Lords Sitting of 24 January 1994

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

Air Transport Duty
Lord Brabazon of Tara Lord Brabazon of Tara asked Her Majesty's Government:
Whether they consider that the introduction of air passenger duty will distort competition between the airlines, the cross-Channel ferries, the Channel Tunnel and British Rail InterCity.
The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley): My Lords, the choice to fly rather than use a train, ferry or the Channel Tunnel depends on a variety of factors, including price. The Government do not consider that an extra £5 on the price of an airline ticket will materially affect these decisions.
Lord Brabazon of Tara: My Lords, I am grateful to my noble friend for that reply. I should perhaps declare an interest with an airline, although it is one that will not have to pay this duty. But can my noble friend tell me why someone who chooses to travel to Edinburgh or Glasgow by InterCity, or to Paris or Brussels by the new Channel Tunnel, should pay no tax, whereas somebody who chooses to make exactly the same journey by air has to pay the new duty of £5 or £10?
Secondly, will my noble friend say why my right honourable friend the Chancellor in his Budget Statement on 30th November said that,
"air travel is under-taxed compared to other sectors of the economy. It benefits not only from a zero rate of VAT; in addition, the fuel used in international air travel, and nearly all domestic flights, is entirely free of tax".—[Official Report, Commons, 30/11/93; col. 932.]
Can my noble friend tell me what taxes and duties the airlines do not pay which railways and the Channel Tunnel do pay?
Lord Henley: My Lords, while it is true that there are no taxes as such on trains, we believe that taxing the railways would create other, more significant distortions. It would also mean taking into account some very short journeys where such tax would be disproportionate. We therefore believe that it is appropriate on these occasions to tax flights but not railways.
Lord Eatwell: My Lords, is the Minister aware that we support him in his desire to eliminate distortions in transport pricing; and is it not clear that the greatest distortion in British transport pricing is the unlimited access which the road transport industry has to the roads, while, bizarrely, British Rail is forced to fund out of current income investment in the permanent way? Is that distortion not set to increase with the folly of privatising British Rail?
Lord Henley: My Lords, that is another question. This Question relates to taxation on air flights.
Baroness Gardner of Parkes: My Lords, at every overseas airport that I have departed from the tax is 20 US dollars a head, so does the Minister have a comparison with other countries? Is their tax not considerably more than the tax that Britain will levy?
Lord Henley: My Lords, I could give my noble friend details at some length of all the duties charged by a number of different countries. For example, Denmark charges £6.50 on all international departures. That is the closest parallel to the United Kingdom tax. Belgium charges up to £9. Ireland adds £5 on passenger tickets in the Republic for sea and air travel to foreign destinations. I could go on. Some levies are a great deal more but, as I said earlier, we believe that £5 will not unnaturally distort the market.
Lord Marsh: My Lords, does the Minister accept that of the airports that he has just listed, virtually none has significant internal transport? The air transport system within the United Kingdom is an intense daily service used by a very large number of people. It competes with InterCity.
Lord Henley: My Lords, we believe that it is right that we should tax internal as well as external flights. That is in line with our commitment to the Community. As I said earlier, we do not believe that it will necessarily distort the market.
Lord Tordoff: My Lords, is this not another case of something that will grow like Topsy? Does the noble Lord not remember that Mr. Gladstone introduced income tax at a very small amount at one time, and now this Government are pushing it higher and higher? Is this not genuinely a serious distortion, as the noble Lord, Lord Brabazon, said, and something which will damage the workings of the market, which I thought the Government were in favour of?
Lord Henley: My Lords, how this grows is obviously a matter for my right honourable friend the Chancellor of the Exchequer. I can only repeat that we do not believe that the levy will have any serious distortionary effect.
Lord Mountevans: My Lords, my noble friend will be aware of the Treasury's forecast, given in a Written Answer elsewhere last Wednesday, that this tax will lead to a 2½ per cent. fall in the demand for air travel. What estimates have the Government made of the impact on tourism, and in particular on short-stay tourism—where the penalty is quite a high element in the fare—off-season tourism and out-of-London tourism?
Lord Henley: My Lords, I am not aware of any estimates of the effect that this will have on tourism. As I said in my opening Answer, people make a number of decisions as to how they choose any appropriate form of transport. We do not believe that the £5 tax on flights out

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of this country will seriously distort their decision as to whether they choose to go by air, rail or the Channel Tunnel.
Lord Tordoff: My Lords, if the Government are not aware of the effect on tourism, is it not about time that they found out?
Lord Henley: My Lords, if the Government are aware of any such effect, I shall certainly let the noble Lord know. I was saying that I was not aware of there being any serious distortionary effect. I do not believe that there can be any distortionary effect on tourism. After all, the tax applies only to flights out of the United Kingdom.
Lord Desai: My Lords, does the Minister agree that it would have been better for the Government to have had a different rate of taxation depending upon the class of travel, with business class paying more than tourist class or charter passengers? Does he further agree that it is obviously more equitable to have the rich pay more than the poor?
Lord Henley: My Lords, the noble Lord has made a very interesting suggestion. We believed that it was necessary to keep the system as cheap as possible. We do not believe that the tax will be an unnecessary burden on any individual. In fact the tax burden will comprise a higher share of both income and expenditure for the higher income groups.
Lord Shepherd: My Lords, in the light of the noble Lord's Answer, will he confirm that this is another form of poll tax?
Lord Henley: My Lords, it is not another form of poll tax. I am not aware of any other forms of poll tax.
Lord Stoddart of Swindon: My Lords, does the noble Lord agree that this is yet another Tory tax which would not have been, and was not, introduced by a Labour Government?
Lord Henley: My Lords, fortunately it is a long time since we have had a Labour Government. We are all unaware of exactly the taxes that a Labour Government would impose. No doubt they would continue to tax spending just as they always have done.
Lord Eatwell: My Lords, is the Minister aware that the Question on the Order Paper refers to the distortion of competition between British Rail InterCity, the Channel Tunnel and Channel ferries, which are used by road transportation? In the light of that Question, will he be so kind as to answer my earlier question?
Lord Henley: My Lords, no, I believe that the noble Lord's earlier question was wide of the Question on the Order Paper.
Lord Campbell of Alloway: My Lords, does the Minister agree that this is another sort of tax without representation? Can he tell us the principle on which it was introduced?
Lord Henley: My Lords, it is not a form of taxation without representation. It was introduced by my right honourable friend the Chancellor of the Exchequer in his Budget Statement. He is answerable to another, elected House.
Lord Richard: My Lords, can the Minister tell the House how much revenue it is likely to raise?
Lord Henley: My Lords, in the first year, which will be a half year as it does not come into effect until October of this year, it will be £115 million; in 1995–96 it will be £330 million; and in 1996–97 it will be £355 million.
Lord Brabazon of Tara: My Lords, is my noble friend aware, following the question of the noble Lord, Lord Desai, that obviously a £10 tax on a first-class ticket to Australia will not make a huge amount of difference but it could be as much as 16 per cent. on, for example, a cheap fare from London to Dublin?
Lord Henley: My Lords, obviously the percentage involved will depend on the price of the ticket. But we believed that it was important to keep this duty as simple as possible and therefore that £5 was a fair rate to charge.

Dahuk: Electricity Supply
2.45 p.m.
Lord Archer of Weston-Super-Mare Lord Archer of Weston-Super-Mare asked Her Majesty's Government:
What action they propose to take to persuade Iraq to turn on the electricity in Dahuk.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, we remain concerned at the plight of civilians in Dahuk. We, France, Russia and the United States made a dè marche to the Iraqi Government on 5th January at the United Nations, protesting about Iraq's continued repression of the civilian population. The dè marche called on Iraq to restore the electricity supply to the Dahuk governate. We will continue to press Iraq to fulfil this and all other obligations under Security Council resolutions.
Lord Archer of Weston-Super-Mare: My Lords, I thank the noble Baroness for that reply. May I remind her that Dahuk, a city of some 700,000 people, has been without electricity for five months and 10 days? It is a city 10 times the size of Glasgow Hillhead. Will the Foreign Office be kind enough to advise parliamentarians visiting Baghdad not to salute Saddam Hussein for his courage but to tell him to turn the lights on in Dahuk and save Kurdish lives?
Baroness Chalker of Wallasey: My Lords, the British Government are deeply concerned about the lack of electricity supplies to Dahuk. I believe that it was more effective when we, together with other permanent members of the Security Council, made a very strong protest to the Iraqis. However, I am not hopeful that the supplies will be resumed by the Iraqis. We have also

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taken action with the Turkish Government. I understand that the Turks have now discussed the issue with Iraq. I hope very much that the Turks will be willing to supply electricity from across the border to the people of Dahuk, who, quite apart from their other needs, deserve it. We have to work at it. I believe that that is the best way forward.
Lord Mellish: My Lords, does the Minister agree that this is surely a story of antipathy—if that is the right word—towards Saddam Hussein and all that he stands for and represents? I believe that I speak for everyone in this House when I suggest that it is about time France, America and ourselves said to Saddam Hussein, "Put that electricity back or else!"
Baroness Chalker of Wallasey: My Lords, I believe I heard my noble and learned friend Lord Hailsham of Saint Marylebone and others say sotto voce, "What else can be done?" The responsibility for the suffering lies with Saddam Hussein. But who can force the man to do what my noble friend Lord Archer asked? The people of Dahuk need the electricity. Perhaps we can find another way to provide it. At the same time we shall not cease to seek to bring Saddam Hussein's iniquities to the notice of all, including Members of another place.
Lord Kilbracken: My Lords, is the Minister aware that cutting off the electricity in Dahuk is a minor example of the terrible maltreatment of the Kurds throughout Iraq?
Baroness Chalker of Wallasey: My Lords, the noble Lord is right. Compared with what has happened so far as the people in southern Iraq are concerned —the marsh Arabs—and what has happened to the Kurds in northern Iraq, it is perhaps a lesser evil. But there is no doubt that if the people of Dahuk had electricity, a lot of their other problems would pale into insignificance because they might then have clean water. Clean water is the basis of better health for all those people.
Baroness Blackstone: My Lords, will the Minister accept that we on these Benches entirely dissociate ourselves from the visit made by the honourable Member for Glasgow Hillhead to Iraq and from the rather foolish remarks he made in his interview with Saddam Hussein? However, can the Minister tell the House what happened to the report by UNSCOM which is investigating the use of chemical warfare against the Shia Moslems in southern Iraq? It is some time since that investigation was initiated. We have as yet had no results.
Baroness Chalker of Wallasey: My Lords, I thank the noble Baroness for her initial remarks. With regard to the investigative report on the use of chemical weapons on the marsh Arabs, the initial evidence shows no immediate grounds for believing that chemical weapons have been used. The detailed evidence is still being worked upon.

Second-Hand Vehicles: Mileages
2.50 p.m.
Lord Ezra Lord Ezra asked Her Majesty's Government:
Whether they are contemplating strengthening the law in relation to the "clocking" of second-hand vehicles and the resale of insurance write-offs.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Mackay of Ardbrecknish): My Lords, the practice of falsifying odometer readings is already a criminal offence and we do not consider that further statutory provision is necessary. There is no law preventing the resale of vehicles which have previously been written off by insurance companies. Many are capable of being repaired to the required safety standards.
Lord Ezra: My Lords, the noble Lord may recall that in 1990 I introduced a Bill to deal with those matters. It passed through this House but failed in another place. Will the Minister accept that in the meantime the situation has worsened? Purchasers of second-hand cars are being defrauded of more than £100 million a year through the falsifying of speedometer readings; many also face possible injury through poor reconditioning of written-off cars. Is the noble Lord aware that, due to the increased number of complaints in relation to second-hand car sales, the Office of Fair Trading is now looking into the matter?
Lord Mackay of Ardbrecknish: My Lords, I am aware that the noble Lord introduced a Bill. It was before my time and therefore I cannot recall it, but if have read the exchanges which took place at the time. It is an infringement of the Trades Description Act 1968 to falsify odometer readings and many hundreds of successful prosecutions are carried out by trading standards officers each year. I cannot see therefore what another piece of legislation would do that the existing law does not do perfectly adequately.
Lord Campbell of Croy: My Lords, why should it not be made obligatory for mileages to be recorded with the vehicle licensing office at certain times in the, vehicle's life, such as at the annual renewal of licences or change of ownership? That seems to be the only practical way of making any real impact on this widespread offence.
Lord Mackay of Ardbrecknish: My Lords, my noble friend is quite right to say that that would be the only practical step we could take. However, it would add hugely to the bureaucracy of the vehicle licensing body. There are other complications. For example, a remarkable number of people manage to lose their registration forms in the course of a car's life. The amount of bureaucracy required to deal with that would be enormous. In addition, we would need a system for checking that the correct figures had been entered: a whole army of inspectors would be required.
Lord Bruce of Donington: My Lords, on the assumption that the law is adequate to deal with the situation—that is the impression given by the

