very efficient at getting more out of the pound than others. That has to be said. However, it is true that we are not investing enough. It is a matter of diverting resources from other uses—consumption, government spending or whatever it is—to manufacturing investment. Perhaps on another occasion we should debate the best ways of encouraging manufacturing investment in the British economy.
What I think is happening, not just in the UK but throughout the world in the modern context of the global economy, is that countries who wish to survive as manufacturing nations must continue innovating at a rapid rate. They must put a great deal of money into research and development. They must move along the product front because the products we used to make can be made much more cheaply and better elsewhere in the world. We shall not be able to resist the tide of free trade. It is a delusion to think that we could. I would not even advocate it.
We live in a climate of growing free trade; we face global competition. Unless we invest a lot of money in manufacturing industry, unless we research and develop new products rapidly, we shall fall behind. It is a matter of vital national policy that we concentrate on quality output in manufacturing industry. Through debates like this we can draw the attention of our policy makers to the matter. Therefore, I am doubly grateful to the noble Lord, Lord Trefgarne, for having introduced this subject.
4.43 p.m.
The Viscount of Oxfuird: My Lords, there are few in your Lordships' House who are so eminently qualified as my noble friend Lord Trefgarne to speak on this subject, an area in which he made such a significant contribution in his days as a Minister of State at the Department of Trade and Industry. He is still so much involved with manufacturing industry by virtue of his presidency of the Mechanical and Metal Trades Confederation, METCOM, which numbers many small and medium-sized enterprises within its membership.
It has been obvious from the contributions from all parts of the House this afternoon that there are few of us who have not grieved at the decline of some sectors of the United Kingdom's manufacturing infrastructure over the past decades or alternatively have been heartened by the reversal of that trend in recent years. That reversal has been seriously spearheaded by our small and medium-sized enterprises—the SMEs.
There is growing evidence—and it has been highlighted by a number of noble Lords already—that we have turned the corner. In the three months to September 1994, manufacturing productivity was up 6 per cent. on the previous year, a level of growth not seen since the mid-1980s, but against a backdrop of the lowest inflation for generations. Manufactured exports are at record levels, having grown by 80 per cent. since 1981 and by over 10 per cent. in the past year.
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However, encouraging as these statistics are, they are frankly not good enough. In the British manufacturing company with which I was so closely involved for many years, the introduction of the principles of total quality management became one of the prime philosophies. That experience taught me that constant vigilance was needed for continuous improvement. No enterprise or institution, of whatever size, should forget this constant requirement for continuous improvement. Those who do will in the end decline and perish.
So what factors do we need to study and address in looking for greater improvements in output within our manufacturing enterprises? It was, as some noble Lords may recall, Rudyard Kipling who referred to the,
"Dear hearts across the seas".
Perhaps I could, first of all, recall the thinking of some of the industrial leaders from beyond our shores. I think, first, of some points I made in a debate back in 1988 proposed by my noble friend Lord Joseph, recorded in the Official Report of 4th May, vol. 496, col. 620. I spoke of the research of the learned American, Professor Birch of the Massachusetts Institute of Technology and of his emphasis on the importance of training our manufacturing workforce in the new technologies. He also emphasised how important the small business was in reducing unemployment. This business is by nature dynamic; it has young entrepreneurs and a very high percentage effect on the unemployment figures.
However, it is equally important to consider the training of people. How heartening it is that we are beginning to see the fruits of some of the investments that the Government have made in this field since that time.
I confess that I have also been somewhat influenced by the works of the American writer, Tom Peters, and I was reading one of his books this weekend, Thriving on Chaos. In it, he contrasts the American penchant for what he describes as "giantism" with the Japanese passion for smallness. He argues that part of the Japanese economic miracle since the Second World War can be explained by their exploitation of the "smaller is better" strategy. He quotes from the book: Smaller is better: Japan's Mastery of the Miniature by the Korean writer O-Young Lee who emphasises the "smaller is better" philosophy. He argues that this is a major factor in explaining the reasons for Japan's economic success since the Second World War.
He is thinking in part, of course, of the success that the miniaturisation of consumer electronic products has brought to the Japanese electronics industry, but he also highlights that the small business sector in Japan is more vital than that in the West and that even the largest Japanese corporations are less vertically integrated and count upon a network of smaller subcontractors for a significant part of their innovation. This helps to foster their commitment to continuous improvement.
This theme is taken up most positively in the recent White Paper to which some noble Lords have already referred, Competitiveness—Helping Business to Win.
The White Paper emphasises that to become more competitive companies need to change the climate within their organisations to stimulate innovation, to

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train their people, to invest in new technology, to take advantage of external skills and knowhow and to use, adapt and develop novel processes.
It is often in these very areas that our small and medium-sized enterprises tend to be more responsive and faster on their feet. That is why a significant and growing proportion of total employment, not just in the United Kingdom but in most of the developed economies of the world, is in small and medium-sized enterprises.
The White Paper on competitiveness highlights the need to improve the effectiveness of our financial institutions in supplying funds to SMEs. It seems that there is an over-reliance in the United Kingdom on the part of small firms on the use of overdraft facilities to provide the funding to sustain growth. In the United Kingdom, overdrafts account for 56 per cent. of small firms debt, compared with 14 per cent. in Germany. It seems that there is a need for both the banks and the SMEs to place greater emphasis on longer term finance.
It is encouraging that the Chancellor took heed of that need in last week's Budget in his plan to create venture capital trusts (VCTs). These are investment trusts which will be owned by individual shareholders and which will attract generous tax relief. They are designed to encourage investors to put their money into equity for small businesses. The trusts will be able to make investments up to £1 million in companies whose net assets cannot exceed £10 million. As an inducement, investors will be able to claim tax relief at 20 per cent. on the investment and to defer capital gains tax that is due on other asset sales if the proceeds are invested in such a trust. Profits and dividends from the trusts will be tax free.
There were also measures to shelter the small and medium-sized enterprises from some of the more onerous requirements of government regulation until they are strong enough to cope with them. The proposal to extend the number of businesses which can pay their PAYE and national insurance contributions quarterly rather than monthly will help an estimated 100,000 employers. The gradual rise in the VAT threshold to £46,000 will also help, as will the proposal to move to annual simplified VAT accounting for small businesses.
I spoke of a Korean observation earlier which asserted confidently with respect to Japanese economic success that "smaller is better". Let me be extremely careful to make it clear that I do not believe that smallness should be an end in itself. Smallness is at its best when it acts as a precursor for growth—a fact that was excellently illustrated by the Financial Times a couple of years ago when it changed the name of its regular "Small Businesses Column" to the "Growing Businesses Column".
A very real example of what I am trying to say is provided by the common agricultural policy of the European Community. The CAP insulates European farmers from market forces and encourages uneconomic farmers to stay in business. Most British farms would still fall within the DTI's definition of small and medium-sized enterprises; but the size of farms in the
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United Kingdom tends to be larger than elsewhere in the Community. They are hindered from exploiting their competitive advantage by the millstone of the CAP.
Smallness is not an advantage in itself if it encourages the Luddite forces of reactionism to resist change and shun improvement. The farming community in parts of our European Union should take note, and the Government should continue to press for further reforms of the CAP and seek further reductions in support prices.
Our British farms are successful medium-sized enterprises and might well be described in the phrase that was immortalised by William Cowper in the late 18th century in his Tirocinium,
"Tenants of life's middle state,
Securely plac'd between the small and great".
I conclude on a note of optimism. Our debate this afternoon has emphasised the need for improved manufacturing output and has given us all a number of valuable indicators of the direction that we should take. The outlook is improving. About 226,000 new businesses were started in the first half of 1994, an increase of 10 per cent. over the first half of 1993. The DTI's Business Link initiative is beginning to provide a most effective support network for our businesses, particularly our small and medium-sized enterprises. With hard work and a commitment to continuous improvement, I believe that we can succeed.
4.54 p.m.
The Earl of Kintore: My Lords, I also thank the noble Lord, Lord Trefgarne, for introducing this important debate. I should like to address a few points about small and medium-sized businesses which not only do not increase their output but actually cease trading, not because they are making the wrong product at the wrong price but because their internal financial procedures are poor or even non-existent.
I must immediately declare an interest as president of the International Association of Bookkeepers. The association, founded over 20 years ago, offers a professional qualification in manual bookkeeping. It also offers diploma courses in computerised bookkeeping, small business financial management and payroll administration. I am delighted to learn that my noble friend Lord Weatherill still has the office bike. I hope that the noble Lord also has good internal financial procedures, as many small and medium-sized companies do. But, sadly, far too many businesses are going into liquidation. Many will have gone under from lack of financial control. Very basic mistakes are made, such as failing to send out invoices; taking too long to chase up moneys that are owing; and taking too much cash out of the business too early.
I believe that some companies really do still put all their paperwork into a box and present the box to their accountants at the end of the year. Apart from considerable expense, it means—unless the accountants work considerably more sharply than many whom I know—that the financial state of the business will not be known for 10 to 12 months after the year end, and vital information that the chairman's Rolls costs more to run per month than the company is making may not be available until it is too late. The Inland Revenue and

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Customs and Excise—and, I imagine, the banks—feel rather unloved over this period as they do not receive the returns that are required. I know that the Inland Revenue starts with blue-coloured demands, and then, round about Easter, the demands change to a rather fetching shade of red. I imagine that, red being the final colour, once it is ignored the game is up. It probably comes as no surprise that, in desperation, both the Inland Revenue and Customs and Excise institute insolvency proceedings.
I was pleased to read in the Budget snapshot, HMT1, published on 29th November, that there are to be consultations on the reform of the insolvency law to help firms in difficulty and to help avoid wasteful liquidations. But surely problems must be identified at a much earlier stage. I therefore welcome the Government's initiative which appears on page 2 of the Budget Day press release, HMT5, under the heading, "To Widen Small Firms' Access to External Finance". I quote:
"Representatives of small business and others will shortly be consulted on the development of a financial management certificate. The aim would be to devise a certificate that provided a clear signal of a firm's financial competence, thus providing an additional incentive for firms to improve and implement their financial management skills".
I appreciate that the Government are to consult, but I should like to ask the noble Earl the Minister two questions, of which I have tried to give him prior notification. The first is: can he give any more details about the financial management certificate than appeared in the press release? Secondly: can he say whom the "others" who are to be consulted are likely to be?
5 p.m.
Viscount Caldecote: My Lords, in the welter of discussion on the economy—inflation, interest rates, PSBR, competitiveness, productivity and a stable currency to encourage growth in the GDP—I believe that, important though they are, we are in danger of failing to see the wood for the trees. We need to remember that the ultimate objective of all economic policy is to give everyone the opportunity to lead a full and satisfying life. Unemployment is a major obstacle to achieving that. So I very much welcome the subject of today's debate, so ably introduced by my noble friend Lord Trefgarne, with its emphasis on increased output and on SMEs (small and medium-sized enterprises), both of which create jobs.
Everywhere, increased output is largely dependent on investment. Recent OECD and IMF data show the connection clearly in the figures averaged over the past 30 years—which may account for the slight difference from the figures given by the noble Lord, Lord Haskel. The United Kingdom's GDP growth averaged 2¼ per cent. per annum. With fixed investment at 18 per cent. of GDP, we were at the bottom of the league, compared with Japanese growth of 6 per cent. and investment of over 30 per cent. of GDP. Other competitors were between those two limits. Nevertheless, the UK has
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made huge improvements in productivity and competitiveness, particularly over the past 15 years. But others have improved, too.
The figures quoted earlier are for fixed investment. Of equal importance—as the noble Lord, Lord Desai, so clearly said—is investment in innovation in competitive products which will sell all over the world. For price is not the only factor which affects sales. Quality and value for money are just as relevant. Switzerland is a good example. The products that they make are usually very expensive but of the highest quality, and they have a very good record in the export field.
Those considerations apply to every company, from the biggest to the smallest. Among them are many world-class companies which make a full contribution to output growth. But there are too few of them. There are many reasons for inadequate investment—for example, short termism; bias of taxation in favour of earnings distribution rather than investment, which means that more of the earnings are used in consumption rather than being reinvested in the company for innovation and the like; and a lack of confidence in demand in the future and in a stable value for sterling.
We have often discussed this topic in this Chamber. I shall not go into the issues today because there is not the time. They have been well covered in the past. I should like to emphasise the enormous progress that has been made under this Government in creating the right climate for investment. But the fact is that, overall, industry has not taken full advantage of it. So there is much more to do.
SMEs can make a major contribution. Many of them—probably the great majority—are owner-managed. That gives them greater flexibility to react to market conditions and invest for the future. There is no short-termism there. Just as important is that investment in SMEs is almost always investment for expansion of both output and employment, whereas in larger companies the objective of investment is frequently to produce the same output with fewer people employed.
What then are the main obstacles to even greater growth in the sector? They are, I believe, largely financial. Adequate cash flow is vital to the success of SMEs or even their existence. In that connection I hope that the Government, the CBI and others will continue to press for measures to deal with the great problem of late payment of bills to small companies. It is a very important issue which must be dealt with.
Also, funding for smaller companies is a major problem. I regret that the Budget did little to help SMEs by, for instance, granting 100 per cent. capital allowances for the purchase of plant and equipment up to a limit, say, of £250,000, as was widely recommended. Similar allowances to encourage investment in innovation should also receive high priority. But much more can be done by the financial institutions and industry itself, without waiting for government action. There is genuine difficulty in raising relatively small amounts of risk capital. Owing to the setting up and administration charges, no venture capitalist will consider investing less than £250,000 and

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more often less than £1 million. There is a major problem for fledgling SMEs and it is important to find a solution.
The noble Lord, Lord Weatherill, mentioned the Prince's Youth Business Trust, of which I once had the privilege of being a trustee. That is an example of how the problem is overcome at the lowest level of investment—probably under £5,000, unless it has changed very much since my day. The administration costs, advice given and so on are either undertaken by voluntary workers or paid for by money subscribed on a charitable basis. Perhaps for larger companies—those that are not dealt with through the Prince's Youth Business Trust—there could be a fund contributed to by banks and other big financial institutions which would facilitate smaller investments to SMEs by contributing to the administrative costs. Thereby, they would benefit from the resulting growth in the longer term future.
But, as has been said, many SMEs depend heavily on overdraft and other forms of bank lending. That makes them very vulnerable to a recession, when cash flow comes under pressure. Banks should be more flexible and not too greedy in providing fixed term loans. That gives great confidence to a smaller company that the overdraft facility or other type of loan will not be withdrawn at a difficult moment. Above all, it should be made absolutely clear by bank managers at the start of negotiations when dealing with SMEs whether they are acting as principals with power to make a binding agreement or simply as messengers making recommendations to some higher authority.
A few years ago I was chairman of a very small company. At a difficult time, we thought that we had made a satisfactory and firm agreement with the bank manager with whom we had dealt for several years, only to find some three weeks later that a higher authority had vetoed the agreement. That was certainly a factor in the ultimate collapse of the company.
Lastly, I should like to see more SMEs prepared to fund their growth by selling, say, 20 per cent. of their equity, as an alternative to more bank loan finance of whatever kind. It is better to own 80 per cent. of a successful company than 100 per cent. of a failure. I hope that investors, especially those taking advantage of investment through the new venture capital trusts, which my noble friend Lord Oxfuird mentioned, will make a real contribution to solving the problem and will not be too greedy in the terms of the agreements that they make with SMEs.
I emphasise again that much has already been achieved in the past 15 years in encouraging enterprise and investment. But we must always remember that our competitors too are improving all the time. We have to get and remain ahead of them. Greater investment is essential to achieve that.
5.10 p.m.
Lord Cochrane of Cults: My Lords, I start by thanking my noble friend Lord Trefgarne for introducing this subject today. It is right, as said by others, that he plays an important part in the engineering training organisations. I should mention also that he is a non-executive director of an interesting SME which
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has perhaps become more large than small, as I shall relate in a moment. I refer to Siebe, a company with a history extending back 170 years. It was founded by an Austrian artillery man by the name of Augustus Siebe who came to this country in 1816. In due time he invented, among other things, a better method for making screws—a vital engineering component—but is now predominantly remembered for the invention of the first serviceable and durable method of working underwater, the traditional hard-hat diver as it later became known.
Siebe is an interesting company. For a long time, it remained quite small, describing its activities as those of submarine engineers. It remained with the descendants of Siebe for a long time and came to the market in the 1950s. I should perhaps declare an interest. I have been a shareholder fairly continuously ever since. The vicissitudes of school fees and so forth perhaps led me to reduce my shareholding; otherwise I might not feel quite so poor as I sometimes do.
Siebe is now an immense company. It has a huge turnover. The profits published today are a great improvement. It is not particularly highly geared. That has all taken place due to a change of ethos in the company and the arrival of determined and skilful managers on the board of directors. At one stage it looked as though they had slightly overdone it but in fact they got it exactly right. The results we see today illustrate how growth is possible if it is well aimed and well controlled. The traditional manufacturer is often described as a maker of "widgets". I gather that that word is now obsolete because widgets are those things which cause beer to shoot out of tins. While useful that is not quite what was originally intended.
As the last Back Bench speaker I do not want to bore your Lordships with a multitude of figures or anything else. But I shall make one or two points and reiterate what was said earlier, particularly by my noble friend Lord Caldecote, on the role of banks. In this country small businesses rely immensely—as I know personally—on bank finance. Banks get cold feet at intervals. I mentioned that the other day in another context. A bank manager was overplaying his hand; he received a rude answer from me; eventually he lost the account and lost a good many other people's accounts too. That merely shows that not all bank managers are wise. We know that, but there was a chap determined that a certain class of business within his branch was unacceptable.
The role of the banks must be continually supportive. They must support us from the word go. In order to do that they need information. In order to give them the information, as my noble friend Lord Caldecote said, we need a decent financial system. That is of prime importance. Again, it tells us whether or not we are actually making money. There was a famous case many years ago of Crittall Engineering which could not get stuff out of the factory quick enough. Yet, mysteriously, it never seemed to have more money in the bank. It was during the period of Nye Bevan's housing boom. The company made steel windows. Unfortunately, it was receiving five shillings a window less than the cost of making them; so gradually it went down and down.