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Minister—is it not clear that steps should be taken to increase the rate of detection and to ensure a more rigid enforcement of the law? To say that it would need an increase in bureaucracy invites a value-for-money assessment as to whether the amount of bureaucracy needed would cost less than the vast sums lost at the present time.
Lord Mackay of Ardbrecknish: My Lords, the amount of bureaucracy would be considerable, as would be the number of inspections necessary to ensure that the figures given by an individual on the registration document were reliable. At present many hundreds of cases are brought each year to the magistrates' courts. The magistrates can impose fines of up to £5,000; that is the standard scale level at which they are allowed to impose punishment.
Lord Monkswell: My Lords, is the Minister aware that on an annual basis the MoT test certificate requires the recording of the mileage and the validation of that recording by the tester? Are the Government aware also that with modern computer techniques the problems of a rise in bureaucracy would be minimal? Do the Government realise that in the modern age in which we live the suggested proposals are extremely sensible?
Lord Mackay of Ardbrecknish: My Lords, I am aware that the MoT certificate shows the mileage. However, some of my earlier points relate to that as well. I am sorry to tell the noble Lord that very often the existence of computer technology increases bureaucracy because more figures can be collected.
Lord Monson: My Lords, does the noble Lord agree that this all too prevalent crime effectively robs the unsuspecting purchaser of a great deal of money—possibly hundreds of pounds? Is it only a fine that can be imposed on conviction of the offence or is imprisonment also available? If so, can the Minister say how many people each year on average are imprisoned for the offence?
Lord Mackay of Ardbrecknish: My Lords, I cannot say how many people are imprisoned. In the magistrates' courts, where the level 5 fine of £5,000 is the top level, there is no alternative of imprisonment. Should the individual elect to go to Crown Court, an unlimited fine or a custodial sentence of up to two years can be imposed.
Lord Brabazon of Tara: My Lords, is my noble friend aware that since 1992 a mileage box is included on vehicle registration forms—V5s—but it is not compulsory to fill it in? Perhaps it should now be made compulsory. Is my noble friend further aware that one of the difficulties is that 50 per cent. of motorists do not bother to return the form when they change their car, although it is a legal requirement so to do?
Lord Mackay of Ardbrecknish: My Lords, I alluded to the fact that many documents are lost. Even if that has not happened, many motorists do not return the form. If one insists that the mileage is recorded and the form returned, there is the difficulty of checking.
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Dare I say that if somebody is going to cheat on the issue, then they are likely to cheat just as much with the filling in of the form as they are with the odometer.
Baroness Fisher of Rednal: My Lords, will the Minister consider the introduction of a licensing system for car auctions? That is where the majority of fiddles now take place. Secondly, will he consider a requirement that purchasers of vehicles at car auctions provide proof of identity when they make their purchase? As the Minister said, trading standards officers have done exceedingly well on what we call the "car lots" in towns and cities. But fraud is taking place with "M. Mouse" and "D. Duck" appearing on some documents as the name of the person purchasing the vehicle.
Lord Mackay of Ardbrecknish: My Lords, car auctions are a little wide of the Question on the Order Paper. However, I understand the point made by the noble Baroness that car auctions may be places where some infringements take place. I shall certainly consider the possibility of solving the problem by licensing car auctions.
Lord Molloy: My Lords, is the Minister prepared to consider giving trading standards officers more powers? Their extensive knowledge may help to prevent some of the frauds by cheats and rogues. The officers have a great deal of knowledge but require more authority. Can that proposal be considered?
Lord Mackay of Ardbrecknish: My Lords, I am not aware that trading standards officers are looking for more authority. Nothing that I have read in preparation for today leads me to that conclusion. However, I shall look into the specific aspect mentioned by the noble Lord and see whether the officers are satisfied with their current powers.
Lord Clinton-Davis: My Lords, is it not clear that far too many lotteries are involved in the purchase of second-hand vehicles? Is it not clear also, from questions asked of the Minister, that further action is required not only in dealing with the two points raised by the noble Lord, Lord Ezra, but also in dealing with the serious matter of "cut and shut" cars? I refer to the situation where two vehicle bodies are welded together. Is it not plain that many frauds are practised and that the Government are turning their eyes away from reality if they say that something ought not to be done about them?
Lord Mackay of Ardbrecknish: My Lords, the Government are not turning their eyes away from the reality of these problems. That is why there are two laws on the statute book—one which we have addressed in this Question and the other which particularly pertains to unroadworthy vehicles. It is an absolute offence to offer for sale or supply or expose for sale a vehicle deemed to be unroadworthy or altered so as to be rendered unroadworthy. Both the problems raised this afternoon are already the subject of offences, and trading standards officers are already active. My problem with the noble Lord's question is that it is easy

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to say that something must be done, but it is sometimes very difficult to translate that into meaningful legislation which can be properly enforced.
Lord Clinton-Davis: My Lords, perhaps it is because the inspection of these matters is grossly inadequate, particularly as the Government seem to have their mind on deregulation and virtually nothing else.
Lord Mackay of Ardbrecknish: My Lords, the fact that the Government have laws in this regard illustrates that we do take the matter seriously and are not looking at deregulating this issue. But what we are sure about is that there is absolutely no point in passing laws if they cannot be properly enforced in an efficient and effective way.

The Civil Service Catering Organisation
3.1 p.m.
Lord Peyton of Yeovil Lord Peyton of Yeovil asked Her Majesty's Government:
What assurances have been given by the Treasury in advance of privatisation to the staff of the Civil Service Catering Organisation.
Lord Henley: My Lords, the staff of Forward—formerly the Civil Service Catering Organisation—have been assured, first, that their terms and conditions of employment will be protected at the point of transfer by the Transfer of Undertakings (Protection of Employment) Regulations; secondly, that the Government will seek to sell the business to a purchaser who can demonstrate the competence and financial strength to assure its future; and thirdly, that if the purchasing company should fail within three years, the Government will guarantee the staff's redundancy payments earned during their time in the Civil Service to the extent that the company is unable to meet those commitments.
Lord Peyton of Yeovil: My Lords, I am most grateful to my noble friend for that very informative reply. Would I be right in assuming that the Treasury, having behaved in such a very proper manner itself, would not stand in the way of other departments giving similar assurances to staff of similar organisations?
Lord Henley: My Lords, each case obviously has to be considered on its merits. It was felt appropriate in this case to give the guarantees that I have repeated on this occasion. I understand that my noble friend has a Question down in some two weeks' time relating to the Telecommunications Directorate. I am sure that he will look forward to getting a full and proper answer on that occasion.
Lord Dean of Beswick: My Lords, will the Minister enlarge on his Answer to the noble Lord, Lord Peyton? He said that the staff have been given assurances that they will be fully protected. In the light of some of the occurrences in areas that have been privatised in terms of the diminution of protection, can the Minister tell us what he means when he says that the staff will be given
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full protection? Does that include wages and conditions right across the board, and how long will such protection last? Those are very important aspects of the matter.
Lord Henley: My Lords, at the point of transfer they will be protected by the TUPE regulations which are applicable in this case. Thereafter it is a matter for negotiation between the new owners and the new staff as to what applies. It is important that I stress, as regards pension rights, that it is a requirement that for future service the purchaser in this case should offer a pension scheme which is broadly comparable with the principal Civil Service pension scheme. The precise details, including any adjustments for marginal detriment, will be subject to the approval of the Government Actuary acting independently in this matter.
Lord Tordoff: My Lords, is there net a possibility of entrenchment of these rights? We have seen in the case of certain organisations such as APEX that staff have been browbeaten into signing away their rights within a very short period of the transfer of responsibility. is there no way in which these people can be protected against that kind of chicanery?
Lord Henley: My Lords, we have given a number of assurances and, as I have said, the TUPE regulations are applicable. Thereafter it is a matter for negotiation between employer and employees.
Lord Marsh: My Lords, will the Minister address the way in which the Government are conducting what would likely be described as negotiations with a series of pension funds which involve hundreds of thousands of people? They are doing so on the basis of using their powers to an extent which the late Robert Maxwell would have gone green with envy over—I am quite serious about that—and in a way which would not be tolerated in the private sector by the Government. Is it not high time that they produced and published consistent principles for dealing with all these public pension funds?
Lord Henley: My Lords, I reject allegations that we are browbeating the pension companies. The assurance I was trying to give is that in this particular case, as regards their pensions, the purchaser will offer a pension scheme which is broadly comparable to their existing arrangements. That will be subject to the approval of the Government Actuary—I stress this point—acting independently in the matter.
Lord Eatwell: My Lords, can the Minister confirm that the National Audit Office found last year that the catering service was characterised by,
"mismanagement, irregularity and fraud"?
Can he further confirm that the main form of fraud was tax evasion, no doubt induced by the record rates of taxation imposed by this Government? Will he tell us who was the Minister responsible for the department committing this massive fraud, and when can we expect a resignation?
Lord Henley: My Lords, I was not aware of those allegations. I shall certainly take them on board and write to the noble Lord.
Lord Peyton of Yeovil: My Lords, if I may go back to the original Question and my noble friend's first supplementary answer, does he realise just how right he was when he said that I would await with some eagerness and great interest the reply to my next question on this subject?
Lord Henley: My Lords, I am very grateful that my noble friend awaits these answers with eagerness.
Lord Molloy: My Lords, governments of all political complexions have acknowledged in situations like this the civilised assistance they have received from the Civil Service unions. Would the Minister be prepared to consider contacting in particular the CSU, as I am sure that it would be prepared to help him.
Lord Henley: My Lords, we have had negotiations in this matter with all the relevant unions. I am not sure whether the union that the noble Lord has mentioned is one of those, but there have been full and frank discussions with them, and since the announcement was made.

Business
Viscount Ullswater: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord Mackay of Ardbrecknish will, with the leave of the House, repeat a Statement that is to be made in another place on the Channel Tunnel rail link.

Social Security (Contributions) Bill
3.7 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Viscount Astor): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Viscount Astor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Increase in primary Class 1 contributions]:
On Question, Whether Clause 1 shall stand part of the Bill?
Baroness Hollis of Heigham: We on this side of the Committee propose that Clause 1 should not stand part of the Bill. Clause 1 is the heart of a very short Bill. By opposing the Question that Clause 1 should stand part, we want to register our anger at and distaste for the regressive and deeply unfair way the Government are structuring our public finances. I appreciate that many of these points were made at Second Reading. I can only apologise to your Lordships for my absence then on parliamentary work for the CPA in South Africa.
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Under this Bill and in this clause let us see who pays and who gains. It is now undeniable, given yesterday's and today's newspapers telling us of the Treasury answers in response to the Shadow Chancellor of the Exchequer's questions, that the Conservative Party is the party of high taxation. In the past 14 years taxes have risen from 32.2 per cent. to 35 per cent. on average earnings. When next year the Treasury forecast is that they will reach 34.9 per cent. on average earnings it will, according to the Treasury report,
"be the highest ever level".
I quote from that noted friend of the Labour Party, the Sunday Times, that,
"Taxes will be at their highest level ever on average earnings".
The average family will be paying £50 a month more. The Government may say that this is an increase on average earnings over the 14 years of some 35 per cent. But again, the Treasury have pointed out that earnings grew by more than that in the previous 14, mainly Labour, years—that is, by 38 per cent. and by 47 per cent. in the 14 years before that.
So, on the highest levels of taxation ever on average earnings and on the lowest growth in real income, we have nonetheless seen, after housing costs, the bottom 10 per cent. about 14 per cent. worse off in real terms. It gets worse. It is part of an increase in taxation from a Government who are already taxing us more than any previous government. We at least know that income tax is a fairer tax than others because it relates more proportionately to people's ability to pay. We know also that flat rate taxes like, for example, VAT on fuel are regressive because they take up more of the income of those who have less income. What we now know is that since 1979 income tax and direct duties have fallen by £10 per week in real terms, but the moneys levelled by national insurance, VAT and regressive duties have risen by more than £20 a week in real terms. So not only are we exposed to the highest level of taxation ever, but that while progressive taxes have fallen, indirect, flat rate and regressive taxes have actually more than doubled in percentage terms.
There is worse still even than that. Within the structuring of national insurance and within Clause 1 of the Bill, not only is national insurance not progressive, not only is it not even neutral that one pays the same proportion whatever one's earnings, but it is actually regressive and made more so. Save for those earning less than £57 per week, which is the equivalent of the old age pension, the more one earns, then for national insurance proportionately the less one pays. For example, on average earnings of around £19,465 a year, national insurance will take 8.8 per cent. of pay, but if one earns 1.5 times the average earnings (£29,000) that takes only 6.8 per cent. of pay.
At the bottom end, 500,000 people are too poor even to pay income tax but they have to pay national insurance. They are mainly women. At the upper end, those earning over £23,000 a year have their contributions proportionately capped. That is why putting a penny on income tax raises less than putting a penny on national insurance. The difference is that that

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penny is raised from different people—that is to say, the low paid, part-time workers, women, the disabled and those with the least ability to afford it.
In other words, taxes on average incomes are at the highest levels ever. Within that, the burden of taxation has been shifting quite deliberately from a fairer income tax to the less fair national insurance and VAT. Within national insurance itself and perpetrated by this Bill, the provisions are structured so that those who earn less pay proportionately more while those who earn more pay proportionately less.
Is this fair? What other blows are still to come? This is a point eloquently and forcefully made by my noble friend Lady Turner at Second Reading; namely, while national insurance contributions rise, what they buy falls. As we have seen, pensions are now detached from a rise in earnings which means that it has already cost the elderly a drop of £19 per week. Unemployment benefit, which is to become a job seeker's allowance, is soon to be means tested after six months instead of after 12 months. It will probably be removed from 240,000 people who are unemployed. As regards invalidity benefit, which is about to become an incapacity benefit, that is to be liable to tax, to tougher medical tests and will be lost to about 70,000 to 100,000 more people.
All these changes especially hurt women because they are especially the low paid part-time workers. In future women will see their pensions postponed for another five years. As regards the job seeker's allowance, women will be hurt as spouses because their partners will lose the adult dependency allowance; and it will hurt them in work as well. The invalidity benefit has grown in part precisely because women contribute to the fund and are drawing from it, but it is just at the point when women are drawing from it that their entitlement will be sharply curtailed.
No one denies that the national insurance scheme has to be funded but in the Exchequer contribution the Government are already recognising that it is not a fully-funded scheme but a pay-as-you-go scheme. Why, then, is there a deficit? First, as the Government Auditor himself said, it is due to the recession. Fewer people are paying in and therefore contributions are falling. In addition, those in work have lower earnings and therefore their contributions are falling. Together they represent a deficit of over £1 billion.
Secondly, the payments out are rising—about £2 billion—in part for pensions and uprating but, significantly, also for the unemployed. Thirdly, we have a deficit because the Government have made a quite conscious decision to use public money, rebates and bribes to switch people out of SERPS into the disastrous private schemes which will cost in bribes nearly £3 billion over any putative future savings. So the need to raise national insurance contributions, and the way in which that is falling disproportionately on the poorest people, is a direct consequence of Government folly and policies. In addition, it is their failure to build the economy and their folly in pushing people into private pensions with rebates.
Therefore, we oppose that this clause—which is, in fact, the Bill—stand part of the Bill because on every account we believe that it is deeply unfair. It represents
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a further switch from income tax to national insurance as a way of raising funds and therefore from a more fair to a less fair method of finance. It takes proportionately more from the poorer than it does from the better off, while at the same time it pays out less to the poorest than in the past when they most need it—that is, the sick, elderly or unemployed. Above all, it is because the Government have so damaged our economy that they are now seeking to float their finances, not by calling on the better off who can retreat (and do) into private arrangements, but by hurting those on average and below average earnings and incomes. We oppose that this clause stand part of the Bill.
3.15 p.m.
Lord Dean of Harptree: The effect of the speech from the noble Baroness, Lady Hollis, would be to deprive the national insurance scheme of an extra £2.2 billion in a full year. I do not believe any Members of the Committee would argue that this additional money is needed to meet the cost of benefits. We do not have to take the word of a political Minister for that because it is clear from the various reports of the Government Actuary. For example, in 1990, in his quinquennial review, the Government Actuary said,
"it would seem advisable to maintain a minimum balance of about one-sixth of a year's benefit expenditure".
I do not believe that anyone argued against that at the time. It is clear from subsequent reports from the Government Actuary that expenditure is exceeding income and therefore that additional resources are necessary if the benefits are to be adequately met.
So the question arises: if the money is not going to be met by increases in contributions, what are the alternatives? In recent years there has been recourse to the Exchequer grant, but I believe that that is an undesirable principle to pursue. If we go too far down that road it could easily undermine the fundamental concept of benefits as of right in return for contributions. That is an immensely important principle and the only way in which we can contain it effectively is if the bulk of benefits are paid for out of contributions.
If the noble Baroness denies that, I hope that she will be able to suggest some other ways in which money could be raised to meet the shortfall in the fund. She could, for example, suggest doubling the rate of VAT on fuel bills. That would cause a major political row, but it would be a very good money spinner. She could also suggest putting VAT on books, children's shoes or even on foodstuffs. Again, a major political row would result, but at least there would have been the additional revenue that is required.
Therefore, with great respect, I find it difficult to take the noble Baroness's suggestion seriously in default of any alternative suggestion as to the way in which the additional money could be raised.
Lord Boyd-Carpenter: It was rather entertaining to me to listen to the noble Baroness, Lady Hollis, objecting to increased payments of this kind. Indeed, her diatribe against increased taxation came entertainingly from the Opposition Front Bench because for years the Labour Party has been an advocate of increased taxation. To see the noble Baroness saying what a