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I saw something similar in my father's time with his mineral supply business. When my brother and I picked it up after his death we discovered that we were popping a 10 shilling note into every lorry-load of stuff we sold. Nobody realised that. Therefore, if one can persuade the banks to be more supportive on a continuing basis they will lose less money, feel less endangered and will not ultimately find themselves in the situation which was put to me by an experienced bank manager who said, "It is all very well having security of this factory and that factory, but they are worthless when the whole industrial estate is empty."
Another role which could be played by the banks in relation to companies is to put in a part-time, non-executive director who acts as liaison. He can say, "I do not think that that is a good idea; perhaps we should go this way rather than that way". That happened to my grandfather. The Royal Bank put him as signatory and director into a privately-owned coal company many years ago. Following the death of the head of that family, the coal company was discovered to be immensely in debt. I believe the personal guarantee of the executors was well over £7 million at the turn of the century. Through the energy of the next generation and possibly the wise guidance given by my grandfather and the bank, they all lived happily ever after, although they did have to mine under the castle gardens. I am sure that the noble Lord, Lord Ezra, appreciates the risks of mining, especially when one already has a huge bank overdraft.
I shall not continue except to say that in relation to part-time expertise in finance—picking up a point made by the noble Earl, Lord Kintore—there are plenty of retired executives with good financial experience who could be obtained to attend one day a week to keep control of a company's finances. That is particularly important when it is at the dangerous stage when, the idea having taken off, capacity needs to be expanded. The question is: more money is needed but how will it be obtained?
In a recent speech the Chancellor of the Exchequer eased the climate. But if those running small businesses think more carefully about the financial implications of what they are doing, they are more likely to prosper in the way we all want.
5.17 p.m.
Lord Ezra: My Lords, although there have been a number of debates in this House on manufacturing in recent years, the noble Lord, Lord Trefgarne, was right to introduce this debate today. Manufacturing remains a vital ingredient in the future economic development of the country. That is shown by the large number of important reports recently published on the subject. They include the Government's White Paper on competitiveness, the European Commission's White Paper on growth, competitiveness and employment, the House of Commons Trade and Industry Committee report on the competitiveness of the UK manufacturing industry, the CBI series of reports issued by the National Manufacturing Council and the report by UNICEE (the
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European equivalent of the CBI) on making Europe more competitive. All those centred on the vital role of manufacturing.
I have participated in most of the debates on manufacturing in this House over the past 10 years. I believe that the most significant development has been the changing attitude of the Government. In the 1980s the Government's attitude was that manufacturing represented only one element in the economy and it did not really matter how wealth was created so long as that was achieved. As we moved into the 1990s, however, the Government have increasingly recognised the importance of manufacturing, and they are right to do so. Fifty per cent. of consumer spending and 70 per cent. of exports of goods and related services are accounted for by manufacturing. In spite of the diminution in the industrial base, to which the noble Lord, Lord Desai, referred, there are still 4 million people employed in manufacturing with at least as many more supplying supporting services. There is therefore little doubt that manufacturing remains a crucial element in the economy.
The Government repeatedly draw our attention, and I am sure will do so again today, to the various positive signs in the economy, such as improved growth, better exports and reduced inflation. It is perfectly true that those developments have taken place. However, the impression created by the repetition of these positive developments is one of complacency. That is regrettable.
While the present indicators may be positive, the underlying trends are not. As the CBI and others have shown, we are still lagging some 20 per cent. to 40 per cent. in average levels of productivity below our principal competitors, even though there has been a narrowing of the gap in recent times. Our investment in manufacturing and related activities has been sluggish to say the least and leads to capacity restraints even at an early stage of economic recovery, such as we are beginning to witness at the present time. We have noticeably lower levels of skills than our main competitors. The noble Lord, Lord Trefgarne, and others referred to that. Finally, our inadequate capacity shows up in terms of a major trade deficit in manufactured goods, which is still running at the level of £10 billion a year, in spite of recent improvements in export performance. It is to these long-term problems, particularly the role of the smaller firms in overcoming them, that we should be addressing ourselves.
If we were asked to encapsulate in a very few words the major weakness which has developed in the British economy for several years past, I believe the answer must be lack of adequate investment, both of a physical nature and in people. Let us look for a moment at physical investment in the public sector, which is very necessary to create the conditions under which private enterprise can thrive. In spite of repeated pleas that the last thing that should be cut is investment in capital projects which are intended to provide an improved infrastructure, this seems to be the first thing the Government turn to when they wish to reduce the public sector borrowing requirement. I am afraid that we saw evidence of that in the recent Budget, when expenditure

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on transport infrastructure was cut from £10.8 billion to £8.8 billion. The main argument for doing that, according to the Chancellor, was that the private finance initiative would close the gap. All I can say is that that is by no means certain. In the meantime, industry, and in particular manufacturing industry, will go on suffering from continued congestion and delays.
Much reference has been made to the inadequacy of investment in manufacturing industry, a point made by the noble Lord, Lord Desai, the noble Viscount, Lord Caldecote, and others. One of the reasons for this inadequacy has been the uncertainty about demand caused by macro-economic volatility. We have just lived through a classic example of this, with the major stimulus to consumption in the late 1980s leading to overheating and then a massive cutback. It is no wonder, with these memories of not so long ago, that manufacturers are cautious about moving ahead too fast with investment and are insisting on high rates of return, to which the CBI, the Governor of the Bank and others have recently drawn attention, in spite of the current low level of inflation. I believe that there is a major role for the Government at the present time to try to put this right.
Of course the Government must continue to take the necessary measures—we saw one of them today—to keep inflation under control. But in addition—this is what is lacking so far—they must take complementary measures to stimulate investment. In this connection, I share with the noble Viscount, Lord Caldecote, the regret that the Government did not follow the advice of the CBI, the Engineering Employers Federation and many others in introducing fiscal measures in the recent Budget to stimulate investment. One of the measures proposed, as the noble Viscount pointed out, was for a 100 per cent. capital allowance on the first £200,000 of investment in any one year. That would have been particularly helpful to small firms.
As many other speakers have emphasised in the debate today, small firms play a crucial role in the economy. Within manufacturing industry almost a third of employment and a quarter of output are accounted for by such firms. Access to finance and the cost of finance are crucial elements in their success. In addition to capital allowances directed at small firms, to which I have referred, there is a strong case for considering an investment bank on lines which have existed for many years in France and Germany, and which are now being looked at in many quarters, to offer debt finance to small firms on terms which are at the very least no worse than those obtainable by larger firms. To get bank money these days small firms have to pay 3, 4, 5 or 6 per cent. above bank rate, whereas a large firm, with all its connections and its ability to go anywhere in the world to raise its money, can usually achieve a rate of between I and 2 per cent. That is a big impediment to the small firm.
What is required is a long-term strategy for stimulating investment in essential public infrastructure and in manufacturing to offset the uncertainties which have been created by past policies. No one can be certain that those policies will be avoided in the future. The upturn through which we are now going is being
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seen in many other countries. As we noted in the recent debate on the economy, while we have done very well in containing inflation, some of our neighbours have done even better, such as France which has inflation at only 1.6 per cent.
There is a need, agreed on all sides, in addition to a stimulus to investment, for greater resources and efforts to be devoted to training. Differences in skill levels are a significant factor contributing to the UK's lower productivity compared with its main trading partners. The noble Lord, Lord Trefgarne, referred to that point in his opening speech and the noble Lord, Lord Weatherill, gave us good examples of voluntary efforts to try to deal with this matter. More than 60 per cent. of the UK's manufacturing labourforce have no vocational qualifications compared with 50 per cent. in France, 40 per cent. in Holland and 25 per cent. in Germany. The gap is most pronounced in people with intermediate skills. This is therefore the area where the greatest efforts need to be made.
The Government repeatedly state that the economy is set on a virtuous path of sustained growth with minimum inflation. Well, that has yet to be proved. The recovery in Britain has been mirrored elsewhere. The test will come when a cyclical downturn sets in. In such circumstances, will the British economy suffer less than it has in the past? If manufacturing is to thrive in spite of future possible cyclical recession, the Government will need to set a framework within which there is a consistent macro-economic policy, a point made by many noble Lords. A major impetus on a continuing basis must be given to investment in physical assets in the public and private sectors and to the development of the necessary skills to make the best use of those assets.
5.29 p.m.
Lord Peston: My Lords, the noble Lord, Lord Trefgarne, introduced this important debate in an interesting and effective way. Indeed, he was no help to me because most of what he said made perfectly good sense and I agreed with him, which does not make for much of a debate. Happily, he will soon know that there are at least one or two things with which I disagree with him and that, at least, might enable me to add a certain amount of life to what would otherwise be an extremely boring progression of, "Yes, he said that and I agree with him".
Certainly, all of us now agree about the importance of manufacturing and there is no argument there. There is no argument about the importance of small and medium-sized firms. In that regard one should not forget that every year large numbers of firms start up but, regretfully, within about three years most of them have gone. I was extremely interested in the intervention of the noble Lord, Lord Weatherill. He referred to an institutional arrangement which not only helped firms to start but to survive. I believe that he is aware, as all noble Lords are, that going into business as a small firm is highly risky. As I say, the odds are overwhelmingly that the firm will not be there for very long. It is very hard to start a surviving business. I believe that the noble Lord, Lord Skelmersdale, also pointed that out.

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In a way, of course, that is the basis of a free market economy. Essentially, entrepreneurship is risk taking. If it were a stone cold certainty it would not be entrepreneurship. Risks are taken and some firms survive and some do not. What is important is to create an environment in which it is easier to survive, particularly if one has products which consumers want. Again, we have to remind ourselves that the ultimate test is: are you producing goods and services which can meet the test of the market? Are you producing things which people want? I hope we all agree—I have said this several times—that firms do not exist for their own sake but in order ultimately to meet demand.
In that regard we have to ask ourselves this question: what is it that the small and medium-sized firm wants? Again, I believe that we all agree that what they want is a stable economic environment. They want an environment in which markets are growing, but what they do not particularly want is a highly fluctuating economy. Given that when this Government first came into power they intended to produce a serious change in economic policy-making, the puzzle is that the economy has fluctuated just as much under this Government as it ever did before. I say it is a puzzle because I thought that perhaps some of the things they were doing might lead to more stability, but they have not.
The manufacturing sector in particular has shown wild swings. Manufacturing output did fall between 1989 to 1992. It has only just risen, almost this very month, to its previous peak. That means that over the whole of the period there has been no growth, although over the longer period there has been growth. Manufacturing investment has not yet got back to its previous peak. We all agree about the importance of investment, as the noble Viscount, Lord Caldecote, emphasised. We have to ask: what is conducive to investment? My own judgment of what is most conducive to investment is that the market should be there when one has the new capital equipment. It is a commonplace to say that it takes time to get the new equipment in. What one does not want is to bring it in during the good times and to find that it is fully operational when the market has gone. That is why economic stability and growth are so tremendously important.
I said that I would introduce an occasional remark of a controversial kind. I certainly do not believe that what the Chancellor of the Exchequer did today in raising the bank rate is remotely of any help to small businesses. We may have a chance to discuss that, I am told, tomorrow, but since I may not be speaking tomorrow I must say that raising the bank rate today makes no economic sense to me whatever. I say to noble Lords opposite that it does not make any political sense to behave in such a panicky way either, but that is for them to reflect on.
I turn to the whole question of finance which other noble Lords have mentioned. I am with them all the way. What a small business wants is a helpful financial environment, but in particular it wants help on a rainy day. To offer a small business funds when times are good is not bad, but what it really wants is that when
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things are going wrong help will be available from the financial institutions, which we all agree are, for the most part, the banks. Help is wanted at that time. It does not seem to me that within recent years the banking system has been as helpful to business as it might have been and as I hope it will become again.
In fact, the noble Lord, Lord Trefgarne, said—and I nearly decided to agree with him on the point—that we should discuss this matter on another day. I am not sure when the next day is to be so I thought that I should at least mention the importance of financial arrangements and liquidity to small businesses. I agree with the point made by the noble Lord, Lord Ezra, about interest rates. There must be some loading of interest rates because small business is riskier than big business, but the difference does not seem to me to be justified by market forces. We should consider changed institutional arrangements that might help us.
I believe that there is no difference between us as regards education and vocational training. We simply have to do more, but what we do has to be more effective. One of the matters which concerns me is that there are far too many courses which are not very good. I am delighted that the noble Lord, Lord Trefgarne, has been appointed chairman of the engineering training board. I am sure he will ensure that from now on training is effective and produces the kind of people we want. I am not saying that if I were chairman I could not do the job better. That may well happen within the not too distant future.
There is another point as regards finance which we should bear in mind. The small businessman wants to engage in his business. He or she wants to make the goods or provide the services. Very often finance is not of great interest and the small businessman does not want to get involved. That is why such businesses need a sympathetic financial environment. That is why in the old days the bank manager was a help. He coaxed them along and would say, "Do it this way and it will work out, while you do what you know how to do". As I say, I believe that the problem today is that the sympathetic bank manager has gone. I cannot remember the last time I had an opportunity to see a bank manager. I see either a computer screen or a person who is clearly not a manager with any authority.
I found the contribution of the noble Earl, Lord Kintore, absolutely fascinating. I did not know that there was an international body concerned with bookkeepers, so I have learned something definite today. I have a very sophisticated computer package which I am supposed to use in order to manage my finances. But my experience is that you cannot beat the old box in which you put all the papers. It is the only system I have ever come across which does not fail. All the stuff is in the box and when the time comes you can work through it. I am as much a modernist in these areas as anybody and I am a great believer in optimal information flows, and all that. I keep a box and I always put every piece of paper in it. If any noble Lord wants to know how to run his finances my advice is, first, to get a box and, secondly, put every piece of paper in it and never throw anything away. That is the secret of first-class financial management.

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One topic which arose in the debate was our old friend deregulation. Of course one wants to create an environment in which small firms are not over-regulated so that they can get on with what they want to do. The noble Lord, Lord Trefgarne, made a point which is not exactly apposite. He referred to the plethora of directions from Brussels. As I pointed out several times during the passage of the deregulation Bill, we cannot do anything about Brussels. The Brussels directives cannot be overcome via the deregulation procedure. Noble Lords may not like it, but that, I am afraid, is the world in which we now live. The way to deal with directives from Brussels is to try to stop them at source before they get here, as we discussed at Question Time today in relation to buses. So we do not disagree on certain aspects of deregulation, but I do not think that we should be too optimistic.
Reference has been made to the social chapter and the minimum wage. The noble Lord, Lord Skelmersdale, mentioned the latter. I suppose that we just have to disagree on that. A minimum wage policy raises the average cost per employee, but it lowers the marginal cost of an employee. Putting on my old teaching hat, perhaps I may say that what matters is the marginal cost, not the average cost. If I had a blackboard I could demonstrate as part of elementary economic theory that a minimum wage may just as likely be employment-creating as employment-destroying. Therefore, one needs to look at the evidence. And looking at the evidence—without boasting I think that I can say that I have read all of it—the evidence does not tell us one way or the other. There are studies showing that a minimum wage can lose jobs and other studies, interestingly enough, showing that such a policy can create jobs. Therefore, I am a bit puzzled by the strength of some noble Lords' opposition to a minimum wage. To put it at its mildest, which is all that I want to do today, the point is arguable.
I am also puzzled by the attitude that is sometimes taken even now towards the social chapter. I refer particularly to the attitude of the Confederation of British Industry. I know that I shall offend one or two noble Lords by saying this, but I do not expect rationality and good sense from the Institute of Directors. However, although the CBI tends mostly to support the party of noble Lords opposite, it occasionally gives the impression that it is interested in serious argument. Therefore, I simply do not understand why the CBI fails to see that the social chapter is part of good industrial relations which, if appropriately applied, will raise productivity and lower costs.
I reiterate the main point, which we have argued before. There is no possibility of this country being able to compete with, say, the Pacific Rim countries on low wages. There is no way in which we can ever get our wages low enough to become competitive with such countries. Therefore, returning to a point on which we agree, we need high levels of skills, flexibility, worker co-operation and excellent management. I believe that the social chapter provides the economic environment for that. Old-fashioned distant management, which simply wants to give orders to a poorly paid, supine labour force, cannot deliver the hyper-efficiency that we
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need. Low wages are like devaluation; they are the easy way out for a management that cannot do its job properly. That is not what we want.
In conclusion, I am extremely pleased that at long last we are having a meeting of minds in this area. When I first became a Member of your Lordships' House, noble Lords opposite could see little or no role for government except perhaps to deal with inflation, and my noble friends and I seemed to be saying that every problem was to be solved by government intervention. As today's debate shows, we have now moved closer together. Noble Lords opposite now see a more positive role for government—they have said so today —and I hope that I have made it clear on this occasion and others that we recognise the limits of government intervention. That does not mean that we agree—I hasten to add, in case any of your Lordships end up in a state of shock—but it does mean that we can argue more constructively and rationally on economic and industrial subjects. I hope that we continue to do that.
5.43 p.m.
The Minister of State, Department of Trade and Industry (Earl Ferrers): My Lords, we have had a most interesting debate, initiated by my noble friend Lord Trefgarne. I should like to repeat what others have said and thank my noble friend for having given the House the opportunity of discussing the important subject of manufacturing industry.
A thriving manufacturing industry means a healthy small firms sector. There are nearly 3 million firms in the country, and 96 per cent. of them employ fewer than 20 people. Therefore, a thriving manufacturing industry implies, and is dependent on, a thriving small firms sector.
I agree with my noble friend Lord Skelmersdale that small firms are important. My noble friend also referred to charities which are important too. He raised some specific points about charities which I should like to look into before writing to him. I am unable to give him an answer immediately on what is obviously an important matter.
The Motion brings together the two strands that are at the very heart of the Government's industrial policy. I refer to the small firms sector and the need for a thriving manufacturing sector. I would want to leave your Lordships in no doubt as to the Government's commitment to a strong and vibrant manufacturing sector. Manufacturing has traditionally been the way by which a country can increase its growth, whether it is a third world country or a developed country. After decades of decline, the 1980s saw a significant improvement in the competitiveness of our own manufacturing industries.
Since 1981 manufacturing output in the UK has risen by 25 per cent.; productivity has risen by over 75 per cent.; and exports are up by well over 80 per cent. That is a good performance, particularly when we bear in mind that it has taken place over a period when we have witnessed a world recession of almost unparallelled severity. But this strong performance is continuing.