815
terrible thing it was to increase this contribution because it was increasing taxation was very entertaining because one knows perfectly well that the Labour Party favours higher taxation and that it is simply trying to make some political capital out of what is inevitably a somewhat unpopular decision. It is, however, the right decision.
My noble friend has pointed out that we are dealing with a contributory benefit. Where the funds are obviously not adequate to pay for benefits under the scheme, it is absolutely right to increase the contributions so that they should balance. I hope that my noble friend the Minister will firmly resist this unhelpful Motion.
Lord Simon of Glaisdale: I did not speak on Second Reading and desire to intervene on only one point—and that is to consider how far this is a matter of taxation. The question of increased taxation is of considerable political moment as of now so obviously the noble Baroness said that this is taxation, that taxation has been increased and that this Bill increases it further.
On Second Reading, the noble Viscount—I fully share the pleasure that all your Lordships have had at his promotion —said that this is not taxation because it is a hypothecated charge; in other words, it is devoted to one single class of recipient. However, the fact that a charge is hypothecated certainly does not make it cease to be taxation. After all, all charges were hypothecated until the introduction of the Consolidated Fund in 1787. The most famous tax case in our history was the case of ship money, which was certainly a hypothecated charge, but nobody has ever pretended that it was not a tax.
The truth is that one can regard this charge (even though it is hypothecated) only in the total fiscal context. It is extremely misleading to isolate it from the general fiscal context. That means that in a sense we are premature—certainly in considering whether or not this is taxation.
I agreed with the sophisticated and clear exposition of the noble Lord, Lord Jay, on Second Reading that from one aspect this is taxation but from another aspect it is not taxation or, as it was put very wittily by the noble Earl, Lord Russell, it is rather like Berwick-upon-Tweed in relation to England: you either attach it or detach it according to taste and your line of argument.
The other argument which was put forward for not regarding this as taxation was that this is not a money Bill. That is true, but that is by no means conclusive and takes one only a very little way. Very few Finance Bills these days are money Bills. The famous Finance Bill of 1909 would not have been certified as a money Bill in accordance with the terms of the subsequent Parliament Act, so the mere fact that a Bill is not a money Bill does not mean that it does not deal with with taxation. In my respectful submission, it would be quite unreal (when the time comes for the total conspectus of the fiscal regime) not to take into account this extra charge.
Having said that, I certainly do not oppose it. This charge has been hypothecated from the outset and for the reasons stated by the noble Lord, Lord Boyd-Carpenter, who preceded me. It is hypothecated because it is a contributory pay-as-you-go scheme and,
816
under those circumstances, it is certainly necessary to treat it as it has been treated by successive governments. That being so, the only question is: within the narrow circumstances of this charge, is it necessary to increase it? As the noble Lord, Lord Boyd-Carpenter, gave cogent reasons why it is, there is only one further thing to be said. If, as the noble Baroness desired, we treat this as a matter of general taxation, it is extremely misleading to say, "The present Government are taking a higher proportion of average earnings than the preceding Labour Government—in fact, a higher proportion than ever before". That is quite misleading because it does not take into account the very considerable increase in average earnings. What matters is how much is left in the way of take-home pay.
Therefore, although I trust that in due course we shall regard this as a matter of taxation when we come to consider the Finance Bill and although at the moment it seems to me that the increase in the charge under this Bill is abundantly justified, I hope that, for the reasons that I have given, the Motion will be carried. I hope also that we shall not embark on these wide questions of whether taxation has increased without considering whether average earnings have increased and whether the taxpayer is, on balance, better off.
3.30 p.m.
Lord Cockfield: Whatever the theoretical arguments about whether this is a tax, the practical aspect of this matter is that, if this were a tax, your Lordships would not be having a Committee stage on the Bill and we would have been spared the pleasure of listening to the speech of the noble Baroness, Lady Hollis, a few minutes ago. We have had this argument ever since I became a Member of your Lordships' House. We certainly had it when it was my dubious pleasure to take corresponding measures through the House 10, 12, 14 years ago. The argument goes on. It is an unproductive one.
The other point I want to make is one which is just touched upon by the noble and learned Lord, Lord Simon of Glaisdale. The noble Baroness brought into the argument the question of the average rate of tax on average earnings. She quoted certain figures showing that the average rate has gone up. Of course it has gone up. The one thing that she has overlooked is that, ever since Mr. Lloyd George introduced his Budget of 1910–11—I admit it is before the time of the noble Baroness, but of course it should be very much in the Committee's mind because it was that Budget which led to the Parliament Act—we have had a progressive tax system in this country.
It follows as a matter of simple arithmetic—it has nothing to do with political views; nothing to do with prejudices or anguish or any of the other matters that the noble Baroness introduced—that if average earnings go up the rate of tax on those earnings must equally go up. Indeed, the fact that the average rate has gone up is something in which, in a sense, we should take satisfaction because it demonstrates and proves how much average incomes have gone up under the present Government. For that, we should be grateful to the noble Baroness.
Lord Peston: Did I hear the noble Lord aright, and that he said that he believed that we still had a progressive tax system?
Lord Cockfield: Yes.
Lord Peston: Is it his view that if we looked at total taxes in this country that would show that the marginal rate of tax rises right across the income scale, from the very bottom to the very top? Is that his view?
Lord Cockfield: If we look at the average rate on average earnings, it will go up if the average earnings go up. Strangely enough, even in the case of VAT that is a progressive tax over a considerable part of the range. That is because the total of consumer expenditure which comes within the charge to VAT in this country is about 50 per cent. only. Most of what are exempted or zero-rated are items upon which people with smaller incomes spend a larger proportion of their income.
Lord Peston: I hate to come back to this point, but it is an interesting technical point to anyone who is interested in taxation. The noble Lord is looking at average taxes and not marginal rates, which is the correct definition of progressive taxation. Secondly, I ask him again: is it his view that over the whole of the income range, taking all taxes into account, the tax system is progressive? Is that his view?
Lord Cockfield: The noble Lord raises an interesting arithmetical point.
Baroness Hollis of Heigham: It is a real point.
Lord Cockfield: I shall come to it in a moment. A little patience on the part of the noble Baroness would not come amiss. Again, it is a matter of simple arithmetic: if the marginal rate goes up, the average rate must also go up. That is how average and marginal rates are related to each other.
The other point is this. If one goes to the extreme top of the income scale one may find that the tax is no longer progressive; but that is looking at a particular sector and that is not what I am talking about. If one looks at average earnings, which are not at the very top of the income scale—I believe that the noble Lord will accept that that statement is correct—then if average earnings increase, then with stable rates the average rate of tax must increase as a matter of simple arithmetic.
Lord Stoddart of Swindon: I tried to follow the argument that went backwards and forwards, but I must confess that I was not convinced by the reply of the noble Lord, Lord Cockfield. My impression is that for a long time—certainly over the past 14 years—taxes, over the whole of the range of taxation, have not become more progressive; they have become less progressive as the amount of expenditure tax has increased. It is part of government policy, and has been for a long time, to transfer the financing of the Budget from direct to indirect taxation. I should have thought that that was bound to be less progressive. However, I do not have any figures, and I do not believe that the noble Lord has any figures, to prove that at the moment.
818
The other speech I was intrigued by was that of the noble Lord, Lord Boyd-Carpenter. He said that it was an incontrovertible fact that Labour always increases taxes, and taxes more than Tories. We all know that that is not true. We know that when Labour left office in 1979, 35.25 per cent. of GDP was taken in taxation. From April this year the percentage tax under a Conservative Government will be 38.5 per cent. Therefore it is proved beyond doubt, and from government sources, that taxation is not just higher under a Tory Administration, but very significantly higher, so I hope that we shall not hear any more about high taxes under a Labour Government from the noble Lord, Lord Boyd-Carpenter, or the Government.
We are dealing with an important Motion and an important Bill. I have been worried, as I have listened to the debate, about whether the insurance principle is maintained or whether national insurance contributions represent taxation of one form or another. It is imperative for the protection of people at work that the insurance principle is maintained and is seen to be maintained because there are altogether too many people at the moment who seem to want to rob existing pensioners of the benefits for which they have paid for a long time. I hope sincerely therefore that we shall all maintain that the NIF is, always has been and will continue to be a separate fund, properly administered, and not subject to raids by any government, whether a Tory Government, a Labour Government or any other form of government for that matter.
I would go much further than my noble friend on the Front Bench. I believe that what we need, and have needed for a long time, is a national superannuation scheme—a scheme into which people pay according to their income and from which they draw out in pensions also according to their income, so that it will be patently obvious that those who pay into the scheme pay in according to their ability to pay and draw out in pensions an amount related to the contributions that they have made, although of course we should nave to ensure that those at the lower end had a pension which was commensurate with their being able to live a decent life in retirement. My noble friend has put forward a useful Motion. I shall support it, and I hope that the Committee will do so also.
Viscount Astor: There should be no doubt that, if agreed, the proposal to delete Clause 1 will wreck the Bill. We have had an interesting diversion. We have even heard from the noble Lord, Lord Peston. His question was perhaps the most interesting we have heard from the Opposition. Of course, we did not hear their alternative proposals.
Clause 1 represents the main substance of the Bill by raising the primary percentage rate of national insurance contributions for employees by 1 per cent. to 10 per cent. from next April. The main primary percentage applies to earnings between the lower earnings limit, which will be £57 a week from next April, and the upper earnings limit for which the corresponding figure will be £430.
Following the speech made on Second Reading by the noble Baroness, Lady Turner, I should have been

819
surprised if she had not sought to change the way in which Clause 1 operates to increase the rate of national insurance contributions payable by employees. I am, however, slightly surprised that the noble Baroness, Lady Hollis, simply opposes the Question that the clause shall stand part of the Bill and has not come forward with an alternative.
I hope, therefore, that I do not do the noble Baroness an injustice if I take it that the Labour Party recognises the need to ensure that the National Insurance Fund has sufficient resources to meet its commitments to the sick, to pensioners and to others in need. That is recognised by the noble Lord, Lord Stoddart. It remains far from clear how the Opposition would ensure the fund is able to do so.
It is self evident that if unemployment were lower and more contributions were flowing in the fund would be more buoyant and these measures to keep inflow and outflow in step would be less likely to be needed. That is the position we ought to get to. For the immediate future, however, practical means of preserving the fund's income are needed and the Government's judgment is that a modest contribution increase is necessary.
The noble Baroness, Lady Hollis, expressed concern about the effect of the increase on low-paid workers. But the initial percentage rate of 2 per cent. on earnings up to £57 a week is not being increased. The change will therefore affect lower paid workers proportionately less. The structure of contributions we now have is especially favourable to the lower paid—so much so that even after the increase from April people earning up to £130 a week will still be paying less than they would have done under Labour's single percentage system. Our system is much fairer to the low paid than is the Opposition's.
On Second Reading we spent some time debating the need for the proposed increase in contributions and I shall not repeat all the arguments today. I simply remind Members of the Committee, as did my noble friend Lord Cockfield, that we are dealing not with general taxation but with the National Insurance Fund. This is a separate pool of money under the control of my right honourable friend and is the principal source of finance for the full range of contributory benefits available to those who have paid in.
I thank the noble and learned Lord, Lord Simon of Glaisdale, for his kind words and for giving me notice of the points that he wished to raise. The noble and learned Lord is an authority on legal matters and has a keen eye for points of detail. He focused upon one such point of detail that I made on Second Reading. I am happy to say that I agree with what the noble and learned Lord said about a charge, once hypothecated, not necessarily ceasing to be taxation. Hypothecation simply means in relation to a tax or charge that the money so raised is to be used for a specified purpose rather than going into a general pool of money out of which various costs are met. Members of the Committee can therefore envisage a specific tax being levied for a specific purpose.
I hope that Members of the Committee were not misled by what I said on Second Reading. Having
820
looked again at my speech I accept that in the strictest sense it contained a non sequitur. In explaining the nature of the National Insurance Fund, I said that, unlike general taxation, which goes into the Consolidated Fund, national insurance contributions are a hypothecated charge. That means that they cannot be used to fund items paid for out of general taxation.
National insurance contributions cannot, indeed, be used to funds items paid for out of general taxation. The social security Acts specifically provide for contributions to be payable to my right honourable friend the Secretary of State, who must in turn pay them into the National Insurance Fund. Aside from certain rebates to persons contracted out of SERPS, the fund may be used only to pay for specific benefits and their administration. Thus contributions are hypothecated to specific expenditure. The reason that they cannot be used to fund items met from taxation is that they are hypothecated to specific purposes provided by the social security Acts—not that they are a hypothecated charge as such. Perhaps the matter would have been clearer had I said that national insurance contributions are hypothecated to specific items of expenditure as provided by the social security Acts. That means that they cannot be used to fund items paid for out of general taxation. I trust that the noble and learned Lord, Lord Simon, will accept that lengthy explanation. I move to the second point that the noble and learned Lord raised. He submitted that a proposal to increase the contributions payable by employees can be properly judged only in the total context of fiscal taxation. I have no difficulty with that proposition. As several Members of the Committee pointed out earlier, the deduction from an employee's pay is real whether or not it is on account of national insurance or income tax. The common terminology for deductions is "stoppages". Of course, Members of the Committee will wish to look at the totality of the effect of various changes in the Budget on the pay packets of wage earners. There is a real practical and legal difference between contributions and tax, which I hope I drew out adequately on Second Reading.
The Government know that the only way to keep taxes as low as possible is to cut borrowing. The Budget presented by my right honourable friend the Chancellor of the Exchequer tackled that once and for all. It did so without putting up the basic or higher rates of income tax. Indeed, since the last election we have extended the lower 20p. band by £1,000. Next year more than 4.5 million income tax payers will be paying tax at only 20p. It is absurd to imply that taxes would be lower under Labour, as has been said. At the last election the Labour Party promised spending increases which would cost every family in the land an extra £1,000 a year—
Baroness Hollis of Heigham: That was invented by Chris Patten.
3.45 p.m.
Viscount Astor: Under this Government the basic rate of income tax has come down from 33p. to 25p. I was not aware that Chris Patten wrote the Labour Party manifesto. Obviously, Labour could not find anyone to