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Manufacturing output is 5 per cent. higher now than it was a year ago—and that is the strongest growth since 1989.
I know that in making these remarks I shall upset the noble Lord, Lord Ezra. He says that the fact that we always mention the good points shows that we are complacent. I do not think that that is the case. I make no apology for mentioning the good points. I believe that as a country all too often we denigrate ourselves and mention only the bad points. Yet when we do well and say so, the noble Lord, Lord Ezra, says, "You're complacent". The noble Lord's speech was, as always, fascinating. But it was also a bit depressing. The noble Lord said, "We'll have to wait and see what happens to firms when we have the next economic cyclical downturn". That reminded me of the lovely song that Stanley Holloway used to sing, "Oh my word, you do look ill". That almost encapsulates the otherwise fascinating speech of the noble Lord, Lord Ezra.
Manufacturing is important, but so also is the service sector. The two are vital. It is not a matter of trading one off against the other. We need both to be competitive. What is more, they need each other. The Government also recognise the true value of small firms. Many of your Lordships have referred to their importance. They are a vital source of new ideas and new products. They also provide services and, very importantly, new jobs. They stimulate competition and they help individuals to realise their personal ambitions. That is no bad thing. From among their ranks some of the great names of tomorrow will emerge.
Small businesses are built up by hard work, by dedication, and, very often, by personal sacrifice. I welcome this opportunity to applaud the success of those who are involved in small businesses and to assure your Lordships that the Government are determined to see that their well being continues.
Taken as a whole, the role of the small firms sector in creating jobs has been particularly impressive. It is worth reminding ourselves that in just two years, between 1989 and 1991, firms with fewer than 20 employees created an additional 350,000 jobs. When one looks at the number of extra jobs created and the number of small firms that have started up, it is interesting to note that six out of 10 were initiated by people with no prior business experience. I do not think that that is something to be ashamed of; I think we can take great pride in the fact that there is an entrepreneurial spirit in our people and a determination to try to do their bit for their families and their country.
Taken as a whole, the role of the small firms sector in creating jobs has been particularly impressive. The number of business start-ups remains buoyant at about 400,000 a year. There is every indication that firms of that nature will remain a crucial and vital source of new jobs. Small firms have a powerful influence on the economy. They are at the forefront of economic recovery. We have only to look at the survey of smaller manufacturing firms carried out in the summer by the CBI in conjunction with Panell Kerr Forster. It shows that output and new orders, particularly export orders, have increased strongly. No less importantly, but rather
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less tangibly, the survey shows an increase in business optimism, in employment, and in export confidence. I hope that that will encourage the noble Lord, Lord Ezra.
There is further evidence of the prospects for small manufacturing firms. The last Quarterly Survey of Small Businesses in Britain undertaken by the NatWest and the Small Business Research Trust shows that throughout 1994 manufacturing was one of the most optimistic sectors in terms of expected sales and that it remains the single most optimistic sector for growth in employment. Those are encouraging facts.
The objective of the Government's policies for all businesses, small and large, can be summed up in one word. I make no apology for using it. That word is "competitiveness". Competitiveness means having what it takes to obtain business in world markets against the competition of others. It is the only way to guarantee our future prosperity. It does not necessarily mean producing the cheapest item, although cheapness is of course important. It means providing the best value for money; it means producing goods of the right type, at the right time and in the right place; and it means creating confidence in the purchaser. People will often buy something which is not the cheapest, merely because they have confidence in the product and, in particular, in the manufacturer.
Markets are increasingly global rather than national. The pace of change is accelerating. It is not slowing down. When I was a young man I went to Singapore. The journey took four weeks. I went there two months ago; it took 13 hours. Everyone said what a terribly long journey it was. But, of course, it is not. It is, relatively speaking, around the corner. So are all the other places in that part of the world. There are tremendous opportunities there for us. But there are threats too. I agree only marginally with the noble Lord, Lord Peston, when he says that countries in the Far East are producing goods at a rate we cannot possibly match. To some extent, that is true. However, I was surprised to be told the other day that women's wages in Korea are higher than those in Northern Ireland. That was as much a surprise to me as I dare say it is to the noble Lord.
Lord Peston: It is indeed.
Earl Ferrers: What all this means is that our companies are operating in an increasingly competitive world, especially with the emergence of the fast-growing nations of the Far East and the new markets in eastern Europe. Those changes bring tremendous opportunities but they also bring threats. Improving competitiveness is essential; it is fundamentally down to individual companies and their managers to achieve it.
I agree with my noble friend Lord Caldecote that governments have to set the conditions. On the whole he felt that industry had not made the best use of them in the past. He said that much has been done, and he is right. Much has been done. But it is also, as he said, being done by our competitors too. We cannot stop the search for increasing competitiveness. That is something which will go on and on.

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Earlier this year the Government published a White Paper. It was not a DTI White Paper. It was a White Paper which articulated, for the first time, policies across all government departments which have a bearing on the competitiveness of industry. It is, I suppose, the first time that any government have said, as a matter of policy, that before they bring forward any legislation they must first ask the question, "How will this affect the competitiveness of industry?".
Enhancing competitiveness is not something one can achieve by turning a knob, issuing a diktat, or passing a law. Competitiveness is a culture of continuous improvement. Everyone has to play his part in that, including smaller companies. They have a crucial role to play.
New regulations are framed with small businesses in mind. We require that all legislative proposals brought before Parliament, which impact on business, must have an assessment of their compliance costs. That must include a small business test to show how the regulation will impact on small businesses. My noble friend Lord Skelmersdale said that he wanted the climate to be right. He wanted low inflation, low interest rates, more deregulation, and less tax. I agree. In some ways he asks for Utopia. We have already done a great deal. The policies the Government have been pursuing have resulted in inflation running at its lowest level now for over a quarter of a century; interest rates being brought down to their lowest level for 17 years; and unemployment dropping by 400,000 since the beginning of 1993. That means that more people are employed.
An essential ingredient in getting the climate right, particularly for smaller enterprises, is to minimise the burden of bureaucracy. Industry cannot get on with its job of producing and selling if it is perpetually strapped around with red tape. Deregulation is an essential part of the Government's strategy for improving competitiveness. Our aim is not just to strike out regulations which are unnecessarily burdensome on industry but to ensure that regulation which is necessary is thought out properly and soundly and properly based. The new powers available to us under the Deregulation and Contracting Out Act are a major advance in the deregulation campaign.
My noble friend Lord Trefgarne was right when he said that industry must become more efficient. I agree. It must. Much of it is, but a great deal of it has a long way to go. My noble friend was also right to applaud the fact that we are not part of the social chapter. The noble Lord, Lord Peston, said that he could not see that being out of the social chapter could be good for staff relationships. The noble Lord looks worried. I am paraphrasing what he said. He looks less worried now, so perhaps I have it right. I can tell him why it is good for staff relationships. It means that other people invest in this country. Forty per cent. of investment from Japan into the EU comes to this country; 43 per cent. of all investment from America into the EU comes to this country. Why does it come to this country? It is because
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we have a better climate; our labour costs are more competitive than those of other countries. That produces good jobs, and that is good labour relations.
Lord Peston: My Lords, perhaps I may interrupt the Minister. Will he say why so much of British capital is invested in the rest of the EU where they do have the social chapter? The argument should work both ways, but it does not. We invest enormously over there where the social chapter is in operation and will continue. It is more complicated than the Minister suggests.
Earl Ferrers: My Lords, I should not try to make things too complicated. The answer to that question is simple. British firms invest their money where they find it attractive and important to do so. That does not rely only on the social chapter. It may well be that in order to supply what they want to supply in France and Germany they find that they have to have their own firms in those countries. It is not as simple as the noble Lord, Lord Peston, makes out either.
My noble friends Lord Skelmersdale and Lord Oxfuird, and the noble Lords, Lord Haskel and Lord Weatherill, referred to small and medium-sized enterprises. They were right in what they said. My noble friend Lord Skelmersdale said that some businesses stay small and have only one or two employees. The businesses with one or two people do not get bigger because they do not want to or they cannot. Often those who run such firms are the ones producing and selling the goods; keeping the books; going to the bank manager; doing everything. They want advice. That is why we have set up the Business Link system. It will enable people to have business advisers who will be friends and who will ask, "Can we help you over this?". The man may say, "Yes, this is the trouble that I have", and be told, "Yes, I have seen someone else down the road and he has got out of it this way". The business advisers will be able to help such people. Business Link will include advisers on design and export promotion. It is an essential part of what the Government are trying to achieve, referred to by several noble Lords as a partnership between government and industry. I agree with my noble friend that the future depends not on Ministers but on companies themselves.
The noble Lord, Lord Haskel, said that there was inward investment in a weak manufacturing industry. The noble Lord, Lord Preston, made a similar point. The noble Lord, Lord Haskel, said that we have £9.2 billion of inward investment and £17.2 billion of investment outside this country. That is good both ways. Traditionally, Britain has been an investor in the outside world, which is good for this country and good for business. Often companies, for the reason that I gave to the noble Lord, Lord Desai, have to locate themselves in other countries in order to carry out their business. Equally, it is good for other countries to invest in this country. That stimulates work, business and employment and often it stimulates other companies in this country to supply the new companies with products.
The noble Lord, Lord Desai, gave his views on these matters. I agree with his comments on investment from abroad. He said that he was an economist and he did not want to go anywhere near the real world. I understand

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that feeling but say to him that sometimes those who are in the real world say that they do not want to go anywhere near an economist. They certainly do not want to go anywhere near three economists because they will receive four answers, which is not particularly helpful.
We had a lovely speech from the noble Lord, Lord Weatherill. I was intrigued to hear that his father led a strike of tailors. I did not realise that but I am sure that it must have been in a good cause. Whatever the cause, it is good to learn that his small family firm has prospered and that it now exports two-thirds of its product. Perhaps I may say, without being too platitudinous, that the noble Lord's father would have been as proud of his son as he was of his business.
The noble Lord, Lord Weatherill, reminded us that Napoleon did not say that we were a nation of shopkeepers but that we were a nation of merchants and adventurers. He regaled us with a story about his family; perhaps I may say that my family also played a part by being adventurers. One member went abroad and taught the Persians how to use gunpowder. I am not sure whether that was a good form of trading but he was so successful that he returned as the Persian Ambassador to the Court of St. James's. That was a glittering career.
The noble Lord mentioned the Prince's Youth Business Trust. It is an important trust and has undertaken remarkable work, as I have been lucky enough to be told. He was also concerned about the Croydon Business Venture which resulted in his writing to 12 people asking them for £1,000 each and getting it. I am glad that he did not write to me.
A certain amount of money has been available for business start-up. The noble Lord was fearful that that will not be specifically available in the future because it forms a part of the single regeneration budget. I know that the fragmentation of start-up support has been the cause of anxiety in a number of organisations, in particular the local enterprise agency network. I realise too that there may be some short-term difficulties. Real opportunities exist in the longer term for local partners to bid for the funds that will be available through the single regeneration budget. In looking to the future, we consider that local enterprise agencies will be important partners in the Business Link. I hope that the individual enterprise agencies will work closely with their local Business Link partnerships. Businesses are starting up effectively and I hope that that will continue.
A number of noble Lords referred to the financial arrangements. My noble friend Lord Trefgarne referred to finance for industry, as did my noble friends Lord Oxfuird, Lord Caldecote and Lord Cochrane of Cults. The noble Lord, Lord Ezra, said that businesses fail too and the noble Lord, Lord Peston, said that banks have not always been helpful. In some respects, people have found that to be the case. However, a recession scythes through everything. Both banks and small businesses are vulnerable but I agree with the noble Lord, Lord Peston, that within prudent guidelines there should be a relatively long-term commitment. If that can be done by medium-term loans that the banks are prepared to make that would be good.
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Small businesses are reliant on short-term finance and overdrafts. The Government encourage small firms to consider alternative forms of finance. Informal investment by the Business Angels is one of them. There is access to the right kind of finance at the right time. That is vital if businesses are to succeed and prosper. It is true that banks are likely to remain the main providers of finance for small businesses. Currently they are providing approximately £40 billion to small firms, mainly as loans and overdrafts. It is vital that there should be a relationship of trust and mutual understanding between the banks and small businesses. There is also in existence the small firms loan guarantee scheme. That was changed last year; the maximum loan was increased from £100,000 to £250,000 to firms which have been trading for two years or more and for some firms the guarantee level was increased from 75 per cent. to 85 per cent. There has been a reduction in premium for all firms.
The noble Lord, Lord Ezra, referred to the commercial investment bank. In some parts of government there is not too much enthusiasm for that but my department is to undertake a review of the issue in order to establish whether small firms and enterprises in the United Kingdom are disadvantaged and what role the banks should play. I should have liked to have referred to many other issues but time runs out. Perhaps I may write to noble Lords.
The noble Lord, Lord Desai, referred to manufacturing investment. Business investment is estimated to have risen by 1.25 per cent. in the year to the third quarter. The Treasury forecasts this to rise to 2 per cent. for the year as a whole and to 10.75 per cent. for 1995. Manufacturing investment accounts for about one-fifth of the total business investment and is expected to increase strongly next year. The CBI has forecast a growth of more than 11 per cent. Those are encouraging facts.
I return to the point made by my noble friend Lord Trefgarne at the end of his speech. On the whole, government's contribution to industry can best be made by supporting and helping businesses but as far as possible by getting out of their hair. We can help by providing information and advice, by making available specific schemes and special initiatives and by providing all kinds of statistics. But it is not the Government who create wealth; it is individuals and the businesses. That is what we want to encourage.
It is always tempting to think that the past was easier than the present. That is nonsense. Many years ago my noble friend Lord Waldegrave said something that I have never forgotten. He said, "Always remember that there is a better opportunity tomorrow". So there is. We are leading Europe out of recession. There are stacks of opportunities and it is our business, whether as government playing their part or businessmen playing their part, to grab those opportunities and to make the best of them that we can.
6.10 p.m.
Lord Trefgarne: My Lords, at this stage in the evening, with an important debate to follow, it is not for me to do more than thank every noble Lord who has

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taken part in the debate. The speeches were uniformly interesting and informative and I am grateful to each and every noble Lord.
I am particularly grateful to my noble friend Lord Ferrers for replying to the debate today. I know that being here today has caused difficulties for him with regard to commitments in his diary and therefore I am doubly grateful to him. With that, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

War Crimes (Supplementary Provisions) Bill [H.L.]
6.11 p.m.
Lord Campbell of Alloway: My Lords, I beg to move that this Bill be now read a second time.
The purpose of the Bill is to afford a fair administration of justice in the context of the War Crimes Act in two distinct ways which are not mutually dependent, so each requires separate consideration. The Bill does not amend any provisions of the Act and to some extent, Clause 1 reflects the sense of urgency as regards implementation of the Act, as appears from the Official Reports to have been the understanding of another place.
If this Bill is given a Second Reading and reaches another place, there would be a long period of time before it could ever receive Royal Assent during which investigations could be ended. A decision could be made as to whether to charge or exclude on the available evidence. Only on the passing of the Act would the limitation provisions of Clause 1 bite. Proceedings instituted before that date would not be affected in any way.
Clause 2 imports from Scotland a pre-trial appellate procedure on which I took advice from the noble and learned Lords, Lord Jauncey of Tullichettle and Lord Morton of Shuna. That is with regard to applications to quash the indictment on grounds of delay. The reason for its introduction is to avoid abortive trials which should not have taken place, because in England those trials must take place as there is no appellate jurisdiction until after conviction.
The Bill has the support of many noble and learned Lords to whom I have spoken informally, including the noble and learned Lord the Lord Chief Justice, who are not able to attend. The right reverend Prelate the Bishop of St. Albans, whose annual meeting is taking place at this very moment, has written to say that he wishes well for these laudable efforts on an important moral and legal issue.
Let it be said at the outset with respect to the memory of millions who suffered, some of whom are still suffering, that it is proven beyond doubt that mass murders were perpetrated—a policy of extermination—by the Third German Reich to the everlasting shame of all mankind. But since the War Crimes Act received Royal Assent on 9th May 1991, no charges have been made. And even today, it is not known whether and
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indeed, if so, when the continuing investigations may end or whether any charges will be made. Already one-third of the suspects interrogated have died.
When the War Crimes Bill was before another place, there was an air of urgency, of resolve, to implement the recommendations of Part I of the Hetherington-Chalmers Report on the basis of the evidence of 301 case files and other material in Part II of that report which was not disclosed in either House. But another place was permitted to labour under a crucial misunderstanding, a crucial misapprehension, which was repeated in your Lordships' House by my noble friend Lord Waddington, that on that evidence, which the noble Lord said that he had read, those trials were warranted and so would ensue with dispatch.
There was no sufficient evidence on which to charge anyone. Another place, in good faith, had to take for granted the supposed quality and cogency of that evidence in Part II to avoid prejudicing a fair trial in impending proceedings, and did so. Even today, there is no sufficient evidence on which to charge anyone and as yet, the Crown Prosecution Service has not even decided whether to seek the consent of Mr. Attorney to institute proceedings in any single case.
It was never envisaged by another place that a delay of that order could possibly arise; that 15 of the 301 people who have been under investigation since 1988 would still be under investigation today; that new investigations would have been initiated as late as March this year; that by today, a decision as to whether or not to prosecute would not have been taken in all cases; and that by now, those trials would not have been either instituted or concluded.
Indeed, on the contrary, it was common ground among all Members of both Houses that if those trials were to ensue, they must be fair trials in accordance with our concepts of justice. Each year of delay infects the prospects of a fair trial as prejudicial to the defence: especially so where the alleged conduct took place so very long ago and the crucial issue is one of identity.
Clause 1 proposes a time limit on the institution of proceedings. Why so? That is because the Crown Prosecution Service, having received substantive reports from the police on which charges could not be laid, remitted the matter to the police for further investigation. Both my noble friend Lord Ferrers and my noble and learned friend the Lord Chancellor have informed your Lordships' House that the end of those investigations cannot be predicted. It is also because in Scotland, all were excluded from prosecution before 27th June 1994 in exactly the same circumstances in which the Crown Prosecution Service remitted the matter to the police for further investigation. A disparate regime for exclusion on either side of the Border, operating under the same statute, all but beggars belief.
Your Lordships may well think that the only fair and just approach was that adopted by the noble and learned Lord the Lord Advocate, which was explained in a Written Answer on 11th July of this year. It read:
"After extensive enquiries in the United Kingdom and overseas, Crown Counsel decided that there was not sufficient available evidence for a criminal prosecution in any of the cases".—[Official Report, 11/7/94; col. WA 93.]

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The book was closed in Scotland by the noble and learned Lord the Lord Advocate on that basis before 27th July, yet the Crown Prosecution Service continues investigations on the same basis, the end of which, the Government take the view, cannot be predicted.
The purpose of Clause 2 is to remove the disparity of procedure in an act of general application and to introduce in England and Wales and in Northern Ireland the appellate procedure as it existed for many years in Scotland. The justification is to avoid a long, complex and costly trial with unusually emotive overtones conducted so long after the event which should not have taken place, and to avoid the "backlash" factor to which the right reverend Prelate the Bishop of St. Albans referred on Second Reading of the Bill. In all those cases, it is inevitable that an application will be made to the court to quash the indictment on grounds of delay, as being prejudicial to a fair trial.
As to the present position and the attitude of government, noble Lords will be grateful to my noble friend the Minister for what she said on 28th November this year (at col. 473 of Hansard). There are now 24 men who have been candidates for prosecution since before 27th June 1994. As I have mentioned, 15 of them have been under investigation since 1988; three since July 1991; and the rest since February, April and December 1993 and January and March 1994 respectively. Of the 369 suspects investigated, 233 have been excluded and 112 have died.
What is the attitude of government? Parliament has had its say. There is no limitation period for murder at common law, so none will be introduced. The continuance of those investigations, whatever delay may be involved, is entirely a matter for the Crown Prosecution Service and must be left to the CPS. It is a matter for the courts to decide whether to quash the indictment on grounds of delay as from 1st September 1939 up to and including the date of trial, or on grounds of abuse of process.
As to Parliament having had its say, having read the Official Reports, perhaps I may say with great respect to my noble friend Lord Tonypandy and to my noble friend the Minister that, on any objective analysis, Parliament has not had its say on either of the procedural matters, the subject of this Bill, which were neither envisaged nor discussed in either House.
There is of course no period of limitation at common law; we know that. But the common law was introduced by a statute with retrospective effect as from 1st September 1939 over persons who owed no allegiance and to whom the common law did not apply. It was a unique and wholly exceptional assumption of retroactive extra-territorial jurisdiction which may no longer be questioned. But your Lordships may well think that some form of control, some form of limitation, is called for in those exceptional circumstances where investigations continue, the end of which cannot be predicted.
Investigations to gather up evidence against a set of octogenarians, some 50 or 60 years after the alleged event, has little to do with my personal concept of the fair administration of justice.
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As regards leaving matters to the Crown Prosecution Service, perhaps enough has been said about the disparate regime operating either side of the Border and about the continuance of the unpredictable delay under the aegis of the CPS which the Government are apparently prepared to countenance. This is not the occasion upon which to consider the judgment, efficiency or competence of the CPS, either generally or in context with this affair in which, perhaps, it may speak for itself. But if the Government are prepared to leave the matter in the hands of the Crown Prosecution Service without any control over continuing delay, then surely a case is made out for some limitation on the institution of proceedings.
Moved, That the Bill be now read a second time.—(Lord Campbell of Alloway.)
6.26 p.m.
Lord Merlyn-Rees: My Lords, I should, first, declare an interest in the matter of war crimes as chairman for many years of the all-party group on war crimes. I am glad to say that we played a part in getting the Hetherington-Chalmers Report published. We also played some part, along with my colleagues in another place, in getting an overwhelming vote in favour of the War Crimes Bill when it appeared before that place. It is my view that if today's Bill were to get to the other place—although I do not believe that it will—it would be overwhelmingly defeated.
I have been two years in your Lordships' House and I am second to none in my appreciation of the role of this place as a revising Chamber. Very often the quality of debates here is far better than those in another place. The purpose of the Bill now before us is to overturn the Act which was passed overwhelmingly in the other place; indeed, it would nullify it. I should like to argue the case for leaving things as they are.
Even if the effect of the Bill were not to nullify the Act, as came out in the discussion that we had during Question Time recently it is not the role of Home Office Ministers to interfere in any way with the police through their War Crimes Unit. The police are independent. The glory of the police—sometimes it is not so; indeed, it never used to happen in Northern Ireland where the police were the creatures of the state—is that they are independent when they are investigating crimes. The Home Office is quite clear on that fact. There have been one or two occasions in recent years when I believed, with no knowledge perhaps, that there had been an overstepping of the mark in that respect. The independence of the Crown Prosecution Service and of the War Crimes Unit is, I believe, most important.
However, that is not to say that one cannot ask questions. Nevertheless, it is not the job of the Home Office to hasten progress and ask, "What are you doing about this?", or say, "Drop that, and do something else". It must be a matter for the independence of the police. I was going to crack a joke, but this is the wrong place for doing so.
As regards my own role as Home Secretary, I often used to reflect on the fact that Winston Churchill said, "Never make a lawyer a Home Secretary." I believe that he had in mind Sir John Simon. The obverse of that

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remark, of course, is that it does not mean that if you are not a lawyer you would be a good Home Secretary. I believe that sometimes judgment has to take over from the detail of the matter—it can be left to other people.
There is no need for me to rehearse the facts that led to the Act of Parliament, and its antecedents in the Hetherington-Chalmers Report. The report came to a conclusion which I mentioned during the first reading of the Act in another place. I shall not quote the whole thing again, just the following sentences:
"The cases we have investigated disclose horrific instances of mass murders, and we do not consider that the lapse of time since the offences were committed, or the age of the offenders, provide sufficient reason for taking no action in such cases. We therefore recommend that some action should be taken in each case in which the evidence is adequate".—[Official Report, Commons, 12/12/89; col. 886.]
I shall return to that point. When I quoted those sentences in another place Mr. Edward Heath interrupted me and asked if I would read on. He was being helpful. I said that I would willingly do so and continued, at col. 886:
"In paragraph 9.18 we describe possible courses of action. We do not recommend deprivation of citizenship and deportation".
That would have constituted another way of dealing with this matter. The noble and learned Lord, Lord Hailsham, discussed this matter in this place. The people we are talking about had entered this country too easily at the time of a Labour Government, which I supported as an ex-serviceman. I had been active in the Labour Party as a kid before the war. People entered this country from Italy —a country I know well—and from Austria too easily. That situation was badly handled. People were not checked. One course of action is not to accuse these people of war crimes but to say that they did not tell the truth when they filled in the forms at the time they entered this country as cheap labour in 1945 and 1946. The young men of South Wales and Yorkshire did not work in the pits at that time because of all the cheap labour entering the country. Many of those people who entered this country wanted a job and I do not blame them for that. Many of them played an important role in the areas to which they moved, but they did not tell the truth about their situation when they entered the country.
The Hetherington-Chalmers Report referred to English and Scots law. I believe this matter has already been mentioned tonight. The report stated that neither English nor Scots law have imposed time limits in the prosecution of indictable crime. The War Crimes Unit has taken its time over this matter. The noble and learned Lord, Lord Scarman, the noble Lord, Lord Jenkins of Hillhead, the Cardinal of Westminster and I have formed ourselves into a committee which has sought new legislation to deal with miscarriages of justice. We have dealt with the case of the Guildford Four and that of the Maguires. I have not checked my papers but I believe that when I was Home Secretary I sent the Maguire case back to the Appeal Court. I was given a dusty answer and told not to waste the court's time. The Maguires are now out and so are the Guildford Four.
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I am the last person to want miscarriages of justice to occur. There must be a cloud over parts of the judiciary and the police, otherwise the Government would not be about to introduce legislation to deal with miscarriages of justice. As interested as I am in war crimes, I do not wish to see miscarriages of justice. I would not care if no one who was investigated was charged if the evidence does not stand up. That is the glory of our system. I am not seeking to catch people for alleged crimes because of what I witnessed at an impressionable period in my life.
As regards miscarriages of justice, I understand that a body, separate from the Court of Appeal, and separate from the Home Office, is to be set up to deal with this. However, I believe the Court of Appeal will be involved. I am not worried about delay. What is important is that this work must be carefully carried out.
I wish to say a few words about the nature of these war crimes. I am an oldish man now but sometimes when one is inside this place one feels younger than when one is outside it. As an old man I sometimes talk with my young sons. They ask me about Dresden. I was proud to serve in the RAF but I was not at Dresden. But I also talk to my sons about the rocket attacks on London and on Lewisham. A ceremony was held in Lewisham recently to mark the anniversary of a rocket attack. However, those events are not war crimes according to the definition of the law.
I have just revisited—as I do every year—war graves in those parts of the world in which I served. I visited Sicily to see the graves of the 51st Highlanders and the 50th Northumbrians. Some of my friends are buried there. My father died as a result of the First World War; he was gassed. I have taken my children to see the war graves of north eastern France. What a society there was at that time, but millions of Germans, French, British and other nationalities died in the First World War and no wonder in the inter-war years the cream of manhood had disappeared.
I regard those events as war crimes in the non-legal sense. However, the war crimes we are discussing are of a different nature. They were committed away from the front. The Hetherington-Chalmers Report describes various crimes. It describes how people were lined up in front of a trench and shot so that they would fall into the trench. What happened at Dresden was terrible, as were the rocket attacks on London, the bombing of Rotterdam and the heavy bombing of the German cities. But the crimes we are talking about must not be forgotten. I shall return to that matter in a moment.
I served in the Air Force but I also spent some time working with Army personnel. Recently I returned to the south of France. When I served in that area I was astonished to discover that the German soldiers who wore Iron Crosses came from eastern Europe. I had been fed the idea that Europe was waiting to be liberated and that most of the people in Europe were waiting to be liberated by us and were not on the side of the Germans. I did not find that to be true. They had fought willingly for the Germans. I found that was the case in Yugoslavia and as regards the troops who were streaming from the Hungarian front. I understand, although I do not know

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about this, that there were similar soldiers —not soldiers of fortune, but working with the Germans—in pockets on the second front.
It was those people from eastern Europe who found their way into this country. That is why we should examine how they entered this country rather than actual war crimes. Some of those people committed heinous crimes.
In the past few years I have talked to Jewish friends who were in concentration camps. My friends told me that the personnel in those camps, who came from the Baltic states and parts of eastern Europe, were worse than the Germans. They tried to outdo the Germans in their behaviour. Only some of those crimes will be able to be proven. I do not want revenge. I have fought against capital punishment. I do not wish those people to be hung if they are found guilty. All I want is for the world to face up to what has happened.
We need to face up to what is happening in Yugoslavia now. The Government have embarked on a scheme with the UN to establish war crimes tribunals, and then trials, in Yugoslavia. Therefore, that process will happen again there. However, I should have thought it would be extremely difficult to obtain evidence. I believe it is a mistake to hurry things up. I have no knowledge of how many cases have been considered. Let the matter be dealt with but at least let it be known that we in the Parliament in this country have stood up and declared that war crimes are evil. Let us not be sidetracked from that.
I saw Barbie's Lyon. I saw Lyon airfield bombed to smithereens. The light bombers—or the posh name for them, the tactical bombers—bombed the airfield. The French kids cheered and they were shot. I saw their legs sticking through the earth. That is a war crime and it is that sort of war crime—not the events that occurred in battle in north eastern France that I describe to my sons—that was perpetrated, mainly on members of the Jewish faith in eastern Europe, that we need to consider. The other House, in which I was proud to play a part, stood clearly for dealing with such war crimes. We should not renege on that. Let us see what happens.
6.40 p.m.
Lord Mayhew: My Lords, supporters of war crimes trials are fortunate indeed to have as their leader, and chairman, someone who speaks not only in a most agreeable and persuasive manner but who was also a Home Secretary—and a much better Home Secretary than Sir John Simon whom he mentioned.
I confess that I had hoped that the experience that we have had since the passage of the Act might have modified the enthusiasm of the noble Lord, Lord Merlyn-Rees, for pursuing the war crimes trials. I think, for instance, of the experience of other countries. I recall that during those debates the noble Lord and others urged us to follow the example of Canada, Australia and Israel. Experience since confirms all the worst fears of those who opposed the Act at that time. All the trials were disasters, especially the one in Israel, which
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illustrated in the most dramatic way how right those noble and learned Lords were who said that it is impossible to identify people after all this time.
The trial of Demjanjuk was a show trial. It was televised. Schoolchildren were bused in. I recall seeing on the television, on the BBC news, the eye witnesses advancing on the accused, Demjanjuk, saying, with complete sincerity and conviction, "That's the man, how could I possibly mistake him?" The Israeli judiciary, and everyone, now knows that those witnesses were wrong. On that occasion it did not stop Demjanjuk being sentenced—to death, as I recall. But it was a tremendous warning of how such war crimes trials can go wrong and it fulfils all the forebodings that we had at the time. I had hoped that that might have modified the attitude of the noble Lord, Lord Merlyn-Rees.
Other events have occurred since the Act was passed. We have had a revelation of the amount of money and the substantial quantity of skilled servicemen who have been devoted not to anti-drug or anti-terrorist activities in the United Kingdom but to searching out in remote parts of Eastern Europe people who might have committed war crimes. Those people were not even British at the time.
Since the Act, there has been the passage of time itself. The noble Lord, Lord Merlyn-Rees, said—I believe I quote him—"I am not worried about delay". But we ought to be greatly worried about delay. Let us consider the Hetherington report which was the basis upon which the Government took up the cause, framed the Act, and pushed it through. The report stated,
"Given the age of the suspects and witnesses any proposed legislation should be introduced and brought into force as quickly as possible".
That was stated five and a half years ago. In describing their investigations in eastern Europe, the authors of the report stated:
"The greatest difficulty we encountered was simply the age of the suspects and witnesses".
That was their finding, six and a half years ago.
The offences were committed more than 50 years ago. The noble Lord states that he is not worried by the delay. But, of course, that is not the end of the delay. Justice will be further delayed. Let us assume for a moment that the Crown Prosecution Service puts a case to the Attorney-General and the Attorney-General judges in favour of the prosecution. That might occur within a month or weeks. But what then, my Lords? The defence starts to build its case. It will have to go to eastern Europe, with translators and interpreters. It will have to examine records and archives. It will have to start a desperate, almost certainly futile, search for defence witnesses. I should have thought it likely that all possible defence witnesses will either be untraceable or dead.
Eventually the trial may begin. The Act contains some unprecedented aspects, especially in relation to retrospection. Therefore there will be an enormous number of points of procedure during the trial. The trial will drag on for a long time. When the verdict is eventually reached, how old will the accused be? If he had a rather senior post when his alleged crime was committed, he will at that time be in his nineties. If he

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were a smaller fry, he will be in his eighties. That is too old. It is far too long since the offence was committed. People's memories are wholly unreliable. Defence witnesses cannot be found. Such a prosecution is wrong.
Those of us who as soldiers took part in the liberation of Europe were brought very close indeed in the concentration camps to the horrors of which the noble Lord spoke. However, despite the appalling nature and seriousness of the charges, the passage of time has made it, in my view, not only unfair but actually indecent to bring charges under the Act.
Perhaps I may say a word about the attitude of the Government. In this House Ministers have not attempted recently to defend the Act or its purposes. Their constant cry has been, "It's on the statute book. The Commons passed it. Therefore we have to carry it out". I believe that that is a little disingenuous. After all, it was the Government who started it. The author of the report, Sir Thomas Hetherington, was asked at a meeting here, "Seeing that the Government ended war crimes trials with the support of all parties in 1948, what has caused this sudden recurrence of a demand for war crimes trials?" He put as one of the major factors the visit to Israel of the then Prime Minister, the noble Baroness, Lady Thatcher. It was perfectly legitimate. I do not complain. However, the fact is that the Government took the initiative in producing the Bill. They passed the Bill; they supported it in both Houses. They are now relentlessly seeking to implement it. The Government cannot avoid responsibility. They cannot simply say, "The House of Commons passed it and we are carrying out what is on the statute book".
Furthermore, the Bill before us now is not on the statute book. We are in a new situation as a result of the passage of time and the Government are perfectly free if they wish to support the Bill. Nothing that the House of Commons has done should stand in their way if they wish to do so. All that the Government have done meanwhile is to devote a lot of money and much badly needed trained security personnel to investigate atrocities committed more than 50 years ago in remote parts of Eastern Europe by people who were not then British. It is hard to imagine a more perverse sense of priorities than that.
6.49 p.m.
Lord Jakobovits: My Lords, this is the third time that we are debating the subject of war crimes. Looking through the list of speakers today, it appears to me that those who are taking part have previously expressed their opinions—or at least the great majority of them. It appears from the speeches made so far that the opinions have not changed, nor is it likely that they will because these are matters of deep conviction. I wonder therefore why the debate has been introduced and why efforts are now being made in the supplementary provisions to undo what Parliament has decided by an overwhelming overall majority on two previous occasions.
The noble Lord, Lord Mayhew, cited the experience of Israel as an example of the dangers involved in bringing such prosecutions. I think that it proves the opposite. It proves that despite the legislation, the courts are still powerful enough to discern the truth, or at least
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to question allegations if they cannot be absolutely proved. Therefore, in that case, as in so many other cases, the law has not been changed. None of the countries changed its legislation; all that was done was to apply the rigours of the law to ensure that there should be no miscarriage of justice.
But let me come to a more fundamental point. Even though I too have spoken in the two previous debates and can offer little originality in my contribution to the renewed discussion, I wish to add a couple of questions. Is it really suggested that the millions of victims are any less dead now than they were 50 years ago or, for that matter, than they were a couple of years ago when Parliament overwhelmingly passed certain legislation? Is our debt to those who have been exterminated with such fearful and unprecedented horrors any less now than it was then?
That leads me to perhaps a more topical question. As this current year is about to conclude and we usher in the new year 1995, the world will observe the 50th anniversary of the liberation of Auschwitz and Majdanek, of Dachau and of Belsen, when we first discovered the horrors that had occurred. This commemoration will be marked throughout the world. There will be gatherings in which the world will be reminded of what took place and what the rest of the world tolerated at the time. In Europe in particular, occupied as it was, there will be countless efforts made to recall, remind and remember. Shall we in this country—because by the grace of God we were spared occupation by the Nazis—be the only or nearly the only European country that will move in the opposite direction? Instead of recalling and perpetuating what happened, shall we expunge it and say that because a number of years have passed we are no longer interested in the execution of justice? It would be inconceivable that we should be the odd man out in this impending year of the 50th anniversary by giving a signal that we care less than others who suffered so much more than we did in this country.
I believe that here I can apply the final verse of the Book of Ecclesiastes the Preacher, written, as our tradition has it, by the wisest of all men. He said:
"This is the end of the matter; all has been heard. Fear God and observe His commandments, for this is the whole duty of man".
None of the commandments is more sacred than the one in the fifth Book of Moses:
"Justice, justice shall you pursue".
Justice needs to be pursued, and not only done when it comes our way.
I hope that even if we never find a single criminal whose guilt can be proved by all the rigid tests that we apply—and rightly—at least our statute books will record that we will for ever remember the ultimate in injustice and in cruelty that has been perpetrated and will wish to count ourselves during the coming year among those who will remember, will recall and will warn future generations that mankind will never again tolerate that fearful slight, not just on human rights but on human life by the million.