821
write it so it had to ask a member of our party. He appears to have succeeded, but the Labour Party did not win the election—
Lord Stoddart of Swindon: I do not know about Chris Patten, who seems to be having his own difficulties. I believe, however, that the Minister is trying to fool the Committee and the public by sleight of hand. He knows perfectly well that because allowances have not been raised in the past two years the amount of direct taxation that people pay has increased. Indeed, if the arithmetic is done a different way it is easy to prove that the rate of tax has increased because allowances have not been increased.
Viscount Astor: I believe that what matters is not the level of taxation but real take-home pay. That has increased sharply. It is a fact that most people are far better off than they were under the last Labour government of the noble Lords, Lord Stoddart and Lord Healey. A couple with two children in receipt of average earnings are in real terms £80 per week better off than they were in 1979. That is an increase of 40 per cent. For many people take-home pay fell under the last Labour government.
The noble Baroness, Lady Hollis, used emotive language but offered no alternative policy. She failed to explain how the Labour Party could fund the National Insurance Fund—a fund which the noble Lord, Lord Stoddart, cares about—and meet the needs of those who are entitled to benefits. I urge Members of the Committee to listen to the wise words of my noble friend Lord Cockfield and to reject the noble Baroness's proposal.
Baroness Hollis of Heigham: I thank Members of the Committee who have taken part in the debate. Most of us, despite saying that it was not a debate on general taxation, were tempted to enter into that subject. The debate has been valuable, given the current controversies.
Perhaps I may deal with some of the points that were raised. The noble Lord, Lord Dean, challenged the notion that there should be Treasury subvention to a contributory scheme based on relationships of funds between the employer and the employee. I am sure that he does not need me to remind him that Beveridge anticipated a tripartite fund. As the noble Lord will know from the Commons research documents, there have been Treasury subventions in all but three of the years since 1979. Indeed, there have been Treasury subventions of over £2 billion for all but three years of the Government's past 14 years. In the light of that, I am not sure whether the noble Lords, Lord Dean and Lord Boyd-Carpenter, are saying that the actions of Conservative Governments in 11 of those 14 years were improper, misguided or illegal, but they certainly occurred.
What is more, the Government have now restored that Treasury subvention in order to return to the original concept of the Beveridge tripartite fund. Therefore, I suggest that the notion that there was not a Treasury subvention was a minor aberration by this
822
Government, who have now seen the error of their ways. May we hope that they take the noble Lords, Lord Dean and Lord Boyd-Carpenter, with them.
The second matter was the problem of balancing the fund. I take the point that the fund needs balancing. However, we have three criticisms. First, there has been an inadequate contribution from Treasury funds between the years 1989 and 1991–92 which has now been corrected. That is primarily because those years—in particular 1991–92—were pre-election years.
However, we have two further criticisms. First, the Government are reducing the benefits which flow so that a contribution fund, in which contributions go up while the participants have no guarantee that contributions will remain in real terms—
Viscount Astor: Will the noble Baroness say which benefits the Government are seeking to cut in the year 1994–95?
Baroness Hollis of Heigham: I am saying that benefits are falling. In the next month an incapacity benefit is to replace invalidity benefit. That will certainly represent a cut. I believe that 74,000 people will no longer be eligible for it, it will be taxable and access to it will be tightened. The year after that we shall see the replacement of unemployment benefit.
Viscount Astor: We are talking about the raising of funds for next year. We are not talking about the year after that. The new incapacity benefit involves new rules rather than a reduction in benefits.
Baroness Hollis of Heigham: Did the noble Viscount really mean what he said? This Bill will raise national insurance contributions by 1 per cent. That is a rise in general taxation for all but the very wealthiest, while at the same time in the Government's current legislative programme the contributory benefits that are funded by that fund will be worth less to more people in real terms. That is undeniable and I am genuinely amazed at the position which the noble Viscount takes. We may argue as to whether the benefits need to be cut, but that they are being cut is challenged by no one except the noble Viscount today. I am surprised by that.
Thirdly, I come to the point raised by the noble and learned Lord, Lord Simon, and the noble Lord, Lord Cockfield, about progressive and proportional taxation and the rise in earnings. It would be impertinent for me to draw the attention of the noble Lord, Lord Cockfield, to the differences between progressive and proportional taxation. I do not believe that anyone would deny that there can be proportional taxation—the same percentage is taken from people's income all the way up the scale—but that is not the same, in my understanding, as progressive taxation, which means that more is taken from people who have a greater capacity to pay.
The argument that has been made by this side of the Committee is that the Government are abandoning progressive taxation in favour of proportional taxation while at the same time increasing the amount of taxes which come from flat rate levies like VAT. That creates a taxation level on average earnings which the Treasury is alleged to have said is the highest ever. Moreover, it

823
is drawn from sources that are increasingly less progressive, less proportional, more flat rate and, therefore, more regressive.
The noble and learned Lord, Lord Simon, and the noble Lord, Lord Cockfield, suggested that the increase in earnings was the reason for the increase in incidence. I repeat what I thought I had said when I moved the Motion opposing the clause. On this side of the Committee we accept that average earnings have increased by 35 per cent. in the past 14 years. We are pleased for everyone. Except for the bottom 10 per cent., we have all enjoyed that increase. However, before we become too complacent about that we should remind ourselves that the bottom 10 per cent. are, after housing costs, 14 per cent. worse off in real terms. Therefore, the national wealth has certainly not trickled down to them.
Apart from that 35 per cent. in the past 14 years, in the 14 years before that, mostly under Labour Governments, there was an increase in wealth not of 35 per cent. but of 38 per cent. And in the 14 years before that, there was an increase of 47 per cent. In other words, while we have certainly seen an increase in wealth and equality, that wealth has not grown by as much as it did in the previous 14 years, and certainly not by as much as it did in the 14 years before that. At the same time, both the levels and incidence of taxation have risen more than at any previous time.
According to the Treasury, taxes have risen to the highest level ever. That is undeniable. Within taxation, the amount carried by regressive taxes, including national insurance, has risen; and that is undeniable. The benefits which will flow from that, the noble Viscount, Lord Astor, notwithstanding, are being cut; and that is undeniable. This Government's current financial strategy has got us into this mess. We do not believe that it is right and proper to raise national insurance by 1 per cent. in order to get us out of it.
The noble Viscount, Lord Astor, asked from where else we could find that money. I remind the Committee that in the past few years the Government have spent £12.6 billion on bribing the better off into private pension schemes, with incentives and rebates. That £12.6 billion would have met many years' deficit of the National Insurance Fund had the Government been so minded.
In the light of increased taxation and an increased burden borne by those affected through the less fair form of taxation, brigaded with a cut in prospective benefits, we believe that Clause 1—the heart of the Bill—should not stand part of the Bill.
3.57 p.m.
On Question, Whether Clause 1 shall stand part of the Bill?
Their Lordships divided: Contents, 131; Not-Contents, 58.

Division No.1

CONTENTS

Aberdare, L.

Arran, E.

Acton, L.

Astor, V.

Addison, V.

Beloff, L.

Alexander of Tunis, E.

Blatch, B.

Archer of Weston-Super-Mare, L.

Blyth, L.

824

Boyd-Carpenter, L.

Long, V.

Brabazon of Tara, L.

Lucas, L.

Braine of Wheatley, L.

Lucas of Chilworth, L.

Broadbridge, L.

Lyell, L.

Brougham and Vaux, L.

Mackay of Ardbrecknish, L.

Bruntisfield, L.

Macleod of Borve, B.

Burnham, L.

McNair, L.

Cadman, L.

Mancroft, L.

Campbell of Alloway, L.

Manton, L.

Campbell of Croy, L.

Marsh, L.

Carnegy of Lour, B.

Melville, V.

Carnock, L.

Merrivale, L.

Cayzer, L.

Mersey, V.

Chalker of Wallasey, B.

Miller of Hendon, B.

Chelmsford, Bp.

Montgomery of Alamein, V.

Cockfield, L.

Morris, L.

Colnbrook, L.

Mountevans, L.

Constantine of Stantnore, L.

Moyne, L.

Courtown, E.

Munster, E.

Cox, B.

Mutton of Lindisfarne, L.

Cranborne, V.

Orkney, E.

Crathorne, L.

Orr-Ewing, L.

Cumberlege, B.

Oxfuird, V.

Davidson, V.

Park of Monmouth, B.

De Freyne, L.

Pender, L.

Dean of Harptree, L.

Perry of Southwark, B.

Denham, L.

Peyton of Yeovil, L.

Denton of Wakefield, B.

Polwarth, L.

Dixon-Smith, L.

Pym, L.

Elles, B.

Quinton, L.

Elton, L.

Rankeillour, L.

Ezra, L.

Reay, L.

Faithfull, B.

Redesdale, L.

Falkland, V.

Rennell, L.

Ferrers, E.

Rippon of Hexham, L.

Flather, B.

Rodger of Earlsferry, L.

Fraser of Carmyllie, L.

St. Davids, V.

Fraser of Kilmorack, L.

Seccombe, B.

Gainford, L.

Simon of Glaisdale, L.

Gardner of Parkes, B.

Skelmersdale, L.

Goschen, V.

Skidelsky, L.

Gray of Contin, L.

Spens, L.

Grey, E.

Strange, B.

Haig, E.

Strathclyde, L.

Hailsham of Saint Marylebone, L.

Strathmore and Kinghorne, E. [Teller.]

Hanworth, V.

Swansea, L.

Harding of Petherton, L.

Teynham, L.

Harmar-Nicholls, L.

Thomas of Gwydir, L.

Hayhoe, L.

Thomson of Monifieth, L.

Hayter, L.

Tordoff, L.

Henley, L.

Torrington, V.

Holderness, L

Trumpington, B.

Holme of Cheltenham, L.

Ullswater, V. [Teller.]

HolmPatrick, L.

Vivian, L.

Hood, V.

Wade of Chorlton, L.

Howe, E.

Wakeham, L. [Lord Privy Seal.]

Ironside, L.

Westbury, L.

Johnston of Rockport, L.

Wigoder, L.

Kimball, L.

Wynford, L.

Lauderdale, E.

Leigh, L.

Lloyd-George of Dwyfor, E.

NOT-CONTENTS

Archer of Sandwell, L.

Dormand of Easington, L.

Ardwick, L.

Fisher of Rednal, B.

Barnett, L.

Fitt, L.

Blackstone, B.

Gallacher, L.

Boston of Faversham, L.

Gould of Potternewton, B. [Teller.]

Bottomley, L.

Graham of Edmonton, L. [Teller.]

Brooks of Tremorfa, L.

Greene of Harrow Weald, L.

Bruce of Donington, L.

Gregson, L.

Carmichael of Kelvingrove, L.

Haskel, L.

Carter, L.

Healey, L.

Castle of Blackburn, B.

Hilton of Eggardon, B.

Cledwyn of Penrhos, L.

Hollis of Heigham, B.

Clinton-Davis, L.

Hughes, L.

Cocks of Hartcliffe, L.

Jeger, B.

David, B.

Jenkins of Putney, L.

Dean of Beswick, L.

825

Kilbracken, L.

Serota, B.

Loveli-Davis, L.

Shepherd, L.

Mallalieu, B.

Stallard, L.

Mar, C.

Stoddart of Swindon, L.

Mason of Barnsley, L.

Strabolgi, L.

Merlyn-Rees, L.

Taylor of Blackburn, L.

Milner of Leeds, L.

Taylor of Gryfe, L.

Mishcon, L.

Turner of Camden, B.

Morris of Castle Morris, L.

Wallace of Coslany, L.

Parry, L.

Wedderburn of Charlton, L.

Peston, L.

White, B.

Prys-Davies, L.

Williams of Elvel, L.

Richard, L.

Williams of Mostyn, L.