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I believe that by sending out this message from this venerated House to our country and to the rest of the world we shall be counted among those who have not failed in the fulfilment of the law—to ensure that justice will be pursued even if it cannot always be done.
6.56 p.m.
Lord Campbell of Croy: My Lords, my contribution in the debate is aimed at helping to find the answer to the question: what was it that put the United Kingdom in a thoroughly unsatisfactory situation in 1989? There had been no way of dealing with any alleged war criminals from World War II who were resident in the United Kingdom. Any new legislation in 1989 would be for events nearly 50 years earlier, with all the difficulties of obtaining clear evidence and certain identification.
The situation arose because in 1948 nothing was done to ensure that there would be legislation in the United Kingdom to deal with any war criminals who had entered this country in disguise. It is important to recognise this crucial omission. The Nuremberg tribunal was established by the victorious allies after World War II. It tried Hitler's accomplices—Goering and Hess, plus military and other leaders who had perpetrated horrors. These were the ringleaders. They and some others who were prominently suspected of war crimes were tried by that tribunal.
Some who should have been tried had escaped and were later found in South America and elsewhere, long after 1948. Others were never found. After three years, the Nuremberg tribunal was brought to an end. It was never intended to have a long life. The big fish had been dealt with. Lesser suspects had been tried in courts in the British and other zones of Germany and these were the smaller fry.
This process was handed over by the British in our zone to the newly formed German courts in the newly democratic West Germany, which continued to try cases over the next 40 years. Other countries in continental Europe also retained the means to try alleged war crimes from World War II. Britain was a notable exception. It was presumed that no war criminal would have found a place in our society here. This was an idle assumption because large numbers of refugees from areas such as the Baltic States, the Ukraine and other parts of Europe entered Britain in the late 1940s with very little screening. It was not difficult for a war criminal who was not widely or easily recognisable to conceal himself among those refugees. With false papers, he was then safe.
Until the War Crimes Act 1991, there was no way in which an accused in this country could be brought to trial in the United Kingdom for a war crime committed in World War II. In 1957 it was made possible for prosecutions to be brought in the UK, but not for war crimes that had taken place before that year. The legislation was not retrospective to World War II. The noble Lord, Lord Merlyn-Rees, recalled cases in the late 1940s when refugees came to this country from south and central Europe. I remember similar events in the late 1940s—I worked in the Foreign Office from 1946 to 1949, dealing with Eastern Europe. The alleged war
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criminals involving our department were Yugoslavs in the United Kingdom, some of whom were sent back to Yugoslavia for trial. But the refugees who had come in from the Baltic States and the Ukraine had been behind the German and Russian front and very little was known about their background. In brief, anyone who thought in 1948 that all war criminals had been brought to trial deluded himself. Any deliberate amnesty then or calling a halt to the process in this country had the effect of a reprieve for the war criminal who had so far escaped arrest by means of disguise and deceit. Trials continued in other countries into the 1950s and later.
In my opinion, the 1991 Act was many years too late. Although the Statute of Limitations does not apply to murder, firm evidence and indisputable identification is very difficult to collect after 50 years. I take an illustration in Scotland. Recently, in a Scottish court, an individual was found to be a war criminal after he had brought a defamation case and after investigation in the Baltic States. However, no prosecutions are to be initiated in Scotland under the 1991 Act because sufficient hard evidence is not available. That is an anomalous and very unsatisfactory situation. Of course the individual should not have brought the defamation case. He must have thought that he was even safer than he was.
The noble Lord, Lord Mayhew, for whom I have the highest regard and for whom I worked in those days when I was a Foreign Office official and he was a Parliamentary Secretary at the Foreign Office, rightly recorded that the Nuremberg tribunal and the trials in the British zone were brought to an end in 1948 with general support. Unfortunately, there was a gap in UK legislation for any person in this country who might be suspected or accused. In the late 1940s I was sending notes to the noble Lord from the Official Box up there because the Commons was sitting in this Chamber after the bombing of the other place. I also sent notes to Mr. Ernest Bevin and Mr. Hector McNeil. The noble Lord, Lord Mayhew, took more notice of my notes, of course, then than he would now.
I shall end by recounting a personal experience. Leading elements of the Scottish division in which I was serving, with our accompanying armoured units, discovered Belsen. That was on 15th April 1945, exactly two weeks before I was wounded and disabled. The concentration camp happened to be on our line of advance. Many of our officers and men had witnessed horror and carnage in the previous 11 months, but they felt a sense of outrage at what they found. There had been rumours that such camps existed but this was the first one to be discovered in the West. Here was the awful proof. The press arrived as we were moving on towards the Elbe, and in the following days newspapers were full of accounts and photographs. Belsen had no

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gas chambers but its victims were left to expire miserably from starvation and disease. We were several months too late to save Anne Frank.
7.5 p.m.
Lord Houghton of Sowerby: My Lords, I shall be brief; at present late hours are not good for me, and I do not think that I ought to take up the time of the House if I cannot stay to the end of the debate. I apologise.
However, I wish to register my position. I am in support of the noble Lord who introduced the Bill. I am fully in support of everything that was just said by the noble Lord, Lord Campbell of Croy, and also the remarks of the noble Lord, Lord Mayhew, who spoke before him. Therefore a good deal of what I might say would be to underline what they said. But perhaps I may just offer the following advice.
The whole of this debate in favour of the course upon which we are now set ignores the fact that we have a jury system. The three countries which have joined in the compact to carry out these prosecutions for war crimes and which have our judicial system have found that their first case has been their last and nothing but frustration and social discontent has followed. We are on a course that we shall regret if we pursue it. It is far too late. Our system of judicial treatment is much more exacting and fastidious than most. When we hear about evidence that is adequate, we probably do not take into account that members of the jury have to be convinced that the evidence they hear is fully corroborated and is the basis upon which they can reach a verdict without reasonable doubt. That is a very severe test to apply to their judgment.
It is not convictions that we have to worry about—it is acquittals. Acquittals are the disaster. Other countries do not have the "fitness to plead" rules that we have. In Canada the accused was so ill during the nine months of his trial that he was able to be in the dock only for limited times on doctor's orders. At other times he appeared wilting and listless and paid no attention to the proceedings. I hope that we can avert a repetition of the social discontent and racial disharmony which follows acquittals in these cases.
Those who press for retribution through the trial of war crimes are after what they conceive to be justice and which is in fact punishment. When they do not bring about the punishment, they cannot be satisfied with the system; and they cannot be content that justice has been done.
I hope that circumstances will allow us to come out of this with honour and dignity. Next year we shall commemorate the 50th year after the ending of the war. No trials relating to events that took place over 50 years previously can possibly succeed under our system. Let us think of what the Canadian case imposed on all concerned. The noble Lord, Lord Shaughnessy, can tell your Lordships a great deal more about that case than I can. The jury listened to evidence for six months. Six months! Let us think of that jury then taking three months to consider their verdict: they came to a unanimous conclusion which led to acquittal. Then the balloon went up. It was very sad and it is still sad. They have not had another.
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In Australia, the question arose of fitness to plead, when the accused in the first case shot himself in the chest and rendered himself incapable of going to trial. The question arose as to how long one waited for the accused to be fit to plead before going ahead. We do not realise what we are in for. I hope that wiser counsels will prevail. Let us get the emotion out of the issue now. It is a practical matter.
In Canada, 43 witnesses from eastern Europe had to be kept in Toronto for nine months while the case proceeded. There were six months of listening to testimony, with translations; the examination of witnesses had to be translated. How can that be a practical basis for a trial? In the Canadian case the defending counsel offered no defence and called no witnesses on the ground that he had no facilities for getting witnesses. The prosecution had all the opportunity and time that they cared to take to find witnesses; but the defence had no similar facilities in order to find evidence to the contrary. Let us pay attention to what noble Lords are saying in that direction.
7.11 p.m.
Lord Lester of Herne Hill: My Lords, unlike other noble Lords who have already spoken or who will speak in this debate, I was not a Member of your Lordships' House during the turbulent and painful passage of the War Crimes Bill. Therefore I may be the only Member of the House to speak on this subject for the first time. However, I have carefully read the remarkable, protracted and sometimes emotive debates. Like most noble Lords, I wish that the Bill had never been introduced, though I do not hold that view for the reasons given by many of its harshest critics.
I do not believe that the rule of law was violated by the coming into force of the War Crimes Act 1991. It gave jurisdiction to our courts to try offences of murder or manslaughter committed as war crimes in Germany or German-occupied territory during the Second World War. It did not change the law retrospectively to make someone liable to prosecution and punishment for an act which, when he did it, he had no reason to believe was a criminal act.
The cold-blooded and sadistic crimes covered by the Act were individual crimes of mass murder, as the noble Lord, Lord Merlyn-Rees, so forcefully reminded us. They flagrantly violated the laws and customs of war as well as of peace. What was done by the perpetrators was criminal according to the general principles of law recognised by all civilised nations, including pre-war Germany.
The 1991 Act removed immunity from prosecution for those war criminals who were not British citizens during the Holocaust and its bestial atrocities. But it did not take them by surprise as to the criminality of their horrific acts. The Act was therefore fully in accordance with the international human rights codes.
Nor do I believe that the fact that the Labour Government decided in 1948, with Sir Winston Churchill's support, not to proceed with war crimes trials in the British-occupied zone, in any way precluded Parliament from passing that Act giving jurisdiction to

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our courts. As the noble Lord, Lord Campbell of Croy, rightly observed, what was done in the late 1940s was and remains controversial. It has been powerfully criticised by writers such as Mr. Tom Bower, in his disturbing and dispiriting book Blind Eye to Murder. But what was done by the British Government (rather than Parliament) in that bleak Cold War era did not in any way decide that Nazi war criminals could obtain a safe and permanent haven from justice in this country by deceiving the Home Office and obtaining British citizenship.
Nor do I consider that the Act has authorised, still less required, unfair criminal trials. It did not create some newfangled procedure for Soviet-style or McCarthyite show trials. Rather, it included the public interest safeguard (in Section 1(3)) for the accused that cases can only come to trial with the consent of the Attorney General or, in Scotland, the Lord Advocate. That is an important safeguard in preventing miscarriages of justice. So is the even more vital safeguard of the independent judiciary in securing a fair trial by jury in accordance with the presumption of innocence, the rights of the accused and the stringent standards to which the noble Lord, Lord Houghton of Sowerby, referred.
The strongest argument made during the debates against the Bill was that it was futile because a fair trial would be very difficult to achieve for a man in his seventies, a half century after the alleged crime was committed. Such a trial would be unlikely to succeed and would be a daunting undertaking for the judge and jury as well as for the prosecution and defence.
I agree with that powerful objection. But another and more troubling reason for wishing that the Bill had never been introduced is that the controversy about its passage stirred that very light sleeper, antisemitism. It did so without contributing in a positive way to public education about the evil banalities of the Nazi atrocities and the lessons still to be learnt, especially at a time when ethnic and religious hatred and antisemitism again stalk across Europe.
In my view, the Bill and its passage revived terrible memories and nightmares. At times there seemed almost to be more concern in some quarters for septuagenarian war criminals than for the traumatic memories and feelings of the survivors who escaped them. Supporters of the Bill were accused, insensitively and unfairly, of harbouring feelings of revenge and retribution rather than the quality of mercy.
That was an exorbitant price to pay for enacting a statute that at best could not result in more than a handful of successful prosecutions. That is why I was firmly opposed to the original Bill and would have voted against it. But —I emphasise—that is past history.
So strong was the opposition in this House, led by the noble Lords, Lord Campbell of Alloway and Lord Houghton of Sowerby, and my noble friend Lord Mayhew, all of whom have spoken this evening, that the Government were compelled to invoke the Parliament Act to secure the Bill's passage. Those noble Lords should be content with their victory in forcing the Government to invoke the Parliament Act to give effect
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to the will of the democratically elected other place. It is regrettable that now, instead of leaving matters to take their course, they seek to stultify the Act altogether by preventing proceedings from being brought in the future and by empowering the Court of Appeal (Criminal Division) to stifle any pending prosecution at its birth. That is a wholly unnecessary power because paragraphs 6 and 11 of the Schedule to the 1991 Act give the Crown Court a specific power to dismiss a charge and quash an indictment if it appears to the judge that the evidence would not be sufficient for a jury properly to convict.
I am sorry to say that this Bill reopens the wounds inflicted during the passage of the 1991 Act three years ago. It seeks to override the Act just when police investigations are concluding and the responsible public authorities are deciding whether or not it is in the public interest to bring a prosecution against suspected war criminals.
Surely we should respect the will of Parliament, as expressed in the 1991 Act, and leave it to the prosecuting authorities, the law officers and the courts to decide whether anyone should now face trial. If the noble Lord presses his Bill further we will send a message to the world that this House is so concerned with the well-being of a handful of suspected war criminals living here that the House is prepared to attempt to take power away from those entrusted by Parliament with the task of reviewing the evidence, so painstakingly obtained, and from those entrusted by Parliament with deciding whether a prosecution is or is not in the public interest. That would suggest a curious scale of values and priorities. It would also imply, without any rational basis, that we in this House lack confidence in the prosecuting authorities and the law officers, and ultimately in our independent courts including the Lord Chief Justice, to pursue justice or not to pursue justice according to the law of the land. That is why I devoutly hope that the noble Lord, Lord Campbell of Alloway, will not proceed further with his unnecessary, divisive and untimely Bill.
7.20 p.m.
Lord Bridge of Harwich: My Lords, I have always thought that by far the gravest objection to the jurisdiction which the War Crimes Act conferred on the English courts was the near impossibility that anyone tried in the exercise of that jurisdiction could be guaranteed a fair trial. It was a near impossibility at the time when the Act went on the statute book. As the years pass the prospect of a fair trial becomes more and more remote.
The noble Lord, Lord Merlyn-Rees, spoke of miscarriages of justice. He spoke of the judiciary being under a cloud, which implies that he thinks those miscarriages were due to judicial incompetence. I hope he is wrong. I do not believe they were. I believe that the miscarriages of justice were due to the fallibility of the criminal justice system. Any criminal justice system must be fallible and regrettably will always remain so. I do not know how it can be made infallible. But however those miscarriages of justice occurred, they vividly brought home to us that an English jury, on apparently credible evidence, trying someone for a

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crime committed in recent times and in the familiar social environment of this country, can still be shown to have been wrong and to have caused a miscarriage of justice. To ask an English jury to try an old man of my generation for one of the gravest crimes in the calendar on the basis of evidence presumably given by witnesses of similar advanced age about events which occurred in eastern Europe in circumstances of great social upheaval is surely to invite a miscarriage of justice.
Before the Bill can reach the statute book, if ever it does, more than 50 years will have passed since the latest date when any of the crimes to which the 1991 Act is directed were committed, and that is a long enough limitation period for any crime, however serious. That is why I support the principle of Clause 1 of the Bill.
That said, of course I recognise the sincerity and understand the depth of feeling of those who take the view that the crimes to which the 1991 Act was directed were of such enormity that the attempt to bring the perpetrators to justice is one which can never properly be abandoned. They must presumably proceed on the basis that, even after so long a time, a fair trial is still theoretically possible. In one of the debates on the Bill which became the 1991 Act the noble Lord, Lord Mishcon, by virtue of a vivid exercise of his fertile imagination, gave an example of how such a case may arise. He envisaged my noble friend Lord Campbell of Alloway walking along Piccadilly and recognising someone with a peculiar scar on his face as being a guard at Colditz who had subsequently murdered a prisoner. When one imagines a case of that kind it is theoretically possible that there may still be a fair trial; but the theory is a remote one.
Even the most passionate advocate of continued prosecution must recognise that whether or not there can be a fair trial in a specific case must depend on the nature of the issues and the character of the evidence involved. When the Bill which became the 1991 Act was before the House for the second time, I urged the House, having opposed a Second Reading when it was before the House on the first occasion, to give it a Second Reading in the hope that the procedures involved could be amended and improved. But the House was not persuaded with the inevitable result that, under the Parliament Act, the Bill immediately received Royal Assent without amendment. If this Bill proceeds there will be an opportunity to enhance the procedure in ways I believe are necessary.
The 1991 Act does not spell out in terms that despite its retrospective character in one sense it is still open to the courts to exercise their jurisdiction to stay a prosecution on the grounds that the defence would be substantially prejudiced by delay or that delay would make a fair trial impossible. I understand the Government's position always to have been that the courts will have that power and now that they can look at Hansard perhaps that will cure the ambiguity. But in principle it is wrong that a statute should remain ambiguous on the basis that Hansard will cure the ambiguity. I hope that if this Bill proceeds it will be possible in Committee to introduce a suitable provision making it perfectly clear that the courts have that unfettered discretion.
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When it comes to the exercise of the discretion, had the Bill in 1991 received a Second Reading, I was minded to table an amendment on the lines of the provision in Clause 2 of this Bill. To my mind there should be an appeal either way. An application to stay a prosecution on the ground of prejudice by delay comes before the single trial judge and, as the law stands at the moment, there is no appeal from his decision. In the special circumstances of a war crimes prosecution—so long as they can and do continue—it seems to me entirely right that the onerous responsibility of deciding on an application whether, in the circumstances of a specific case, there is such prejudice that the prosecution should be stayed or whether there cannot be a fair trial should not rest on the shoulders of a single judge. Any such decision is bound to be highly controversial and it is only right that the last word and the responsibility for taking the decision should rest on the shoulders of three judges in the Court of Appeal.
7.29 p.m.
Lord Beloff: My Lords, few noble Lords would disagree with me were Ito say that Lords Hansard does not have a very wide circulation in the Balkans. But it might be the case that someone who had perpetrated crimes of equal horror, if not on the same scale, as those alleged against the people we are discussing might come across our debates and say, "Well, it's all right chaps. I have only to get to England and I will find a group of British aristocrats and lawyers who have devoted themselves to preventing the prosecution of war criminals". War crimes, as we now know—though not on the scale of those that have been alluded to by the noble Lord, Lord Merlyn-Rees—are a feature of our world, and although we cannot prevent them, it is not for us, by indulging them, to make them more likely.
People have talked about the changes that have occurred in the past few years since 1988, when the current movement which led to the 1991 Act began, in the circumstances of some of the individuals involved. But more important are the changes that have occurred in the countries where these crimes were perpetrated. In 1988 those countries were still part of the Soviet bloc. It was obviously very difficult for our investigators to be sure of receiving the co-operation of the local police and legal authorities which they would require in order to amass the evidence that they were looking for. Circumstances in those countries have changed. We now have governments which are eager to do what they can to enlist the support and sympathy of the West. That makes it possible—I am not in the confidence of those who are in charge of the investigations—that it will not simply be a question of whether one old man can identify another. There may well be written records which were certainly not available five or six years ago and, as we know, our outlook on the Soviet Union itself—these crimes occurred not in Russia but in places which were then part of the Soviet Union—has changed enormously. For instance, the Katyn massacre was long maintained to be a crime of the Germans but has now turned out not to be so. It therefore seems that we are

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entitled to look at whether or not this is a suitable thing to do in the light of the legislation which is on our statute book.
It is curious, because the argument has been exploded so often, that the noble Lord, Lord Mayhew, continues to insist that the agreement to cease war crimes trials in the British zone of occupation in Germany is binding on the British Parliament in relation to crimes which were not committed by Germans, nor in that territory. The decision, which was a perfectly understandable one, to end those war crimes trials was, as the noble Lord, Lord Campbell of Croy, reminded us, a part of handing over criminal jurisdiction to the burgeoning democratic courts of the new German federal republic. Indeed, to their credit, the German federal government have been from time to time prosecuting, and are still prosecuting, war crimes, where the criminals have been identified. Though they may have a different system of courts and prosecution, as is true of other continental countries, no one has so far suggested that there have been miscarriages of justice there or in the war crimes trials that have taken place in France. In other words, this is a matter which deeply affects Europe and ourselves. As the noble Lord, Lord Jakobovits, said, for many of us it is a matter of conscience.
I agree with the noble Lord, Lord Lester of Herne Hill, that there are problems in raising the issue of the motive of these appalling crimes. On the issue of anti-semitism, I am sure that it has had its effect, in the debates both in this country and in Canada and Australia, on the attitude to these crimes, but that surely is not something which we should take into account. It was wrong to massacre Jews in eastern Europe because they were Jews, just as it is wrong to massacre people in Bosnia because they are Moslems. The identity of the victims is not the important point. The important point is the motive and the conduct of the crimes.
Therefore, I can see no reason why we should, as this Bill would demand of us, suddenly intervene politically in a process which is proceeding, albeit slowly. No doubt the delays will limit the number of prosecutions and possibly the number of convictions. But I feel that it would be sending a signal to every neo-Nazi in Europe if the House of Lords was thought to be in any way acting so as to condone crimes which, as I say, have been repeated but never on the scale of those with which we are dealing.
7.35 p.m.
Lord Shaughnessy: My Lords, to support this Bill, sponsored by the noble Lord, Lord Campbell of Alloway, is not to condone in any way the hideous, almost unbelievable, atrocities that happened in Europe in the course of World War 2. The noble Lords, Lord Mayhew and Lord Campbell of Croy, had a similar experience to mine at the end of the conflict in 1945 and witnessed the liberation—at least the freeing—of the concentration camps in north west Europe. That horrifying experience will be ingrained in the minds of many other noble Lords—it certainly is in mine—and therefore the question of even contemplating the mitigation of such crimes is not a factor so far as I am
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concerned. I do not view this Bill in a technical sense as many other noble Lords have, but as an attempt to limit the whole process which was inaugurated with the War Crimes Act 1991. The biggest problem is the passage of time and the possibility of a fair trial after 50-odd years which have passed since any of these crimes may or may not have been committed.
There is no use repeating the problems of age, identification and the possibility of finding reliable witnesses either for the prosecution or the defence. That has all been discussed before. But if the process continues, the problem becomes bigger. Each month and year that passes the difficulties which face mounting a fair trial are increased.
The noble Lord, Lord Houghton of Sowerby, in what might have been considered as a trailer for my speech, referred to the experience under the Canadian War Crimes Act. I shall refer only to a couple of instances in order to give examples. The first prosecution was against a man called Imre Finta. As a constable under the Nazi regime, he was accused of sending a number of people to their deaths in a concentration camp. He was apprehended. I am not sure whether he was actually indicted, but after his arrest under the Canadian War Crimes Act, it was about two years before he came to trial. The whole process of assembling evidence and whatever else which had to transpire, took that long. He came to trial and in May 1990, shortly before the War Crimes Bill was debated for the first time in your Lordships' House, he was acquitted. Because of a technicality, the Crown in Canada was granted the right to appeal to a higher court. That process had gone on since May 1990. In March of this year the case reached the Supreme Court of Canada, which denied the appeal and at last Finta was discharged.
That is a very long time for a man who is now 82 years old, who has lost his business, his house, and who is now in reduced circumstances, to go through such a process. I raise this point because if that kind of thing were repeated under the War Crimes Act which we are now discussing—it probably would not because I believe that an acquittal cannot be appealed under the British criminal system—it would be a very severe curtailment of human rights and compares to the dreadful experience which people experienced under the Nazis during the war with whom we are concerned in this exercise.
No other prosecutions have been mounted under the Act in Canada. One man was charged but the proceedings were stayed because of his ill-health. He was 83 years of age. Three other prosecutions were mounted and in two of the cases they were stayed because a witness became ill and unfit to attend the trial although, if there is a recovery, the trial can be started again. In another prosecution the key witness died. In a further prosecution an application was made to take evidence in the former Soviet Union, but that was refused by the trial judge. There has been no success in any of these trials in Canada. I shall not dwell on that any more.
As some noble Lords may know, in Australia an investigation under the Special Investigation Unit of the Attorney-General's department has been set up to go

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into the whole question of their war crimes legislation. In its final report, which took four years to prepare and which cost 40 million Australian dollars, the conclusion was that the unit found that 16 members of the Belgrade special police unit were allegedly responsible for the arrest and torture of thousands of Nazi opponents, including 856 inmates who migrated to Australia. On the evidence gathered, the SIU found it insufficient to sustain charges even though investigators believed that suspects were likely or highly likely to have committed war crimes. The report states that the others were too old or infirm to go to trial. That is the Australian experience.
I do not wish to detain your Lordships much longer. If retribution has to be made, we have to think of some other method. The experience of other jurisdictions would indicate that proceeding as Parliament has decreed with this legislation, which I accept, may not be successful. We have had no prosecutions mounted so far although we have been told that there are a number of possibilities. I believe that it was Bacon who said,
"Revenge is a kind of wild justice, which the more man's nature runs to, the more ought the law to weed it out".
I have no proposals about how we should proceed. As I said, I think the Bill gives some hope that we can at least limit the continuing unpleasant legal situation that exists today. The noble Lord, Lord Jakobovits, quoted the Old Testament. The doctrine that is proposed in Exodus of,
"Eye for eye, tooth for tooth",
has little relevance in this context. If we proceed under the existing War Crimes Act without limitation, we shall be doing an injustice to a hapless group of suspects, probably toothless and failing in eyesight.
7.51 p.m.
Lord Archer of Sandwell: My Lords, like my noble friend Lord Merlyn-Rees, I have to declare an interest as an officer of the All-Party Group on War Crimes, and like the noble Lord, Lord Lester, I am speaking on this subject in your Lordships' House for the first time.
A number of threads have run through the debate. The first touches on the constitutional implications of the Bill. The effect of Clause 1 would be to disapply the War Crimes Act in respect of future prosecutions. Since we know as a fact that no prosecutions have been initiated under the Act—indeed, as I understand it, that was the very reason that the noble Lord, Lord Campbell, was induced to introduce the Bill—it would follow that, in effect, it would repeal the 1991 Act—
Lord Campbell of Alloway: My Lords—
Lord Archer of Sandwell: My Lords, if the noble Lord will forgive me for one moment, I believe that I can anticipate his point. If not, I shall certainly give way to him. The noble Lord asked us to remember that if the Bill is given a Second Reading and makes its way in due course onto the statute book, there will be a period of time—a window, as it were—in which the authorities can act. I understand that that was the reason that the noble Lord sought to intervene. I understand the noble Lord's desire that no time should be lost, but I am bound to say that I doubt whether it is conducive to justice to compel those concerned to initiate a prosecution by a
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specific cut-off point, to clear their desks by a specific stroke of the clock. I would be very concerned if that were the effect of what we have done.
Whatever the merits of the 1991 Act, it is on the statute book and it would be curious to seek to repeal it three years later, particularly in view of the overwhelming majority that it received in another place, unless there had been some material and unpredictable change of circumstance since it was passed. So I listened with great care to what the noble Lord said about how the situation had changed. The answer appears to be that when the Act was passed no one knew that by the end of 1994 no proceedings would have been initiated. I believe that there are two answers to that.
First, it was obvious then that investigations would take some time. Their very nature would involve some time-consuming inquiries and no one would have the authority to undertake them in the first place until the Act was on the statute book. Certainly, as the noble Lord, Lord Beloff, pointed out, the way in which the political situation would change was not then wholly predictable. That may have made some difference. However, no one then wanted to see prosecutions being initiated without proper consideration.
Secondly, it was clear in 1991 that even if some prosecutions had been initiated, not every prosecution would have been initiated within three years. Inevitably, some cases would still be outstanding in December 1994, and if it was then considered right to make provision which would necessarily have that effect, it now seems strange that it was not envisaged that prosecutions might run into 1995.
I turn now to the question of whether it is right to impose a time limit on any category of criminal prosecution. That proposal has never found favour in this country. There is something repugnant in the suggestion that if a criminal can by subterfuge or dissimulation contrive to remain undetected for a sufficient period of time, that should earn him exemption from paying the penalty for his crimes. That is an unattractive proposition when applied to any offence. It becomes less enticing with the seriousness of the offence. When it is sought to apply it to some of the most horrifying offences in history, it surely has few attractions. It was considered by the authors of the Hetherington-Chalmers Report, who rejected it on at least two grounds. First, in paragraph 9.19, they pointed out that it is not applied in the criminal law of this country. We would have to make specific provision for a specific category of case. They pointed out the recent example of a domestic murder that was committed 27 years before the trial. Secondly, in paragraphs 5.41 and 5.45, they pointed out that the United Nations, expressing the consensus of the civilised world, had agreed in 1968 on the Convention of the Non-applicability of Statutory Limits to War Crimes and Crimes against Humanity. In 1974 the Council of Europe took the same view in a similar convention. The Bill would fly in the face of that consensus.
What is not in dispute in this debate—it has been clear from virtually every contribution—is that in each case the court should be assiduous to ensure that no injustice arises from any delay and if, in consequence,

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there are no convictions, so be it. Where there is a doubt, clearly the benefit of the doubt should be accorded to the defendant. That is what the noble Lord appears to contemplate in Clause 2.
Whether there is a doubt depends on the facts of each individual case. As the noble and learned Lord, Lord Bridge, reminded us, it depends partly on the question at issue. In some cases, there may be an issue as to identity. Clearly, the court should have in mind that for any of us, alas, appearances change with the years. I am still surprised at how, encountering people I knew in my youth and have not seen for many years, I am frequently able to recognise them. I am sometimes flattered to discover that they recognise me. Of course, the judge should consider with the greatest care the guidance that was given in the case of Turnbull and warn the jury accordingly. Of course, a jury may be wrong. In considering any category of offence, the only way to ensure that a jury is never wrong is never to allow a jury to convict anyone. I have a great respect for British juries and I am not unduly troubled on that score.
Something may turn on a witness's opportunity for recognising the defendant and on any reason that he may have had for paying particular regard to him. I once heard someone who had spent time in a concentration camp say, "If someone is peering into your face and you know that he has absolute power of life and death over you, you are not likely to forget his face".
However, not all war crimes cases turn on the issue of identification. In many cases the defendant admits that he is the person in question; what he disputes are the acts imputed to him. Then the question may turn, as one of your Lordships indicated, on the authenticity of documentary evidence. We have good reason to know how meticulously the Nazis made and retained records even of their vilest crimes and how when they fell into the hands of Communist regimes, they were obsessively concerned to preserve them. The American courts have subjected such documents to the most scrupulous examination and have found them to be reliable. Of course, each case must turn on the issues and the nature of the evidence. No one would recommend any lapse in the usual standards.
This country undertook the exercise because there was a campaign by certain national groups in this country on behalf of those who had reason to anticipate that they might be accused of war crimes. It was a campaign to resist any extradition or deportation of those who might be accused. It was said in response to that campaign that, instead of returning them, the British Government proposed that they should be tried in this country. It would be curious indeed if, having rejected the other alternative, we then withdrew from this one. That would isolate us from the whole community of nations where the question has arisen, and it would occasion great hurt to the families of the victims.
My noble friend Lord Merlyn-Rees has already quoted what was said by the authors of the Hetherington-Chalmers Report on the point of whether crimes so monstrous should ever be forgotten. Perhaps I may quote something else of which they reminded us.
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It was a quotation issued by President Roosevelt, Marshal Stalin and Mr. Churchill at the Moscow Declaration in 1943. They said:
"Let those who have hitherto not imbrued their hands with innocent blood beware lest they join the ranks of the guilty, for most assuredly the three Allied Powers will pursue them to the uttermost ends of the earth and will deliver them to their accusers in order that justice may be done".
That was said before many of the crimes were committed. I hope that we will not now resile from that obligation.
8.1 p.m.
Baroness Elles: My Lords, it is just about five years since the main debates on the Hetherington-Chalmers Report took place in this House and another place. They were sombre and impressive debates. Whatever view Members of either House took, and whichever way they voted, I think that it can be said, without any fear of contradiction, that every vote was cast while conscious of the great devastation and evil that was committed, and was in no way either for or against the Bill, or could be taken as condoning any of the acts that were committed and that we had debated.
I should like at this stage to welcome the presence of the noble Lord, Lord Lester of Herne Hill, and the noble and learned Lord, Lord Archer of Sandwell, who have joined in these debates, because they have contributed great legal knowledge. I should add modestly that I, too, am speaking for the first time, but do not pretend to add to the great legal knowledge which they are contributing to the debate. I did not speak previously because there were so many distinguished noble and learned Lords speaking in the debate of December 1989. It was not because I was not a Member of the House, and perhaps I should explain that.
It is evident that there will be many more Members of your Lordships' House, as compared with Members of another place, who will have had personal knowledge and experience of the effects of the appalling and evil deeds that were committed and about which we have been thinking tonight. We have had several examples of that. I insist on saying, as some people have said before, that old men forget. The issues through which we lived are never to be forgotten. I was a young WAAF officer at Bletchley during the war in the sector dealing with the German airforce. Of course I am still subject to the Official Secret Acts, but I can say that there were things that passed my desk which I shall never forget.
I went to Crete after the war and saw columns of names of people from the age of six to 76 who were killed by the occupying forces in retaliation. Those, again, are matters that remain indelibly on one's mind. There is no question of forgetting what happened. That is why I put the argument that the War Crimes Act which was passed—I accept that it was passed through the functioning of the Parliament Act—was a piece of legislation which was not necessary to remind us and the world at large of the atrocities and evils that were committed so long ago.
I have a cousin who at the time was a young medical student at the Middlesex Hospital. He, with about 100 others, volunteered to help the Army Medical Corp in