Resolved in the affirmative, and Clause 1 agreed to accordingly.
4.5 p.m.
Viscount Goschen: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Channel Tunnel Rail Link
Lord Mackay of Ardbrecknish: My Lords, with the leave of the House, I should like to repeat a Statement being made in the other place by my right honourable friend the Secretary of State for Transport.
"With permission, Madam Speaker, I should like to make a statement about the proposed new Channel Tunnel rail link.
"The House will recall that in March 1993 I announced a preferred route and asked Union Railways to lead the consultation on it. Union Railways carried out a huge consultation exercise, and reported to me in October. Its report is available in the Vote Office. I am now able to announce the Government's final conclusions on the route.
"Union Railways' report confirms that St. Pancras is preferable to King's Cross as the terminus on environmental, operational and commercial grounds. I therefore confirm the choice of St. Pancras as the London terminus. BR will no longer need to continue seeking powers to build the King's Cross low level station and will be withdrawing the King's Cross Bill. I intend to remove the safeguarding of the land and property affected by that project. Links from St. Pancras will be provided to the east and west coast main lines to facilitate through services to the Midlands, the north of England and Scotland; and Midland main line services will be retained at St. Pancras.
"I propose to seek powers in the hybrid Bill for the advance works for a new Thameslink station under St. Pancras, at Midland Road. This would be the optimum location for any eventual new Thameslink station serving the King's Cross and St. Pancras area. It is our intention that further improvements to Thameslink would be carried forward by the private sector. The use of any powers obtained will be a matter for the private sector promoters of the Channel Tunnel rail link, and of Thameslink, not the Government.
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"I now turn to the route itself. The approach to St. Pancras has been one of the most contentious issues in London. The surface route along the north London line corridor would be difficult to construct and environmentally damaging. I considered the approach to St. Pancras in combination with three other options recommended by Union Railways for operational reasons. I have accepted a package which incorporates a tunnel, a grade-separated approach to the terminus, a short open concrete box at Stratford to allow for an emergency crossover, and advance works for a connection to Temple Mills.
"In Kent, there is no easy choice at Pepper Hill. The tunnel under the electricity switching station has to be ruled out because of high cost and grave threat to the construction programme. The choice between a tunnel under Pepper Hill and an alignment around it cannot be made without more information. Before taking a final decision I shall hold further consultations with those concerned.
"I confirm that there will be a short tunnel under the North Downs. I have accepted a 240 metre long tunnel at Hollingbourne to preserve the setting of the conservation area and reduce noise impacts; and a 170 metre long tunnel at Sandway under the Headcorn Road so as to reduce the impact on the conservation area.
"At Ashford, I have had to rule out the tunnel option to the west of Ashford on grounds of cost; but, as a consequence, and at the request of Ashford Borough Council, I have asked Union Railways to consider urgently the relative merits of the present northerly preferred route and a central route through Ashford but then proceeding on the surface in a north-westerly direction. The new international station at Ashford is now proceeding and will serve passengers both before and after the construction of a new rail link.
"At the Dollands Moor freight inspection facility adjacent to Eurotunnel's terminal, the Bill will allow for possible realignment to improve operations, with the further possibility of allowing international freight trains to have direct access to the rail link, thus removing the need for an additional freight inspection facility at Westenhanger. I shall also provide in the Bill for two freight passing loops in Kent, to keep open the option of taking more freight trains if demand justifies it in the future.
"I turn now to intermediate stations. The decision in October 1991 to route the rail link on an easterly approach into London was based in large part on the opportunities for regeneration. With that objective in mind, the Government's view remains that, subject to satisfactory finance, there should be at least one intermediate station between Ashford and London. Four possible locations—Stratford, Rainham, Ebbsfleet and Nashenden—have been looked at. The proposed domestic station at Nashenden has no private sector or local authority promoter or support. I have decided that it can be ruled out.
"That leaves Stratford, Rainharn and Ebbsfleet. Ebbsflett and Rainham are in direct competition, both

827
being M.25 parkway stations. On present information, a combined international and domestic station at the northern site at Ebbsfleet seems the better parkway station option, but a final decision will depend upon the provision of satisfactory financing by the promoting group.
"The economic case for a station at Stratford has yet to be fully made. If the justification for one—in particular, the financial case—improves before the hybrid Bill is introduced, powers could be sought to build a longer box there than the one to which I referred earlier.
"I intend to issue planning directions in the next few weeks to safeguard the route announced today and St. Pancras. These directions will replace all of the existing safeguarding directions. I want to make it clear that the decisions on safeguarding the route announced today are final. Any changes which may be proposed by the private sector partner who will eventually build and operate the new link must be within the area safeguarded. Furthermore, any changes must not materially worsen the environmental impacts of the safeguarded route. The private sector will, however, have flexibility to decide on some operational features of the railway. I expect that the private sector will also want to consider carefully the phasing of the works.
"I recognise that there is considerable concern about blight. Homes wholly or substantially required for building the railway, together with those seriously affected by the works or operation of the railway, will be included in the safeguarded zone and will be offered voluntary purchase. Any other homes that may be affected by operational noise above the proposed threshold for noise insulation will qualify for purchase in cases of hardship.
"As I announced last November, the project will go ahead on the fastest possible timetable, with the private sector assuming full responsibility for construction and operation. The Government are willing in principle to provide substantial public sector support, in recognition not only of the significant domestic transport and regeneration benefits from the new line, but also of some of the very large benefits to international passengers. Government assistance will be provided partly through the transfer of European passenger services to the private sector partner as soon as the partner has been chosen. The total Government assistance to be provided will depend on the outcome of the competition to select the private sector partner, which will be launched very soon.
"A hybrid Bill is being drafted on the basis of the safeguarded route. We aim to have it ready by this autumn for consideration by the private sector and for the Government to take forward thereafter. The precise timing of the Bill's introduction will depend on the parliamentary timetable and the private sector's views.
"This solution will provide a fast rail link between London and the Channel Tunnel. It achieves all the Government's objectives. People who live in Kent
828
will get further improved rail services to London. Rail travellers will receive the extra capacity when it is needed around the turn of the century. It provides a new railway which is sensitive to the land and townscapes through which it passes. It establishes a joint venture in which both the public and private sector play their roles.
"It is a further demonstration, coming on top of Dartford Bridge, the second Severn crossing, Heathrow express and the Jubilee Line extension, all of which have been built or are under construction, that the private finance initiative is now moving ahead fast".
My Lords, that completes the Statement.
4.15 p.m.
Lord Clinton-Davis: My Lords, the House will be grateful to the Minister for repeating the Statement in this House. We welcome the Statement. However, it has taken something like six years of vacillation on the part of the Government to come to a decision. As from May of this year trains from Paris to Calais will travel at 180 miles an hour but will be obliged to complete the journey from Dover to London at an escargot pace of about 47 miles an hour—a true case of a two-speed Europe.
Was it not palpably clear years ago that a substantial non-user grant would be needed to make private investment viable for what is clearly a large and complex development? Equally, was it not ideological fantasy on the part of Conservative governments to believe that it was impossible to make public provision? That was the underlying commitment of the Channel Tunnel Act. Is it not clear that one of the difficulties was insufficient enthusiasm from the private sector for investment in the project? I hope the Minister will say what is meant by substantial public sector support from the Government. I refer to the paragraph of the Statement which states:
"The total Government assistance to be provided will depend on the outcome of the competition to select the private sector partner, which will be launched very soon".
Is it not clear those bodies will be reluctant to come forward until they know what substantial public sector support is likely to be forthcoming from the Government? Vagueness is the enemy of progress in this matter.
Under Section 42 of the Channel Tunnel Act 1987 funding for British Rail was restricted to domestic rail services. International services were excluded. Why could the same criteria being applied on the basis of the Statement not have been introduced long ago? What the Government have introduced is a red herring as regards privatisation because even under the Channel Tunnel Act public money could have helped fund the link on the basis that it also improved domestic services. However, the Government stood in the way of that interpretation. Is the Government's contribution likely to include investment by the Government in Eurostar's new train sets and the upgrading of existing rail lines?
I turn to the question of safeguarding routes. It seems that the Government have agreed that there is to be a safeguarded route, subject, however, to some relatively

829
minor areas in respect of which further consultation is said to be required. Does that qualification mean that the route is properly safeguarded in law? Is there not a risk that a partially safeguarded route is not protected and that today's Statement may simply amount to a preferred route as a matter of law? I do not know the answer to that question as I am not a planning lawyer. Perhaps the Minister will cast some light on the position.
I turn next to the environmental consequences. The Statement says:
"The surface route along the North London Line corridor would be difficult to construct and environmentally damaging".
Is that not in marked contrast to the assertion made by the Secretary of State in another place on 22nd March 1993 when he said:
"In all but one case, the environmental impact of going for tunnelling would be worse or no better than not going for tunnelling"?—[Official Report, Commons, 22/3/93; col. 614.]
So what is the truth of the matter concerning the environmental consequences?
Perhaps the Minister will cast some light on the costs thrown away by the Government's pusillanimous approach. I hope that he will make a better fist of it than his predecessor did on 24th March last year when I asked him precisely that question. What will be the effect on Waterloo station of the operations to be carried out on the Channel Tunnel link?
Finally, can we have some assessment of the completion date which the Government have in mind? We have heard so many different estimates from the Government. On 18th May 1990 Mr. Roger Freeman said that it would be the year 2000; on 9th October 1991, Malcolm Rifkind, the then Secretary of State, said that it would be 2005; on 14th October 1991 the same Minister said again that it would be 2005; yet on 22nd March 1993 the present Secretary of State said that it would be the year 2000. We have heard a number of conflicting guesses from the Secretaries of State concerned. Perhaps the Minister can throw some light on the matter.
Lord Tordoff: My Lords, I also thank the Minister for repeating the Statement in your Lordships' House. Those of us, unlike the Minister, who have been through the process of considering the Channel Tunnel Bill and all the addenda attached to it over the years feel a modest sense of relief that something seems finally to have been decided, even though some aspects are shrouded in mystery, as the noble Lord, Lord Clinton-Davis, suggested.
First, we were told that Waterloo was adequate and there was no need for a further terminal. Then we were told that there was need for a further terminal, that the terminal would be King's Cross and that there would be tunnelling and people around Warwick Road would be compensated. All those phases proceeded like peeling the skin off an onion. I hope that now we have reached the core of the onion we can begin to make some progress.
Are the Government really satisfied that St. Pancras is the right option? I accept that that is what has been decided, and thank heavens for a decision. However, when your Lordships' Select Committee looked at the
830
King's Cross Bill there seemed to be some question as to whether the structure of St. Pancras was adequate to deal with the heavyweight trains that would be required to go north-west and north-east from the station.
I am glad that the Thameslink station under St. Pancras is to be built because that seems to be a sensible connection. However, I wonder why it has to be built by the private sector. That is another example of piecemeal development. I fear that the pieces of the jigsaw will not fit together into a picture that we can recognise as a comprehensive rail service when the work is finished.
As regards the route itself I profess no expertise. I simply hope that those people affected will be properly compensated and that such planning blight as there will undoubtedly be does not continue for a minute longer than is absolutely necessary.
I am glad that the international station at Ashford is beginning to take shape. However, I wonder what Ashford council says about the decision to rule out the tunnel option. Does it have any views on either of the other options which were available or does it consider both to be unsatisfactory in relation to the tunnel option?
I am glad that there will be a passing loop for freight in Kent. It sounds rather like an old-fashioned single line railway where people exchanged sticks. It hardly seems part of 20th century technology, but it is better than having no proper freight link to the Channel Tunnel. A separate freight line is what is really required but I do not suppose that we shall get that out of this Government, even though the shipment of freight from our industries into the markets of Europe is probably the only serious reason for having a Channel tunnel in the first place.
I turn to the question of the station en route. The choice apparently now comes down to Stratford, Rainham, Ebbsfleet and Nashenden. I heard of Ebbsfleet only today. No doubt it is a very worthy place and a useful parkway. However, is that really part of any transport strategy? Presumably it is possible to drive round the M.25 to get to Ebbsfleet in order to catch a train to Paris. The question is whether it is possible to drive round the M.25 in the first place. I should have thought Stratford a much better option. I never supported the option of Stratford as the terminal for the route but it has connections with the Jubilee Line and the other metropolitan lines. One hopes that one of these days it will have connections with CrossRail. It is interesting that when the Government congratulate themselves on the wonderful decisions they have made on the Dartford bridge, the Severn crossing, the Heathrow express and the Jubilee Line extension, which they apparently see as the pinnacle of their success—although it has been difficult to get any of those routes accepted by the Government—they omit CrossRail. I should have thought that that was a vital part of the strategy, although I dare say that a number of people living in London under whose houses the railway would run do not agree with me. It seems to me that the proposals are still extremely piecemeal.
When the Government talk of environmental considerations they mean noise and disturbance from passing trains. That is important. But environmental

831
considerations go wider. The Government should be providing a transport strategy which will get people out of their motor cars and on to public transport as often as possible. I should have thought that Stratford was a much better option in that respect than this place, Ebbsfleet, to which we shall all no doubt be taken at some stage. The Statement indicates that the financial case for Stratford has yet to be fully made—not the environmental or transport case. I wonder whether there is a danger that when the decision is finally made on the station en route the financial case for Ebbsfleet may be the most promising because it is a cheap site. I hope that the Government will not fall into the trap of accepting Ebbsfleet simply because it is a cheap site if it does not provide the connections to the transport network of the Greater London area which are so necessary.
We welcome the fact that a number of issues have now been cleared up and this important project can at last proceed, although, as the noble Lord, Lord Clinton-Davis said, the timing considerations are still obscure. To say that the scheme can now move ahead as fast as possible is an ironic statement. We should have been able to travel on the railway from May this year.
Lord Mackay of Ardbrecknish: My Lords, I thank the noble Lord, Lord Clinton-Davis, and the noble Lord, Lord Tordoff, for the welcome they gave to the Statement. I hope that that is an indication of a good start to the Statements that I may have to make in your Lordships' House. I am also pleased that I have brought relief to the noble Lord, Lord Tordoff, and other noble Lords who have perhaps already been down this track on a number of occasions.
It is only fair to point out to both noble Lords that this is an extremely important decision. It is important in terms of the size of the project. It is also important because the route passes through an extremely busy part of our country. I am told that Kent is one of the most densely populated parts of the country. It is an area where a great many people live; it also has a number of areas of outstanding natural beauty which one naturally wants to try to protect as far as possible.
I do not accept the strictures of the noble Lord, Lord Clinton-Davis, about six years of vacillation. If we get the decision right, as I believe we have today, that is of great importance.
I should like to correct the noble Lord, Lord Clinton-Davis, in case he gave some of your Lordships the idea that trains in France will travel at an average speed of 180 miles per hour. I was rather intrigued by the suggestion the first time I read it in the press. I have checked up. They will not. Trains may reach that speed on sections of the line but their average speed will be considerably less. When the whole project is finished and the rail link from London to the Channel Tunnel is open the journey time will be shortened by approximately half an hour. That is important. It is wrong to leave your Lordships with the belief that the trains on the other side of the channel will travel at 180 m.p.h. almost all the time. Engineers among your Lordships will not be surprised to learn that that is not the case.
832
I was asked in particular about the safeguarding position at Pepper Hill and Ashford. Perhaps I may say to the noble Lord, Lord Clinton-Davis, that nothing is safeguarded at those two sites until the further studies have been completed and a decision made.
I believe that Waterloo will have an important part to play in the system in the future. Journey times from Waterloo, of course, will take a little longer than from St. Pancras, but there will be great advantages for those people who come from locations to the south and west of London. We believe that Waterloo will play an important part in the future operations of this line.
The noble Lord, Lord Tordoff, asked me whether we were sure that St. Pancras was the correct site. Once he has had the opportunity to digest the enormous report, he will see the arguments that have been brought to bear and I believe that he will come to the same conclusions.
With regard to Ashford, as the Statement points out, at the request of Ashford Borough Council Union Railways has been asked to consider the relative merits of the two routes. Clearly it is involved. Ebbsfleet and Rainham are possible stations. Their attraction is that they are on the M.25. However, I made it clear that one site will be chosen, and we are at present looking more favourably at Ebbsfleet.
Lord Tordoff: My Lords, if the noble Lord will forgive my intervention, I had the impression from the Statement, although it is not clear, that there were three options, Stratford being one. Is the Minister now saying that the choice is in fact only between Ebbsfleet and Rainham?
Lord Mackay of Ardbrecknish: My Lords, I am sorry that I did not make myself clear. Ebbsfleet and Rainham have the same attraction—they are on the M.25. Different arguments apply for Stratford. That is my point. I hope that it satisfies the noble Lord.
4.32 p.m.
Lord Boyd-Carpenter: My Lords, contrary to what was said earlier, the Statement indicates that there will be substantial public expenditure in support of these developments. I appreciate that my noble friend is probably not in a position to give any precision to that announcement. However, knowing the way in which governments work, presumably the Government have in mind a maximum expenditure for this project beyond which they are not prepared to go. Could we know what that sum is?
Lord Mackay of Ardbrecknish: My Lords, my noble friend reminds me that I did not answer one of the questions posed to me by the noble Lord, Lord Clinton-Davis. He has given me an opportunity to do so.
How much money the Government are prepared to provide will depend on what comes out of the competition for the private sector promoter, which will start shortly. I cannot anticipate at this time the balance of the total sum of money between private and public capital.
Baroness Jeger: My Lords, first, is the noble Lord aware that in the King's Cross area the local authorities and local amenity groups have spent thousands of

833
pounds with regard to the King's Cross Bill. The Government are now withdrawing the Bill. What compensation will he made to the local authorities and others who have spent so much of local taxpayers' money in pursuing a Bill which the Government, on a whim, are withdrawing? Secondly, will the noble Lord tell the House how many homes and businesses will be involved in the scheme? Who will rehouse the people and relocate the businesses?
Lastly, did I hear the Minister correctly saying that in areas of blight people would be offered voluntary purchase? Does that mean purchase out of their own pockets? Let us suppose that already people are being made distraught by their mortgages and that businesses are going down the drain. What does the Minister mean by voluntary purchase? Are the Government taking any account of the human problems involved in the plans?
Lord Mackay of Ardbrecknish: My Lords, perhaps I may answer the noble Baroness's last question first. Referring to the houses at the edge of the safeguarded direct route—not those which will have to be taken over and knocked down—by voluntary purchase I mean that the person who owns the house has the option of deciding whether or not he should take up a purchase offer from the private sector company which will be doing the work. It is not the owner's money. He will be given the money in exchange for his house, so to speak. It is the other way round from the way in which the noble Baroness considered the matter.
It is difficult to quantify the number of houses and businesses directly affected. However, it will affect few dwelling houses on the line of the safeguarded route. There will be more business consequences but we hope that the general improvements in the area brought about by the project, especially in east London, will more than compensate.
The noble Baroness referred to the King's Cross Bill. It is not the Government who are withdrawing it but British Rail. Whether people are paid something is a matter for British Rail.
Lord Thomson of Monifieth: My Lords, is the Minister aware that there will be a great sigh of relief from those of us who live in Kent that this six year tale of dithering, indecision and blight is at last coming to an end? However, for Ashford it has not yet come to an end. Will the Minister give some indication as to when a final decision will be taken that will produce the safeguarded line through Ashford?
On a more general point, given the folly of the previous Prime Minister with regard to the financing of the project, is the Minister aware that there will be a great welcome for the fact that there will now be a substantial public sector involvement in providing a decent rail service through Kent? Is that result probably not the most spectacular U-turn in the history of railways in Britain?
Lord Mackay of Ardbrecknish: My Lords, the noble Lord ought to know that trains do not make U-turns. However, I am glad to note from his accent that I seem to be an honorary Kentish man, if he indeed lives in Kent.
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Clearly we wish the Ashford route to be resolved as quickly as possible. We shall certainly move to settle the matter with the parties involved and with the borough council as soon as possible. Obviously we have to do so in time to have a hybrid Bill ready for the autumn.
Earl Lloyd-George of Dwyfor: My Lords, I congratulate the Government on having finally settled on a route from St. Pancras, in particular if it involves the restoration of that splendid hotel next to the station. However, will the noble Lord tell us how the route will improve freight movements? I have always believed, as I think many people who support the Channel Tunnel project do, that freight rather than passenger traffic will make or break the Channel Tunnel project. How will the route help long distance freight from Glasgow, Birmingham, the Midlands generally and West Wales? I have in mind Milford Haven, which has a marvellous, under-used port for transatlantic traffic. How does St. Pancras fit into that pattern?
Lord Mackay of Ardbrecknish: My Lords, the freight situation is a little complicated. The line we are discussing today is primarily for passenger traffic. However, as I mentioned in my Statement, if it is thought necessary, there will be provision for some freight movement. The important aspect about the link so far as concerns freight, is that as pressure on current lines in Kent builds up towards the end of the decade and into the next, and as the passenger link comes in, that will relieve some of the pressure on those lines to make room for what we trust will be an increasing amount of freight traffic, preferably exports going from the United Kingdom to the Continent.
Lord Morris: My Lords, I, too, welcome my noble friend repeating the Statement. Does my noble friend agree that although Her Majesty's Government have been accused by the Opposition of dithering and blight, if they had not gone through, most responsibly, a very lengthy consultation exercise, noble Lords opposite would have complained even further? One bears in mind that Her Majesty's Government saw that considerable report in October. It is a remarkable achievement that they came to a decision so expeditiously. I congratulate my noble friend on so doing.
Lord Mackay of Ardbrecknish: My Lords, I thank my noble friend for his kind remarks. He is absolutely right. If the Government had come to a hurried decision about this whole issue, the Opposition would have complained that they should have taken their time. The Government having taken their time, the Opposition complain about that. That is their way, and I would not expect otherwise.
Lord Redesdale: My Lords, having taken part in the King's Cross Select Committee, I was rather surprised to hear that St. Pancras is such a worthy station. The evidence that was produced in front of the committee was that King's Cross was very much the preferred option. One of the issues brought up in the Select Committee was that the underground system which is to service that station will be overcrowded, given the

835
introduction of so many passengers from the channel service. Is the Minister aware of that, and are there any plans to improve the underground system?
Lord Mackay of Ardbrecknish: My Lords, obviously the noble Lord has a point about the way in which passengers come in to the new terminus at St. Pancras and fan out once they have arrived. On the present analysis, we believe that the underground station at King's Cross may have sufficient capacity to cater for passengers for the domestic services. Above that level we have to look at further dispersal methods and at improving the way in which passengers come to and from the station. Although my geography of London is not terrific, I would not have thought that there is too much difference between King's Cross and St. Pancras in that respect.
Lord Tordoff: My Lords, further to my noble friend's question, does this not again bear on the Stratford situation? If the trains stop at Stratford rather than the other places in Essex or Kent, there will be a considerable siphoning off of passengers onto the Jubilee Line and onto the Docklands Light Railway to go down to Canary Wharf and on, we hope, to CrossRail. That will relieve congestion at St. Pancras. Should that not be a very weighty consideration when deciding which of the stations we should choose?
Lord Mackay of Ardbrecknish: My Lords, the noble Lord puts a good case, and one which is no doubt part of the argument in favour of a stop at Stratford. Equally, there is a similar argument for a stop at either Rainham or Ebbsfleet to allow for access onto the M.25. People will want to use their motor cars to get to the railhead in order to go to the Continent.
Lord Sefton of Garston: My Lords, is the Minister as concerned as I am, along with many other people in the north west, about the link with the west coast mainline? I understand from the department that if that link is to be achieved major works have to be carried out in the direction of Hampstead. I understand that the link is called the "Hampstead cord". Can the Minister give an assurance that the same level of urgency will be applied to doing those works in order to establish the link between the west coast mainline and the tunnel as seems to be attached to all the other railway projects that we are to have in and out of London?
Lord Mackay of Ardbrecknish: My Lords, it is not just the importance of getting in and out of London which makes the Channel Tunnel so important. It is the links to the rest of the country—even further north perhaps than those in which the noble Lord is interested. I am not a railway man, but my understanding is that there is a link to the west of London which allows for freight and other traffic to make the loop from the Channel Tunnel out, round London and in a northerly direction.
Lord Sefton of Garston: My Lords, will the Minister be so kind as to check with the department? I have a letter telling me that work has to be done.
Lord Mackay of Ardbrecknish: My Lords, of course I will check on that point.
Baroness White: My Lords, can the noble Lord say anything about the link with the ports in Wales, in the west?
Lord Mackay of Ardbrecknish: My Lords, my understanding is that there are links in the complicated rail system round London that enable links not just with the north of the country—which of course the noble Lord and I believe to be important—but also with Wales, which the noble Baroness thinks is important.
Lord Clinton-Davis: My Lords, before we move on perhaps I may come back to the matter of Stratford, Rainham and Ebbsfleet about which the Minister was questioned earlier. How long is the investigation likely to take? What happens if satisfactory financing by the promoting group is not forthcoming?
Lord Mackay of Ardbrecknish: My Lords, we are perfectly confident that there will be satisfactory finance from the private sector for the whole project, if that is the noble Lord's question. So far as the three stations that we discussed are concerned, we feel that it is too soon to make a final decision now. As I mentioned earlier, a key factor will be what the private sector puts up by way of finance and also by way of argument, so far as those stations are concerned. I can assure the noble Lord that those decisions will be taken before the introduction of a Bill.

Social Security (Contributions) Bill
4.45 p.m.
House again in Committee.
Lord Carter Lord Carter moved Amendment No. 1:
After Clause 1, insert the following new clause:
("Statement of change in contributions and entitlement
.—The Secretary of State shall annually supply every contributor to the National Insurance Fund with a statement of the increase (as against the level at 5th April 1994) in the value of his annual contributions consequent upon section 1 of this Act and of any change (as against the level at 5th April 1994) in the value of the benefits from the National Insurance Fund to which that contributor is entitled.").
The noble Lord said: This amendment has been carefully drafted to ensure that all the contributors to the National Insurance Fund receive that information which they would receive if they were in a private insurance fund.
Perhaps I may deal immediately with the question that has been discussed; namely, whether this is a contributory insurance fund or a tax. I refer the Committee to what was said by the Minister for Social Security, Mr. Nicholas Scott, on 16th December:
"The House will be aware that the Bill concerns the national insurance fund, which provides finance for the range of contributory benefits, the most notable of which is the retirement pension, but which also includes widows' benefits, sickness, maternity and unemployment benefits". —[Official Report, Commons, 16/12/93; col. 1301.]
Mr. Scott went on to say:
"The increase in employees' national insurance contributions requires social security legislation separate from the Finance Bill,

837
because it is not a taxation measure, but a national insurance fund income measure under the care and management of my right hon. Friend the Secretary of State".—[col. 1302.].
Incidentally, I should say that, the Minister having said that in the Commons, his right honourable friend the Chancellor of the Exchequer, when he spoke at the Conservative Party Conference, said with his usual disarming frankness that he did regard it as a tax. After all, he is only the Chancellor of the Exchequer. It is important that, if we are to contribute to the National Insurance Fund, there should be a clear statement of what goes in and what comes out so far as the individual is concerned.
I took the trouble to look at the information that I receive annually, which I can have whenever I want it through the year from any insurance company which provides me with a pension. I receive an estimate of the total and the capital value of the fund; the basic guaranteed sum; the sum for death before retirement; the amount of a level annual pension; the level of a dynamic annual pension; the level of the reversionary bonus; the level of additional bonus; and the total value of the fund. The same information would be provided if I were insuring for permanent health insurance, mortgage protection policies or against injury or accidental death. For all the normal insurance cover in the private sector a very full statement will be provided to show what I have contributed and what the levels consequent on the benefits are. As I said, that information is obtained annually automatically, but I can have it all through the year and when I want it. At the same time, in the area of local government we all now receive an annual statement which shows exactly how the council tax and the unified business rate is spent.
It is clear therefore that the public sector should be trying to match the private sector in that respect in this era of open government and the Citizen's Charter. We should also remember that half a million people do not pay income tax but they pay national insurance. The Government seem to be in something of a quandary as to whether this is a tax. But there is an actuarial valuation in the scheme, so for this purpose we can regard it as a funded insurance scheme. In reference to the scheme, there have been a number of references to an increase of 1 per cent. It is not an increase of 1 per cent. but an increase of one percentage point. An increase of 1 per cent. on 9 per cent. is an actual increase of 11.1 per cent., which I believe is about eight times the current level of inflation.
As I said, we feel that the contributors to the state and national insurance scheme should have exactly the same information as the contributors to a private insurance scheme. That is borne out by the excellent ninth report of the Social Security Advisory Committee under the chairmanship of Sir Peter Barclay, who is now retiring. He has done a first-class job as chairman of that committee. In summary the report says:
"The social security system in the United Kingdom is extremely complex and changes in one area have to be considered carefully in terms of their ramifications for other parts of the system and for possible impact on the policy of other Government Departments … the contributory system provides accrued rights for contributors which the Government has a moral duty to sustain; social security is everyone's business. Almost without
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exception, everyone will be a recipient as well as a contributor at some point in their lives; the maintenance of an adequate social security system which is perceived by the population as fair is, in our view, a necessary factor in maintaining the social cohesion of the nation".
Therefore for all those reasons—the demands of equity, the importance of the social security budget (about which we never tire of hearing from the Government) and the very important fact that individuals are contributors to a fund which we are continually assured is a funded insurance fund —we argue that contributors should have the sort of statements sought in the amendment. I beg to move.
Viscount Astor: The noble Lord wants a clear statement. That is a laudable aim. However, I do not believe that his amendment achieves that aim. It may be helpful for me to explain a little about the contribution conditions that people must satisfy in any year in order to qualify for benefit.
Contributors must pay contributions on a prescribed level of earnings in a particular year in order for that year to be a qualifying year. For retirement pensions this will be £2,964 in the year 1994–95, which is 52 times earnings at the weekly lower earnings limit of £57. The requirement for sickness and unemployment benefits is slightly less, at 50 times earnings at the weekly lower earnings limit. Thus, although Clause 1 seeks to increase the contribution rate for employees, this does not affect the way in which people qualify for benefits. That will continue to be based on contributions paid on a set level of earnings, and that remains unchanged.
Although we are proposing to increase the rate of contributions paid by employees, the increase will not in itself result in any change to personal entitlements. Benefit entitlements remain assessable under the rules relating to those benefits. The increase simply alters the level of contributions paid on a given level of earnings. In view of that, there seems little point in establishing a statutory arrangement to advise contributors of how much or how much extra they are paying. They can already obtain that information from their payslips and P60s, supplied by their employer.
There are already existing measures to advise contributors of their entitlements under the national insurance scheme. The Contributions Agency issues over 3 million annual notices following the end of any year to those contributors whose contribution record is insufficient to count towards their basic retirement pension. The statement provides details of contributions paid and gives contributors the opportunity to pay voluntary contributions to bring the year up to the qualifying level and thus secure benefit entitlement. In addition to that administrative arrangement, the Benefits Agency also provides a retirement pension forecast service to contributors. They can request a forecast by completing an application form obtainable at local social security offices. The forecast gives details of the pension entitlement based on the national insurance record held. It states the number of qualifying years required in the future to obtain the maximum pension which can be achieved and offers advice on the payment of additional contributions, if required.