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Germany to deal with health and other related problems. He found himself at Belsen having to clear up some of the appalling situations there. I see that my noble friend Lord Campbell of Croy is not in his place. I should like to tell him that those young medical students had to decide who was fit enough to be kept alive. Those for whom they did not have enough medicines they had to leave to die. Those are things which a young medical student does not forget. Of course the situation at Belsen was one of the most appalling.
To return to the Bill, I should like to support it. It limits the time within which these prosecutions can take place, but the memory of the acts and the record of horror —I repeat this—is not eliminated. My noble friend Lord Campbell of Alloway has argued fully and cogently for such a limitation to be imposed for these particular cases, and he has dealt with the legal and moral issues. I believe that I am right in saying, in reply to what my noble friend Lord Beloff said in a very moving speech, that no one would now be able to evade prosecution by coming to this country because of the Geneva Conventions Act 1957. So even if people in the Balkans were to read Hansard, we need not worry that they would be able to escape to this country to avoid prosecution.
Having dealt with those issues, and with so many other noble Lords having dealt with vital and crucial issues, I wish to deal with two or three practical matters. I believe that it is accepted that all the Scottish cases have been dealt with and withdrawn. According to the Answer given by my noble friend Lady Blatch in this House on 28th November, I understand that 233 of the total of 369 cases have been investigated fully and that the CPS has decided that they will not be proceeded with. Secondly, 15 of the 34 remaining cases are still to be investigated and nine are with the CPS. I have given my noble friend the Minister notice of this question: Has there been any common factor in the investigative reports of the 223 cases which have led the CPS to advise against prosecution and which would be likely or certain to apply to the remaining 24 cases? That is important when we consider the effects of the Bill. I ask that also because I noticed in her reply that there are three cases into which the investigations started only this year. That would be relevant to whether the proposed statute of limitation would apply to those cases and which might result in a prosecution.
My second point relates to costs. I realise that this is a delicate subject and that people may think that we should not be talking about finance when we are discussing the tragedies and evils that have been committed, but it is relevant to today. The cases, in which there has not been one prosecution, have cost over £5 million so far. Those of us who sometimes come into contact with the Metropolitan Police, as opposed to the Metropolitan Police War Crimes Unit, and who are so impressed with the valuable work that they do when dealing with crime on the streets and in people's houses know that they are short of financial resources. Is it therefore justifiable to spend that kind of money on these special cases in which most noble Lords have led me to believe that even one prosecution is unlikely.
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Could not that £5 million be better spent by the police authorities in dealing with today's crimes and seeking to protect present and future victims of crime?
The CPS is heavily burdened in reading through the vast number of documents which result from the investigations. They have led it to advise the Attorney General that there should not be any prosecutions. Is it right that that service which is so often criticised—I must confess that I, too, have criticised it from time to time—for failing to be efficient and occasionally failing to be at court, should be burdened by this extra large and important task when the results are again going to be negative?
No one condones the acts that were committed. Nobody who lived during that period will ever forget them. I do not believe that anyone who hears the debates in your Lordships' House, or anywhere else, or who reads a newspaper will ever forget them. However, I believe that the funds and the people who are being made available to deal with the cases should be diverted to deal with today's problems and not left to deal with those of 50 years ago.
8.10 p.m.
Earl Attlee: My Lords, I echo the noble Baroness's final comments about the horror of these crimes. However, I am perhaps one of the youngest Members of your Lordships' House and I believe that we must bear in mind that the majority of any jury may be in the same position. They will not have been alive when these offences were supposed to have been committed.
Difficult moral and ethical questions are posed. I read the Second Reading debates of the original War Crimes Act in Hansard. I found them interesting but the content was heavy. The arguments against the War Crimes Act appeared to be stronger.
I have also listened to many Starred Questions in your Lordships' House and have been dismayed at the reluctance of the various Ministers to give an indication of the age of the youngest suspect. That cannot conceivably be due to a poor brief; it must be possible to anticipate such a simple and obvious question. Clearly, many suspects will be too old or too feeble to plead. Will the Minister say how old the youngest suspect is?
I support the noble Lord's Bill because I do not believe that anyone will be convicted or even prosecuted under the Act. I do not rely upon my own judgment but that of your Lordships' House when debating the original Bill.
8.12 p.m.
Lord Dacre of Glanton: My Lords, after the debates on the War Crimes Bill in 1991 I read in the press about those Peers who believed that time carried away guilt. I do not believe that anyone here today holds that view. We all agree that the crimes to which we are referring should be neither forgiven nor forgotten. They are unexampled in modern history and it is most important that we should remember them. Our generation will never forget them because they passed through our consciousness. But we want them to be remembered by later generations. If we are to achieve that we need an

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emphatic gesture. Several noble Lords have spoken as though these trials will be that gesture. I do not believe that. I believe that the trials will send an indistinct message. Perhaps they will never take place; as we know, none has taken place yet. Time is passing and perhaps none will take place.
I believe that a true history is the proper means of recording these horrible events. The true history is being constructed, I may say, to a large extent by the Germans themselves. When I say that the crimes should never be forgiven I refer to the authors of them and not their descendants who are guiltless in that respect. I should like the real record of this awful period to be in a correct and accurate history and not in muddled trials leading nowhere.
There are enemies of a true history. We all know about the historical revisionists in France, in America and in this country. There were none in Germany but perhaps the situation has changed. Such people wish to argue that these crimes did not take place. There are also well-meaning people who, through failure to understand their true nature and to distinguish between extermination camps and concentration camps, sometimes play into their hands. I wish to ensure that the historical record is clear and emphatic and that it is passed on to the next generation. I do not believe that the lesson will be conveyed by trials if, in fact, they ever take place.
The noble Lord, Lord Mayhew, has made many of the comments I intended to make. I take the liberty of emphasising one point. We heard about the trials which foundered in America, Canada and Australia. But the classic case is that of Ivan Demjenjuk. He was identified as Ivan the Terrible of Treblinka. Inquiries into the case began in 1975. The process dragged on. He was denaturalised in America in 1981 and after a further five years he was extradited to Israel. Two years after that he was sentenced to death. Three years later, in 1991, new evidence was produced which totally destroyed the case that had been based on the evidence of 13 Israeli witnesses. They saw him not on a television screen but face to face in Israel. They all swore, allegedly independently, that he was the man whom they knew. What is the use of people saying that if one has once looked into the eyes of an extermination camp guard or torturer one will recognise him wherever one sees him? Here were 13 Israeli subjects who had looked into the face of Ivan the Terrible in Treblinka and said that they recognised him. In fact, they had "recognised" a man who had never been in Treblinka in his life.
I do not believe that there will be any effective trial. By the time the evidence has been collected, the defence has had time to prepare its cases and the trials have been mounted, all such people will be dead. What will be gained? I do not believe that justice or even the monumental record which people want will be achieved. What will be left will be a fuzzy impression and, to a great extent, acquittal, as was said by the noble Lord, Lord Houghton of Sowerby.
The monument that I should like this generation to leave to the next generation, in order to show how thin is the crust of civilisation and how easily, if the rule of
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law, accepted morality and international order are allowed to lapse, the beast in man can emerge, will not result from the kind of justice that well-meaning people are seeking through trials which will not be effective. The trials may achieve condemnation but they will not leave an effective impression on the next generation. That is what really matters. We need to make an emphatic gesture which will last and make an impression. We do not want a muddle such as will emerge from the trials which are envisaged.
Noble Lords have referred to previous debates in this House and the other place and have said that Parliament voted by an overwhelming majority in favour of the Bill. The noble Lord, Lord Jakobovits, said that, as did other noble Lords. But this House is part of Parliament and this House voted the other way by a substantial majority. Therefore, Parliament did not vote in favour of it by a substantial majority. The House of Commons did but that is only half of Parliament, whatever the respective powers conferred by the constitution. We know that votes in the other place are subject to more discipline and are less independent than they are in this House. That is the message I should like to leave. I support the Bill of my noble friend Lord Campbell of Alloway.
8.20 p.m.
Lady Saltoun of Abernethy: My Lords, like other noble Lords, I have never questioned the heinousness of the crimes, the perpetrators of which the War Crimes Bill was designed to bring to trial. I have never questioned that they took place because on the morning after the press got into Belsen, I saw the newspapers before my parents could hide them from me.
Having said that, I support the Bill. There is very little that I can add to what the noble Lords, Lord Campbell of Alloway, Lord Mayhew, Lord Houghton of Sowerby, Lord Dacre of Glanton, Lord Shaughnessy and the noble and learned Lord, Lord Bridge of Harwich, have said. I support it because I believe that it is very doubtful, after the passage of so much time, whether it is possible for any of the suspects to receive a fair trial.
If we had a statute of limitation in this country we should not be discussing this matter now. I do not know why we do not have that. It may be because Article 4 of the Magna Carta says that justice should not be prolonged, meaning postponed. Since we disregard that, perhaps we should consider introducing a statute of limitation in this country for murder cases. Meanwhile, Clause 1 would provide such a statute in this particular context.
Clause 2 introduces one of the most sensible and practical procedures of the Scottish judicial system in the context of prosecutions under the War Crimes Act. I wonder whether those procedures could not be adopted usefully in England as a general rule.
8.23 p.m.
Lord Cochrane of Cults: My Lords, I am grateful to my noble friend Lord Campbell of Alloway for introducing this Bill. It seeks to rectify a situation which he has described in detail, all the problems which it engenders, and the injustices that it may cause. It is doubtless causing anxiety among many people who, as

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matters stand at present, are innocent and elderly. I do not know whether or not they are innocent but I do know that when I first spoke in your Lordships' House in April 1991 I found it a terrifying experience. I spoke on this subject for the first time in your Lordships' House after the noble and learned Lord, Lord Shawcross. The House was packed, unlike now, and I did not know whether I should be able to cope with a problem of this complexity in the presence of so many experts.
But with the passage of years—and how the years have gone by—the difficulties which I tried to address then about ensuring a fair trial have not diminished. The problem remains intractable and I can see no solution.
In replying to my noble friend on 28th November, my noble friend Lady Blatch said, quite correctly, that there is no limit on the time which needs to elapse before a charge of homicide or murder can be laid. As I see it, that is perfectly true. But what was not said was that it derives from common law and I believe that common law never assumed that anybody would try to lay a charge some 55 years or thereabouts after the events are alleged to have taken place. There is no doubt that a great many of those crimes did take place. But the passage of time is a great impediment.
Perhaps I may remind my noble friend Lady Blatch of another circumstance for which the law made no provision—the opening of shops on a Sunday in Scotland. That was never considered necessary but, with the passage of time, shops opened in Scotland. It was not provided for earlier because it was deemed to be unthinkable. I believe that the same applies to the laying of charges of murder or homicide after very many years. That is why I do not find that particular argument very convincing.
On the last occasion on which this matter was debated, my noble and learned friend Lord Hailsham of Saint Marylebone said that he knew of no case where a charge of murder had been preferred after 27 years. Earlier today I had an opportunity to speak to the noble and learned Lord, who confirmed that as far as he knew—with the qualification that he had not researched it in detail but nobody had complained in the interval—27 years still remained a fair answer.
We are a long way from 1st September 1939. Unlike the noble Lord to whom I was speaking at dinner, on '1st September 1939 I was 12 years, 11 months and one week old. I can remember it. But because of that distance of time there are problems of identification: whether the chap was there, if it happened, and whether he did it.
That was brought to my mind the other day at a dinner given for the former pupils of the prep school which I attended. The first year that was truly represented was 1935 and there were four of us. I had not seen three of them since 1939, as far as I can tell within the limits of evidence and recollection. I did not recognise them and, indeed, I hardly recognised their names until they added a few supporting details. One of the four I had seen once. It is an awfully long time ago. Okay, we were young then and we have matured. If people want to know how I have matured, they can look at my picture in Dod's, which was taken in 1957. It is the best one that I have. Again, a chap may confess and
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say, "Yes, of course I did it", but has he gone dotty, has it been screwed out of him, or does he want to get his name in the Sun? I do not know.
On the day to which I alluded earlier noble and learned Lords remarked, as they have again this evening, on the retrospective enlargement of the jurisdiction. Is that right? I do not think that it is. If we count back, we are now some 55 years from September 1939. Let us go back, those of us who were alive then. I made this argument in my maiden speech and it attracted a modest degree of approbation and I hope that I shall be equally favoured tonight. We can perhaps go back to 1884, the year after my father was born. I looked it up and saw that, in February of that year, General Gordon was sent to the Sudan. In November the Mahdi occupied Omdurman. The annual Army Act was passed which set the billeting allowance for an ordinary soldier at tuppence halfpenny.
I am now convinced, as other noble Lords and other noble and learned Lords have said, that it is time to leave the problem alone. All that can be said has been said. For my part, I believe that it is now time to leave this awful affair for judgment by a greater power than ourselves, as we in time will face in death.
8.30 p.m.
Lord Hylton: My Lords, the noble Lord, Lord Mayhew, and the noble Lord, Lord Dacre of Glanton, both referred to the case of Mr. John Demjanjuk. It so happened that I found myself in January 1992 having breakfast in a hotel in Jerusalem with his American defence counsel. At that time, Mr. Demjanjuk had been convicted in a show trial in Israel of being, as has been mentioned, Ivan the Terrible, a Nazi concentration camp guard in the Ukraine. I am glad to say that that man was later cleared on appeal in Israel. It turned out to have been a case of mistaken identity.
I also happen to have been in contact with members of the groups known as the Birmingham Six, the Guildford Four and the Ulster Defence Regiment Four. The first two cases were heard before juries in England, while the third case was heard before a judge alone in Northern Ireland. All three of them were severe, serious cases of miscarriage of justice. They just go to show that, even in the most esteemed systems of justice, things can go wrong. Indeed, they can even go wrong when the cases are recent and are being tried relatively soon after the events in question.
In my view, there should be a worldwide period of limitation on the prosecution of serious crimes, including murder and genocide. I would suggest a period of 30 years. After all, that is the equivalent of one whole generation. To adopt such a period would be to follow the good precedent set by Belgium.
I trust that the Bill will receive a Second Reading. I support it at the same time as supporting the prosecution of recent war criminals for offences committed in such countries as Croatia and Bosnia. As a layman, I support

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the noble Lord, Lord Campbell of Alloway, because I cannot see how anyone in the circumstances that we are discussing can get a fair trial after 50 years.
8.33 p.m.
Lord Gridley: My Lords, I have not come to your Lordships' House today to be critical of the Government's actions in pursuing those who, in their opinion, were responsible for war crimes. However, I hope to be constructive and I am critical of the delay that has occurred in that operation. Looking back over that period, it seems to me that, basically, the Second World War was about preserving territorial boundaries, the preservation of people when under attack and the preservation of the freedom of those who were suffering in that respect. We also went to war 65 years ago to rid the world of Hitler's Germany and the brutal power wielded by his secret police over the European territories invaded, conquered and occupied by the Germans.
I speak with an interest in the matter because as an hereditary Peer one Christmas I was looked after by Tenno Heika the Emperor of Japan when I was interned in Changi Goal. He sent us some of his excellent brandy. Unfortunately some of us were suffering from sores due to malnutrition, so it was handed to our doctors to use to treat us.
In tonight's debate we have not considered whether it would be normal for people who are active, or those who are rather slow in pursuing obtaining evidence, to bring a suitable case against people in Scotland or Britain which would be evidence of past action during the war.
Also of relevance is the fact that one must realise that the secret police operated in Hitler's Germany. His so-called method of government was to use secret police in his own territory. When he occupied the territories of northern Europe, he brought those individuals with him. The peoples of occupied Europe suffered from the action taken by him in those territories, which lasted for six years until we had our victory.
When victory came I was amazed to find that those in occupation had used that kind of government in a Country. Many people were in dire disorganisation; they were accusing one another of giving evidence against each other. Indeed, there existed grave disorganisation generally.
It seems to me that the only way we can get some evidence—that is, if it is obtainable and reliable after 50 years—would be from those who had suffered. That is where the evidence would be. It would be extremely difficult to get it.
I am not privy to what is going on in Scotland or to the difficulty that people are finding there. However, generally it is very unwise or very unusual for the British to be slow in bringing charges against such people after a lapse of many years. I do not think that they would stand for it. I do not believe that it is acceptable in any court of law in Britain to delay such an action against a person who has to be tried. The
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evidence must be brought against that person. Then he is either cleared and goes free, or he is sentenced for what he has done.
I wrote a great deal about what I was going to say. However, I have tried to meet the spirit of what has been said this evening. Some of the speeches have been quite brilliant. I do not feel capable of arguing the matter from the legal aspect. I can simply speak from my experience of those things about which I have felt so strongly since I have been back in this country. I see the wonderful things that are done or that people try to do and how we carry out our affairs generally—except, of course, what happens in the press. It is a fact that this is a fair place to be.
I remember when the victory came, I went outside and Mountbatten was there in all the glory of his naval uniform. A great load left my mind. There is nothing more terrible than to be defeated, to lose one's freedom and not to know what on earth will happen to get one out of the situation. How different at a time of victory! I am eternally grateful for the way in which we were rescued and for the action that this great country took in bringing that about. I only hope that the debate this evening, which I think and hope will be useful to the Government, will enable them to make things move faster than they are at present.
I praise my noble friend Lord Campbell of Alloway for having brought this matter to our attention again. I warmly support what he has said. I think that we must make some effort to take a decision on this matter and either convict people of crimes which they have committed or let them go free. That is the way that Britain carries out its affairs. I warmly hope, with all my heart, that we will adopt that course.
8.40 p.m.
Lord Belhaven and Stenton: My Lords, in supporting my noble friend Lord Campbell of Alloway, I should like first to say, as other noble Lords have said, that I have no wish to detract in any way from the wickedness of the crimes which we are discussing. I wish that the perpetrators had been caught quite a long time ago; but as many noble Lords have said, "caught" is the relevant word here.
In the 16th century I believe that it was a custom occasionally to dig up corpses and to try them. I suggest that if we keep this up much longer that is what we may have to do in this country. But, seriously, I ask how many more years will have to pass before we bury this matter and take more note of what is happening now in many parts of the world. However, if we must go back 50, 60 or 70 years we will find that Germany was not the only European country to practise mass terrorism. Lenin is quoted—at a period before the events in Germany—as having said,
"Do you imagine that the victory can be ours without the most extreme revolutionary terror"?
Terror there was. And after Lenin, it got worse and worse.
It is astonishing to me, and perhaps to other noble Lords, that in the course of these investigations we are discussing —I apologise if I am wrong—the help of the KGB was enlisted. The KGB, as your Lordships well

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know, is exactly the same organisation as the NKVD, Cheka, OGPU and many other acronyms, but it is one still-existing organisation. I have to say that one might as well, had things turned out otherwise, have enlisted the help of the Gestapo in the investigation of Soviet crimes.
The Hetherington Report gives a brief account of the activities of the NKVD in 1939–40 in the Baltic states and eastern Poland. The full horror of these activities stretches the imagination of those of us who have lived under civilised regimes. I would tell your Lordships in this context that my Polish mother-in-law, having seen her father and many others murdered by the NKVD, fled to the German occupied area of Poland as she thought it was safer than the Russian occupied area. It was not exactly a good area to go to but it was the best thing she could find. That gives one an idea of what it was like in the Soviet occupied area.
My point is this: at that time, crimes were committed by the German and Soviet authorities which beggar belief. Every day nowadays in the Ukraine and other areas of the former Soviet Union more evidence of atrocious Soviet crimes is coming to light. The mass graves at Katyn of Polish soldiers are by no means unique, and evidence of mass murder is being dug up everywhere. Yet no one has suggested that ex-members of the NKVD should be investigated. Some may be living here but not a finger has been lifted against them. Their crimes were as bad or worse as those of others, but they were on the winning side. Soviet judges actually sat on the Nuremberg tribunal. Perhaps they knew something about war crimes.
We would do far better to pay more attention to what is happening in the world today. On Monday the noble Earl, Lord Winchilsea, asked an Unstarred Question on Moroccan atrocities in the Western Sahara. This year appalling atrocities continue to be committed by countries most of which are members of the United Nations. There is Tibet, Rwanda, Bosnia and East Timor to mention but a few. There is a long list. It is nearly 50 years ago since the Gestapo and SS committed their last crimes. The perpetrators are old and almost impossible to identify. I believe we ought now to leave the judgment to Almighty God.
8.45 p.m.
Lord McIntosh of Haringey: My Lords, as in all debates on Private Members' Bills I should make it clear that the Opposition does not have a collective view and that I speak for myself personally.
What is curious about this debate is that although noble Lords have come to very different conclusions, they are really not in disagreement about the fundamental facts behind the issue. No one disagrees with our recognition of the horror of war crimes, particularly not the noble Lord, Lord Belhaven and Stenton, who wishes to extend the discussion beyond German war crimes. He is quite right to do that; but we are talking about German war crimes, and no one believes that the horror of those crimes should go unrecognised in any way.
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I do not believe that anyone is departing from the principle that crimes of this sort should, if possible, in principle be pursued indefinitely, and from the principle that there should be no statute of limitations for crimes of this kind. If convictions can be achieved, the law should make that possible. That is why I believe that the War Crimes Act 1991 was thought to be unwise by a number of people—I am not talking about this House—but it was not thought to be wrong in principle. It was not thought to be wrong in principle to pursue war crimes. At the same time, I sense, even among those who support the War Crimes Act with most conviction, that they feel there will not be any convictions arising from it. That is certainly my view. I believe we are embarking on this exercise because we believe it is right to do so and not because we think that anyone will be convicted, and certainly not from any view that it is desirable to put someone aged 80 in prison for a period of, in theory, 25 years, or whatever length the life sentence may be in their case. Therefore we are not looking at the results; we are looking at the principle behind pursuing war crimes indefinitely.
I have to say that in those circumstances, with those options, I opt for pursuing the principle that we do not impose a statute of limitations on war crimes which we would not impose on any other crime. I support the view that the War Crimes Act 1991, however imprudent it may be in judicial terms, ought not to be overturned. Let us be clear that the Bill of the noble Lord, Lord Campbell of Alloway, would overturn the War Crimes Act. If it were carried, there would he no War Crimes Act.
I now turn to my final argument for disagreeing personally with this Bill, and for wishing that Clause 1, certainly, should not succeed. I have no legal expertise to enable me to assess the virtues of Clause 2 of the Bill. My final argument is as it was when I voted for the War Crimes Bill in 1991, and in the previous Session. This Bill was carried by an overwhelming majority on a free vote in the elected Chamber and I do not think it would be right for us to seek to overturn it now by a Private Member's Bill.
8.49 p.m.
Baroness Blatch: My Lords, my noble friend Lord Campbell will know from the Answer I gave to his Question on 28th November 1994 (at col. 473 of Hansard) that his Bill raises a most important point; indeed a fundamental question of principle. The title of the Bill explains that a purpose of the proposed legislation is to place a time bar on the institution of proceedings under the War Crimes Act 1991. The 1991 Act, as noble Lords will recall from the lengthy and detailed debates in Parliament during the passage of that legislation, is about acts of murder, manslaughter, or, in Scotland, culpable homicide which were committed as war crimes in Europe during the Second World War. Such offences are of the gravest kind it is possible to imagine. That, as the noble Lord, Lord McIntosh, said, is agreed all over the House, whatever side of the debate noble Lords are on. We do not have a time bar in the United Kingdom on bringing charges for murder, manslaughter or culpable homicide and that applies

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irrespective of the circumstances in which such acts are committed. Clearly, therefore, the proposal in the Bill now before us—that, in effect, an exception should be made for such acts committed as violations of the laws and customs of war—requires more than usually careful attention.
Before I go to the detail of the Bill, I do not think that it will come amiss if I remind noble Lords briefly of the background to the War Crimes Act and of the Government's policy on war crimes in relation to the Act. Just over five years ago, the Report of the War Crimes Inquiry (Cm 744) was presented to Parliament. That inquiry was conducted by Sir Thomas Hetherington and Mr. William Chalmers at the request of my right honourable friend the then Home Secretary. The inquiry had been appointed following allegations that persons now living in the United Kingdom committed war crimes during the Second World War. The inquiry was asked, among other things, to obtain and examine relevant material relating to the allegations and to consider, in the light of the likely probative value in court proceedings of the relevant documentary material and the evidence of potential witnesses, whether the law of the United Kingdom should be amended in order to make it possible to prosecute such persons for war crimes.
The inquiry recommended that our courts should indeed be given jurisdiction over such crimes and that consideration should be given to the investigation of a number of cases and to possible prosecutions. The report of the inquiry was published in June 1989 and recommended action as soon as possible. Soon after, in March 1990, the Government introduced into Parliament the War Crimes Bill, now the War Crimes Act.
The Bill proposed, in line with the recommendations of the inquiry, that our courts should be given jurisdiction over murder, manslaughter and culpable homicide committed as violations of the laws and customs of war during the Second World War in Germany or German-held territory by people who are now British citizens or resident in the United Kingdom, the Channel Islands or the Isle of Man.
The Act makes clear that such people may include those who were not British at the material time. I emphasise this because our courts already had jurisdiction over murder, manslaughter and culpable homicide committed abroad by British nationals, by virtue of Section 9 of the Offences Against the Person Act 1861 and Section 6(1) of the Criminal Procedure (Scotland) Act 1975, which was a consolidating statute incorporating the corresponding provision in Section 29 of the Criminal Justice (Scotland) Act 1949. Indeed, our courts already had jurisdiction over grave breaches of the 1949 Geneva Conventions, including wilful killing and torture, wherever in the world the offence was committed and whatever the nationality of the offender, by virtue of the Geneva Conventions Act 1957. But that Act did not apply to grave breaches committed before its enactment.
I should also emphasise that the War Crimes Act did not create any new offences. Violations of the laws and customs of war have long been criminal according to
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the general principles of law recognised by this country and all other members of the community of civilised nations. What the Act did was to make it possible to proceed against people who, at the time of the alleged war crimes, did not have British nationality and who would, therefore, have escaped liability for prosecution before the Act came into force.
The Bill was approved in another place on a free vote by a large majority—to be precise, by 273 votes to 60. Noble Lords will recall that the Bill was then denied a Second Reading in this House, in June 1990, by 207 votes to 74. The Government then reintroduced the Bill in identical form in another place in March 1991, where it was again approved on a free vote, and again by a large majority—by 254 votes to 88. It was subsequently denied once more a Second Reading by noble Lords, in April 1991, by 131 votes to 109. The Bill was enacted in May 1991 through operation of the Parliament Acts 1911 and 1949.
These details of the passage of the Act make clear that the legislation aroused strong feelings and passions—all of which have been illustrated again today. But the War Crimes Act is now law. The police and the prosecuting authorities do, therefore, have a clear remit and clear responsibilities to investigate and prosecute, as appropriate, where there is information that people now living in the United Kingdom committed war crimes in Europe during World War II. The Government stand fully behind the principle of the Act. The Government's declared policy is that those who committed most terrible crimes in Nazi-occupied Europe during the Second World War should not be able to use the privilege of residence in the United Kingdom to escape justice.
I should make clear that the Hetherington-Chalmers Inquiry was just that—an inquiry. It was not a criminal investigation. Investigations with a view to possible prosecutions were not necessarily appropriate or possible until the Act came into force. It came into effect on Royal Assent in May 1991. Investigations began later that month and it was understandable that the police and the prosecuting authorities should have wanted to proceed without delay. They had a formidable task ahead of them. The report of the Hetherington-Chalmers Inquiry included recommendations that investigations be undertaken in no less than 124 cases known to the inquiry team and, both before and after the coming into force of the Act, further information was received. The Government accordingly ensured that the police were resourced to undertake the necessary investigations. These were thought likely to take some time, not only because inquiries had in some cases to be made far away in unfamiliar territory, such as in parts of the former Soviet Union, but also because the events to be investigated took place a long time ago. But there was a clear expectation when the Act came into effect that information that war crimes had been committed should be acted on. As I said in response to my noble friend's Question on 28th November, there is no statutory time bar for laying charges of murder, manslaughter or culpable homicide in the United Kingdom and this applies no less where such acts are committed as war crimes.

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Since May 1991, the Metropolitan Police War Crimes Unit has investigated 369 cases in England and Wales. Of these, a further 112 people who were investigated are now dead. Further to my Answer last week to my noble friend Lord Campbell of Alloway, I understand that 23 people are now being investigated, of whom nine are being considered for prosecution by the Crown Prosecution Service. That leaves 234 cases which have been dropped.
There are no investigations at present in Scotland or Northern Ireland. I cannot, of course, say what decisions will be taken regarding prosecutions or when decisions will be reached. Such matters are for the independent consideration of the Director of Public Prosecutions and the Attorney-General. But the figures clearly show that substantial progress has been made with the investigations.
It is against that background that I turn to the detail of the Bill put forward by my noble friend, Lord Campbell of Alloway. The Bill has two substantive clauses. The first clause provides that no prosecutions shall be instituted for offences in relation to the War Crimes Act 1991 with effect from the coming into force of the Bill, if enacted. Such a provision, if it were passed into law, would render the War Crimes Act ineffective. The clause would be tantamount to repeal of the 1991 Act and would, therefore, mean that people who did not have British nationality at the material time would again be immune from prosecution.
Parliament did not intend at the time the War Crimes Act was enacted that the police and prosecuting authorities should have a prescribed period of time in which to undertake investigations into war crimes and bring charges as appropriate. That point was well made by the noble and learned Lord, Lord Archer. The police and prosecuting authorities were enabled to see their work through to a conclusion, and, as I said, they have already made substantial progress.
But in the context of Clause 1, I must return again to the point of principle to which I have already alluded. I question whether Parliament would ever wish seriously to contemplate a time bar on institution of proceedings for such serious offences as murder, manslaughter and culpable homicide. To do so would be viewed with the utmost concern and alarm. Clause 1 of the Bill does not, of course, propose introduction of a time bar for such acts generally but is nonetheless dangerous in that its effect would be to make an exception for people who did not have British nationality and committed uniquely horrible acts against humanity in Nazi-occupied Europe.
Clause 2 of my noble friend's Bill would confer jurisdiction on the Criminal Division of the Court of Appeal to consider appeals against refusals by the Crown Court to dismiss charges, on grounds of delay or abuse of process, by persons indicted for crimes by virtue of the War Crimes Act 1991. The function of the Criminal Division of the Court of Appeal is to hear appeals against convictions after trial. It is not to determine questions of jurisdiction during trial. That is not to say that where a person has been indicted, whether or not on charges in relation to the 1991 Act, he cannot challenge the indictment. He can, by applying for the proceedings to be stayed on the ground of abuse
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of process, including delay. If such an application were refused, there would be the opportunity to seek judicial review of that decision in the High Court. Like Clause 1, therefore, Clause 2 proposes that in war crimes matters we depart from general criminal law and procedure. Both clauses, therefore, if enacted, would set precedents whose effects would be far-reaching.
My noble friend Lord Campbell said that he aimed, through Clause 2, to put England and Wales on a par with Scotland. But I have to say to him that the different legal systems make such comparisons rather misleading. In particular, Scotland does not have the same system of judicial review as we have in this country.
I think I can fairly say that this Bill is not necessary to remove any possible injustice which might be thought to arise from operation of the War Crimes Act 1991. A prosecution will not be brought on a bare prima facie case. Rather, the test will be whether there is a realistic prospect of conviction. Furthermore, proceedings by virtue of the War Crimes Act may be instituted in this country only with the consent of the Attorney-General. If proceedings are instituted, then, as I explained, the Crown Court has inherent jurisdiction to stay those proceedings on grounds of abuse of process, including delay. But we have to think also of the enormity of war crimes and of those who suffered at the hands of the perpetrators of such crimes. The passage of time and the difficulties in investigating these crimes do not diminish the wrong that was done nor the need, now that the 1991 Act has been enacted, to investigate the evidence as in any other case of murder or manslaughter.
My noble friend Lord Dacre challenged claims that Parliament had agreed. Each time I mentioned the War Crimes Act I referred to it as having been passed by Parliament. It is, of course, true that the House of Commons voted overwhelmingly for it, as I said. But the Parliament Act is a proper part of our process. It was invoked and was accepted, and that ought to be an end to it. I believe that technically one can state that Parliament has had its say.
The question was also asked: could not the money be better spent or put to better use? I have to refer to the overwhelming commitment by the House of Commons and the invoking of the Parliament Act, including the provision of the necessary money for the war crimes legislation. The question of costs in bringing criminal procedures has to be weighed against the gravity of the offences alleged. There can be few, if any, graver allegations than those being dealt with under the War Crimes Act.
The protracted and complicated nature of the inquiry was known to Parliament when the Act was passed. It was also recognised that officers would have to visit scenes of crimes and witnesses in many different countries. It was known that it would be expensive and all matters were reflected in the budget that was set at that time. The same considerations apply to the Crown Prosecution Service which, of course, is the responsibility of my right honourable friend the Attorney-General.

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The noble Earl, Lord Attlee asked whether I could tell him the age of the youngest person under investigation. I am afraid that I am not able to give him that information but I shall write to him if it should become available to me.
My noble friend Lady Elles asked whether there was any common reason for decisions not to prosecute. There are no common reasons for decisions not to prosecute which can be identified. In some cases, there was a lack of credible eye-witness evidence of the alleged crimes; in others, no allegation of murder or manslaughter was made. In some cases, death has intervened. Each case currently under investigation will be considered on its merits.
This is a Private Member's Bill and the Government would not therefore propose to vote against it. But, as I have explained, the provisions of the Bill would have profound implications which the Government do not feel able to accept.
Lord Bridge of Harwich: My Lords, before the noble Baroness sits down, may I ask her one question on a matter of procedure? If I heard her rightly, she said that a decision of a trial judge in a Crown Court is subject to judicial review. My understanding is that that was the law, as pronounced by the divisional court, until the recent decision of your Lordships' House in its judicial capacity to which I was a party and in which we overruled that decision. Unless our decision has in turn been departed from, the present law, as I understand it, is that a decision on an application to stay a prosecution on the grounds of delay or abuse of process is not open to judicial review in the Crown Court. It was for that reason that I gave such wholehearted support to
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my noble friend's Clause 2, so that the ultimate responsibility for such a decision should rest with three judges and not with one.
Baroness Blatch: My Lords, I am incredibly diffident about taking on the noble and learned Lord, Lord Bridge, on the matter. My understanding is that the judicial review process applied. I shall, of course, write to the noble and learned Lord and make my reply available to the House when I have taken proper technical advice on the matter.
9.7 p.m.
Lord Campbell of Alloway: My Lords, this has been a good-natured, balanced debate on a very serious subject. At this hour of night I believe all noble Lords would agree that it is-appropriate that I should thank all those who spoke for and against Clause 1—even the noble Lord, Lord Lester of Herne Hill, who perhaps when he reads the Official Report tomorrow may think that he went a bit over the top.
My heart bleeds for my noble friend the Minister, because the Home Office did not do its homework properly on Clause 2. Anyway, she could not have answered many of the arguments in my speech because obviously her brief was written before the speech was made.
All that having been said, we come to the point that there has been a balanced debate on Clause 1, and nobody has spoken against Clause 2. The two are not mutually dependent. They require separate consideration. I commend this Bill to the House.
On Question, Bill read a second time and committed to a Committee of the Whole House.
House adjourned at nine minutes past nine o'clock.