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The Committee may also be aware that all changes to contributions and benefits are reflected in departmental publications which are widely available. I do not think there can be any doubt that individuals already have wide access to information about their likely entitlements.
Moreover, published Bills, including those which deal with the structure of specific benefits, have to have a financial memorandum which sets out the financial effects of the provisions in the Bill. Additionally, from April last year, they have to include a compliance cost assessment which assesses the cost to the business community of the proposals. All this information is in the public domain and can of course be discussed and debated during the normal passage of the Bill through Parliament.
It is of course quite proper that people should be able to get information about their entitlements and that we should inform them where there is a risk that they will lose out on qualifying for benefits. We already have substantial administrative arrangements towards meeting those aims.
For the future, the Contributions Agency is considering the possible issue of a fuller statement to a wider range of people but has not fully evaluated the costs or benefits of such a move. The current computer system would not permit such a change and it would take some years to provide such flexibility within the new system which is being planned for the future. Early indications are that the costs of moving to such a system would be very considerable. Postage costs alone at current rates would be in excess of £6 million per annum. In addition there would be development, maintenance and staff costs and also the cost of dealing with additional inquiries generated as a result of such a move. All those costs would need to be borne by the National Insurance Fund out of money otherwise available for paying benefits.
The new clause proposed by the noble Lord, Lord Carter, does not attempt to give the recipient a full statement of his contribution record but a rather narrow and, I believe, unhelpful set of figures which could even be misleading to the recipient. With that explanation of our intentions for the future and of why I feel that the noble Lord's amendment is not suitable, I hope that he might feel able to withdraw the amendment.
Lord Carter: I am grateful to the noble Viscount but not surprised by his answer. I wish I had a pound for every time that I have heard a Minister say that the computer system will not allow them to change the system. I am very pleased that the noble Viscount has put it firmly on record as a statement from a Minister that an increase in contributions produces no increase in assessable benefits. That is exactly what we have been saying when we opposed the Question that Clause 1 stand part of the Bill.
We are continually told that there is a funded insurance fund, but the Minister is in fact saying that an increase in contributions does not produce a corresponding increase in assessable benefits. In a private insurance fund that would be automatic.
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I was interested to hear that the Benefits Agency is considering a fuller statement of the wider range of benefits. I should be pleased if the Minister could keep the Chamber informed of how that is progressing. It would be helpful. We are all aware of the complexity of the social insurance system. It is all very well to say that the information is available and tucked away in various departmental documents. It would be extremely helpful if every contributor to the fund had information of the kind that he set out so clearly on the pensions forecast and the statement of pension entitlement as one approaches retirement age. For all those reasons I believe that this is an idea that has to be followed up.
The Minister said that the way in which the amendment is drafted might not be the right way to provide even the information that we feel is necessary. We shall take that point on board. No doubt we shall wish to come back on Report with a similar but more helpful amendment.
Viscount Astor: It might be helpful to tell the noble Lord that one of the problems with the computer system is that it is 17 years old. I understand that it is one of the oldest large working systems in this country. Therefore the ability to access information about individuals and produce it is a problem. I agree that the noble Lord's aims are laudable in the long term. But there are certain practical difficulties. That is the argument against the amendment.
Lord Carter: It is another failure by this Conservative Government over 14 years to invest in up-to-date technology.
Viscount Astor: We are making sure that we get the best value out of the technology that we have.
Lord Carter: Obviously I intend to withdraw the amendment but I believe that we shall wish to come back to the matter at Report stage.
Amendment, by leave, withdrawn.
5 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 2:
After Clause 1, insert the following new clause:
("Report by Secretary of State
.—The Secretary of State shall publish and lay before Parliament a report on the impact of the increase in the main primary percentage under section 1 of this Act upon—

(a) contributors to the National Insurance Fund who pay primary Class 1 contributions but who do not pay income tax;

(b) the level of Home Responsibilities Credits and those persons who qualify for such credits.").

The noble Baroness said: This amendment asks for a report to be made by the Secretary of State,
"on the impact of the increase in the main primary percentage under … this Act",
upon two groups: those contributing to the National Insurance Fund who pay contributions but who do not pay income tax, and those who are currently receiving home responsibility credits.
The amendment may appear to be somewhat technical. I would be the first to admit that it was tabled partly as a probing amendment so that the Minister can give us a fuller explanation than we have been able to

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obtain from the various organisations and his department in relation to the effect of the Act on those people at the lowest levels of income.
The amendment refers to two groups of people. The first group is made up of the 500,000 people—400,000 of whom are women—who do not pay income tax but will see their national insurance contribution rise by 1 per cent. I refer to the hairdresser, the nursing auxiliary staff member, the shop assistant earning £6,000 a year and others who are earning perhaps one-third of the national average earnings and are therefore too poor to pay tax but face not only increases of VAT on fuel but also a 1 per cent. increase in national insurance contributions. The Minister may say that it represents a good deal for them notwithstanding. However, given that it is a pay-as-you-go scheme rather than a fully-funded scheme, one might argue that their benefits should come from general taxation and not from an additional levy on already low earnings. The amendment therefore asks the Secretary of State to report the effects of such changes on their real income over time.
The second group to which the amendment refers is even more invisible. The implications of the national insurance changes for those people are even more obscure. I refer to those women who are in low paid, usually part-time, work; those who are earning even below the national insurance level—the lower earnings level—of £57 a week. The people in the first group earn between £57 and income tax levels; those in the second earn even less than that. There are 2.25 million women who earn less than £56–£57 per week. Such women may be care assistants earning £1.80 an hour; a travel agency worker earning £1.79 an hour; a bingo-hall worker earning £1.50 an hour; a cleaner earning £2 or £2.20 an hour; a switchboard operator earning £2 an hour or a state registered chiropodist earning £1.75 an hour, among others.
Jobs like that mean that if a woman—they are usually women—works between 15 and 25 hours a week her income is likely to be below the lower earnings level of £56–£57 a week on which one pays contribution. Such women may be married and that income is often a modest but welcome addition to the household. They may be the sole income earner in their family, particularly if they are single parents on benefit, and that benefit may be reduced accordingly. On either count it is surely welcome that such women are in the labour force. It keeps those marginal to the labour force attached to it with the opportunity later to increase their hours and qualifications. It helps to reduce their entire dependence on benefit and, if it does not sound too moralistic, it encourages children of such families with a model of a working adult often combining that work with home care.
Such women will usually have children; alternatively, they may be carers offering large numbers of hours of care to an elderly person. If they earn above £57 a week and pay national insurance contributions, they are fully entitled to SERPS; that is, an earnings addition to their old-age pension. However, at the other extreme, if they do not work but have such home responsibilities as dependent children or are carers working over 35 hours
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a week, since 1978 that has counted as work for the purposes of pension and SERPS entitlements; that is to say, the number of years one is required to contribute in order to be eligible for SERPS is proportionately reduced by the number of full tax years in which one is receiving child benefit or, alternatively, being a full-time carer.
In other words, home responsibilities give women at home with legitimate caring responsibilities an entitlement to SERPS in the same way as though they were paying national insurance contributions. Therefore, though such women may be penalised by losing income during their working years, they are not doubly penalised when it comes to pensions. The problem is for the women who are in the labour market; they are not now at home and therefore apparently entitled to home responsibility protection but are still not earning enough to pay a national insurance contribution. If they were at either extreme they would have an entitlement to SERPS; between the two it appears they do not.
As I understand it, a woman earning under £56 a week might be in one of two categories, depending on the number of hours she works. If she works more than 16 hours a week she is deemed by the DSS to be working full time. But she may be receiving only £2 an hour and earning therefore under the £56 a week limit. Nonetheless, her 16 hours a week and, say, £50 income would be topped up by family credit. Will she retain her entitlement to her home responsibility protection or will she lose it by going into the market place, not having regained it by earning enough to pay national insurance contributions? If a woman works under 16 hours a week and is therefore on income support with perhaps, as a single parent, a £15 disregard and thereby reducing her benefit, what then happens to her home responsibility payments?
We fear that if a woman moves out of the home into low-paid work and begins to enter the labour market she will lose her right to an adequate pension in old age. Precisely because of her domestic responsibilities-child care or caring—she will not earn enough to pay national insurance contributions in her own right and will therefore lose her build-up entitlement to SERPS. By doing what the Government urge her to do—moving into the labour market consistent with her home responsibilities—she appears to be punishing herself with a promise of greater poverty in old age.
We believe that to be the situation. I would be delighted to have misstated it and hope that the Minister can assure us that such women, who lose their home responsibility credits by not being at home but nonetheless are not earning enough to pay national insurance and regain their entitlement benefit, are fully protected when it comes to their pensions. I beg to move.
Lord Redesdale: I support the amendment. It is obvious that a rise in the national insurance contribution will affect far more people than would a similar rise in income tax, simply because the national insurance contribution bites at a lower level of income. As was pointed out, 500,000 people who pay national insurance

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contributions are earning below the income tax threshold. The people who will be hit by the tax will be the poorest members of our society. To scrutinise the damage that the tax will do can only be a good thing.
Lord Astor: The noble Baroness is concerned about the effect on low-paid workers of the Government's proposal to increase the main rate of national insurance contributions for employees. It may be helpful for me to explain that the way in which we restructured national insurance in 1989 provided a system which cushions the effect of changes for the low paid.
The system we took over from the Labour Party in 1979 had a single percentage rate which became payable once a person's earnings exceeded the lower earnings limit. People therefore paid a fixed percentage on all their earnings up to a maximum. That meant that an increase in the contribution rate was applied to the whole of people's earnings—again up to the maximum. Low-paid workers would therefore find all their pay subject to any change in the rate.
The present system—which I say to the noble Lord, Lord Redesdale is better—is in two tiers. Earnings up to the lower-earnings limit of £57 a week are assessed for national insurance at just 2 per cent. That is not changing as a result of the Bill before the Committee. It is only the main rate due on earnings over £57 a week which is due to rise. It will be obvious therefore that for people earning not much more than £57 a week, the increase in contributions will be very small compared to what it would have been had it applied to all their earnings.
Members of the Committee may find it helpful for me to explain the exact effect upon people who do not pay tax. For a single person, we are talking essentially about someone earning under the single person's allowance of £3,445 a year or about £66 a week. For a married man or single parent the figure is £5,165 or just under £100 a week.
For a single person beneath the tax threshold the maximum increase in national insurance contributions will be 2p; that comprises 9p from the 1 per cent. increase on pay of £9 above the lower earnings limit, offset by 7p caused by the raising of the lower earnings limit as a result of which a further £1 of pay is assessed at 2 per cent. instead of 10 per cent. For a person earning £99 a week, that is just below the married couple's allowance. The maximum increase will be 35p a week.
I now turn to the second item which the noble Baroness wishes to be covered in the report proposed by the new clause—the impact of the increase in contributions on the provision of home responsibilities protection, or HRP for short. There would in my view be no effect whatsoever and I fear that the noble Baroness has perhaps misunderstood the way in which HRP and contributions interact. I hope to be able to explain to her why that is the case. It may help the Committee if I say a little about how HRP operates to help people maintain their entitlement to a retirement pension when they have to stay at home due to caring responsibilities.
As the Committee will be aware, the retirement pension builds up over the working life of contributors
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through the payment of national insurance contributions. Broadly speaking, nine-tenths of the working life needs to be covered by qualifying years of contributions to give entitlement to a full basic pension. A qualifying year is one in which contributions have been paid on earnings equal to 52 times the lower earnings limit in force for that year. The Committee should note that it is not the amount of contributions that count, rather the earnings on which they were paid. Thus an increase or decrease in the percentage rate of contributions has no effect whatever on potential benefit rights.
People who are unable to work and maintain their record of qualifying years may be given a credit of sorts by means of HRP if they are undertaking the role of carer. The most common example is looking after children. Thus the main payee for child benefit automatically has potential title to HRP for the years child benefit is in payment. Carers of sick or disabled people receiving attendance or certain disability benefits can also get HRP. The effect of each year of HRP is to reduce the length of the working life and hence the number of qualifying years of contributions needed to get a full pension.
If higher contributions meant that people attained qualifying years more readily, there would indeed be an effect upon the level of HRP, because HRP and qualifying years are mutually exclusive—one cannot get HRP for a qualifying year because it is not needed. However, as I explained earlier, qualifying years are based not on amounts of contributions but on the earnings underlying them. As these will remain a constant factor in calculating qualifying years, there will be no discernible effect upon awards of HRP.
I hope that I have answered the noble Baroness's questions. I shall study in Hansard what she said and will write to her if there are any points which I have not covered in my reply.
Baroness Hollis of Heigham: As we are in Committee perhaps I may ask the noble Viscount for clarification. I have before me a document from the DSS dated 24th January 1994. It states:
"From April 1978 a man or woman who stays at home and satisfies one of the conditions outlined in paragraph 2 can have their retirement pension entitlement protected".
I would draw attention to the words,
"who stays at home and satisfies one of the conditions".
The question I was putting to the Minister—I do not think I have yet had an answer—is: if they are not staying at home (in other words, they are in work but receiving below £57) will they still get HRP?
Viscount Astor: Nothing is changing. Those earning under £57 who enjoy the protection of HRP will be completely unaffected by the Bill because they pay no national insurance. Any woman with appropriate responsibilities gets HRP for any year in which she does not pay enough national insurance to make the year count for pension. She does not need to stay at home. The point is that she must earn under £57.
Baroness Hollis of Heigham: I want this to be very clear because everyone else's understanding is different. A woman who is in the labour market earning up to £57 a week will continue to receive HRP.
Viscount Astor: Yes, that is correct.
Perhaps I may return to the general thrust of the noble Baroness's amendment. We already publish a report by the Government Actuary on the financial effects of any changes to national insurance contributions. The proposed clause requires a separate report on the coming into force of this Act. That would be an additional burden on Parliament and one which is unnecessary and indeed of limited vale.
Baroness Hollis of Heigham: I thank the Minister very much for that reply. We shall want to study it. It is at odds with the extract from the White Paper but it may just be that the wording there was casual and informal and does not have the degree of accuracy that the Minister has offered today. In the context of the Minister's reply, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.15 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 3:
After Clause 1, insert the following new clause:
("Annual Report to Parliament
.—The Secretary of State shall publish annually a report to Parliament setting out the yield from the increase in primary Class 1 contributions payable as a consequence of the provisions of section 1 of this Act.").
The noble Baroness said: This amendment stipulates that the Secretary of State should publish annually a report to Parliament setting out the yield from the increase provided for in the Bill. We on this side of the Committee do not like the Bill but we acknowledge that revenue must be raised by any government to meet the social security obligations appropriate in a civilised society. However, we view the Bill as part of a social security package designed by the Government under which everyone—or almost everyone—will be expected to pay more for a declining level of benefit. I still hold that view despite the exchanges we have had on the point this afternoon.
The notion behind the amendment is that Parliament should have the opportunity of overseeing regularly what the Government are doing. Our concern stems from our suspicion that the Government do not really care very much for the welfare state. There have been frequent references to dependency and derisory statements by some Conservative supporters about the so-called "nanny state". There have been alarmist prognostications about the demographic time-bomb awaiting us in the year 2030 when those in employment will have to support a much larger retired population. I find that a little surprising since the equalisation of the state retirement age at 65 for women could be expected to reduce the numbers involved rather than the reverse, and that change alone is likely to produce savings of £5 billion a year at today's prices.
We are told also that European countries face the same problem as we do. That may well be true. Although many are having to review social security spending, they are doing so from a much higher base than the UK. According to a table I have, the UK is seventh in the league of EC countries in social security
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spending per capita and the benefits in the UK are relatively low compared with those in many EC countries. I cannot help feeling therefore that much of the Government's concern about social security spending, and thus their concern to increase contributions, is ideologically motivated. They would prefer a society in which almost everyone provided for themselves through the private market—"private" in their terms being good and "public" bad—and that despite the fact that poorer people are simply not a commercial proposition for the private sector and their only hope of being protected is via a socially motivated public sector.
For these and many other reasons we believe that Parliament should have a positive duty of monitoring what the Government are doing. The annual report to which the amendment refers would provide the opportunity for doing that. Moreover, this is an argument for open government which I thought the Government were supposed to favour. I beg to move.
Lord Boyd-Carpenter: It seems to me that the amendment is wholly unnecessary. The information it seeks is relevant and interesting but it is information which could be obtained simply by tabling a Question either in this House or in another place—a perfectly simple, straightforward Question which would produce the answer. Therefore, to load the statute book with a solemn provision of this kind seems wholly unnecessary and really rather bad draftsmanship.
Perhaps I may comment a little further on what the noble Baroness said as regards the suggestion that there was no great anxiety on this side of the Committee concerning the beneficiaries of social security. As one who was actually in charge of social security for a longer period than any other Minister, I resent that. On the contrary, on this side of the House, as on the other, there has been great anxiety about the working of our national insurance system. The fact that it seems to me to be quite unnecessary to put an annual report into the Bill when the information can be obtained by any noble Lord or Member of another place tabling a Question in either House, is not inconsistent with that.
Baroness Elles: I support my noble friend Lord Boyd-Carpenter, particularly as the noble Baroness referred to figures from the EC comparing our benefits with those of other member states. As she will know only too well, statistics can be read in all sorts of ways. The benefits in the United Kingdom compare more than favourably with those of any other community country otherwise I would wonder why so many Community citizens come to this country and, under the obligations of the Community, benefit very fully under the social security scheme, particularly under the national health scheme. I know that the noble Baroness is very knowledgeable about these matters, but I suggest that she looks at these figures with a certain amount of fairness.
As regards benefits for women, no one more than her party has been seeking equality for men and women. Unfortunately, in seeking equality for men and women what has happened is one of the results of that policy. The pensions are then paid at the same age which was

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the result of a case which came before the European Court of Justice. Therefore, whether one likes it or not, 65 is the age which has been chosen.
I suggest that the Government have pursued very fair and active measures to benefit the country, and particularly those who are least advantaged. The one method which I thought was extremely helpful was introduced by the Conservative Government. That was the home responsibilities credit which allowed women to stay at home and to draw benefit despite the fact that they were not actually in work. I know that this is slightly off the purpose of the Bill itself, but in view of the noble Baroness's comments I felt obliged to support what my Government have been doing all these years and particularly to support the words of my noble friend Lord Boyd-Carpenter.
Viscount Astor: To put this amendment into context, it might be helpful if I summarise the current arrangements for reports of this sort. The Committee will be aware of the requirement that a report by the Government Actuary must be laid with the annual orders that set the rates of benefits and contributions for the coming year. These reports give details of expected contribution income and benefit expenditure in considerable detail, highlighting any changes in structure or rates.
The Committee will also be aware that a Bill includes a financial memorandum which sets out the financial effects of the provisions in the Bill. Additionally, a compliance cost assessment, which assesses the cost to business of the proposals, is now required. All this information is in the public domain and can, of course, be discussed and debated in the course of the Bill's parliamentary stages.
I should make brief mention of the requirement for the Government Actuary to undertake a five-yearly examination of the National Insurance Fund and report on the extent to which it may be expected in the longer term to bear a proper relation to demands in respect of benefit. This review typically looks 50 or 60 years ahead.
From what I have said I am sure your Lordships will recognise that there is already a substantial body of published material dealing with the workings of the National Insurance Fund and legislation which affects it. The report by the Government Actuary will be laid before your Lordships in connection with the benefits and contributions orders next month. It will need to recite changes which have occurred to the contributions system and will set out the yield deriving from them. This will include the financial effect of the 1 per cent. increase and is, I believe, exactly what the noble Baroness is seeking.
The noble Baroness's amendment would also require reports in respect of the 1995–96 and each subsequent year to he made to Parliament separately identifying the yield deriving from the 1 per cent. increase. I believe that that would be an unnecessary burden. Once contribution rates have been changed with the agreement of Parliament, those rates become the new
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base rates, which are then subject to periodic review and further amendment up or down, again with Parliament's approval.
I do not think it would serve any useful purpose to monitor on an ongoing basis the effect of a simple change in rates. The Committee is fully aware of the financial effect of the provision and this will not vary year on year. Obviously, the yield will increase slightly with the general tendency for earnings to rise, but this is a feature of the contributions scheme.
The function of reports to Parliament about the National Insurance Fund is to look ahead and to assess the ability of the fund to meet its prospective expenditure. The proposed addition by this amendment to the report does not aid that function. I agree with both my noble friends Lady Elles and Lord Boyd-Carpenter that this amendment is not helpful. Therefore, with that explanation, I hope that the noble Baroness will feel able to withdraw it.
Baroness Turner of Camden: I note what the Minister has said this afternoon. We shall look at it very carefully in Hansard tomorrow. As regards the comments made by the noble Lord, Lord Boyd-Carpenter, what we were after is not replies by individuals to questions, but a regular opportunity for Parliament as a whole to look at the situation, which is very different from tabling a Question and receiving an answer from an individual Member of this House or in the other place.
Lord Boyd-Carpenter: I am grateful to the noble Baroness for giving way. If, as she accepts, the information can be obtained simply by tabling a Question; if the information as produced seems to be debatable, then she or any of her colleagues on the Opposition Front Bench would very easily find an opportunity to debate it.
Baroness Turner of Camden: I still do not accept what the noble Lord has said. If there is a regular obligation to publish a report, that is an item which comes before both Houses of Parliament. Therefore, the opportunity is made available, through legislation, for the Secretary of State to be questioned about it. That is very different from an individual taking the initiative and putting down a Question. There are no similarities between the two situations.
As regards what the noble Baroness said, I am not objecting to the notion that there should be equality for women at the age of 65. I simply mentioned that because there we are talking about a monetary yield as a result of that alteration. My information is that there would be a substantial yield as the result of women being required to work to the age of 65 before receiving the state pension. I am not arguing about the benefits as regards ourselves and other countries in the EC. I have had a lot of information on that score. Concerning the NHS, in this amendment we are not talking about that body, but about contributions on the social insurance side and the contributory benefits being achieved thereby.
It is not my intention to press this amendment to a vote this afternoon. We shall look carefully at what has been said because it is our intention to try to ensure that

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the Government are entirely accountable as to what happens as a result of the passage of this Bill. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 4:
After Clause 1, insert the following new clause:
("Report by Social Security Advisory Committee
.—Before the coming into effect of the provisions of section 1 of this Act, the Secretary of State shall submit such proposals to the Social Security Advisory Committee whose report shall be laid before Parliament.").
The noble Lord said: I believe that all Members of the Committee are aware of the excellent work which is done by the Social Security Advisory Committee. I suggest that it is probably one of the most effective committees which regularly reports to government. Because of the ramifications of the National Insurance Fund, we feel it important that that body should be in this Bill. We have touched on this matter in a number of the amendments today. We should ask the SSAC to report on the impact of an increase in contributions and the effect on the level of benefits although, as I have said, we did hear from the Minister as regards a previous amendment that the increase in contributions is not matched by an increase in assessable benefit. It is important that the SSAC should be able to point that out.
Perhaps I could give an example of the excellent work that is done by the SSAC in this area. There is now a great myth being peddled by the "militant tendency" on the Tory Right regarding the ability to pay for the welfare state. The myth is that we cannot afford the welfare state as it presently exists. A number of recent reports have shown that that is not so. With a reasonable level of economic growth, we can certainly support a proper level of provision for the welfare state as we know it.
The argument was memorably advanced by the late Anthony Crosland in the 1950s and early 1960s and has been brought up to date by the SSAC's most recent report, its ninth, which points out, with some calculations, that if we assume a real growth in GDP of 3 per cent. per annum and unemployment of 1.5 million, by the year 2000 social security benefit expenditure as a percentage of GDP will be less than it is now. I imagine that the present Government will try to attain a level of growth of between 2.5 and 3 per cent.—the next Labour government will certainly seek to attain that—and we all wish to see a substantial reduction in unemployment. If that comes about, the evidence of the SSAC (which is a fine and objective committee) shows that the percentage of GDP taken by social security benefit expenditure will decrease from the present level of 12.3 per cent. to 11.3 per cent. That is a reduction of one percentage point—not of 1 per cent. as is often said—and in the order of 10 per cent. of actual expenditure. That is an example of the excellent work of the SSAC.
At the more detailed level, an annual report on these proposals by the SSAC would provide an independent and objective comment on the relationship between benefits, entitlements and contributions. The committee would be able to comment on such matters as "reforming", which means reducing, the unemployment
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benefit, which is what the Government intend; changing the criteria for unemployment and incapacity benefits; changing the pension age, which has been mentioned; and rebates to bribe people to leave SERPS, which have amounted to £12.5 billion since they were introduced a few years ago.
We are continually told that national insurance is not a tax but a fund income measure. Well then, let the SSAC report on how the insurance fund is performing in relation to contributions and benefits. As I mentioned the National Insurance Fund, perhaps I may refer in passing to the statistical correlation that has not so far been discussed in debates on the Bill in either House. I refer to the correlation (which is marked when one looks at the table of the history of the fund) between the state of the National Insurance Fund and the years in which there have been general elections.
As I said, the SSAC is one of the most effective of the committees which report annually to government. I conclude with a quotation from the foreword to its ninth report:
"We live in a complex society and the social security system is correspondingly complex. It is therefore not surprising that the effect of changes on small but possibly significant groups at the front line of benefits will not always have been foreseen by policy makers. We believe that the Committee acts as a useful check before changes are made".
That is the reason for the drafting of the amendment which asks that,
"the Secretary of State shall submit such proposals to the Social Security Advisory Committee"
before the provisions come into effect. I beg to move.
5.30 p.m.
Viscount Astor: I agree with the noble Lord, Lord Carter, that the Social Security Advisory Committee has since November 1980 performed art invaluable function. In accordance with laid down statutory requirements, the Secretary of State is required to submit for the committee's consideration a significant proportion of the proposals for changes in social security benefits and certain contribution rates that are put into effect by regulations. It is then open to the committee, if it chooses, to have the proposals formally referred; that is, the committee will conduct with outside interested organisations a consultation exercise and will produce a report on the proposals for the Secretary of State's consideration. Even where the committee agrees that the proposals need not be formally referred, it may well ask questions or express views on what is suggested. Either way a process of advice or consultation will take place and an independent view provided of the changes proposed.
Historically, neither the committee nor its predecessors—the National Insurance Advisory Committee and the Supplementary Benefits Commission—have had referred to them that legislation which is subject to full parliamentary scrutiny. Included in this category is the provision in the primary legislation before the House that the noble Lord would like the committee to consider before it can come into effect. The proposals for regulations that are considered by the committee are those which for the most part are not subject to full parliamentary scrutiny; that is, those which are subject

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only to the negative resolution procedure. It is therefore appropriate that someone else, in this case the committee, should have a chance to give a view that is independent of that of the government of the day. The enactment of primary legislation is, as your Lordships are well aware, handled in an entirely different way, with an opportunity given for debate in this House where your Lordships can make your views known.
With that explanation of the committee's important role in dealing with regulations and not with primary legislation, which is subject to full parliamentary scrutiny by both Houses, I hope that the noble Lord, Lord Carter, will feel able to withdraw his amendment.
Lord Carter: I think that the real answer as to why the Government do not want the SSAC to comment on their proposals before they come into law is that they dare not ask it to do so in a number of cases because they know what sort of answer they would get.
The Minister correctly pointed out the SSAC's valuable function and the fact that the committee reports on a significant proportion of changes which are required to be introduced through regulations. However, there have been examples of changes being made to benefits in the past—usually a worsening in the benefit level or a change in the rules to make the benefit harder to get—without the SSAC being given a chance to comment.
I was a little surprised by the weight that the Minister attached to the opportunity to debate primary legislation as if the SSAC had no role in that and it was all left to Parliament. The contents of the SSAC's ninth report show the matters on which the committee reported in the past year. They include the Benefits Agency, the situation in Northern Ireland, the Child Support Agency, the Contributions Agency, students, hardship payments, community care, mortgage interest, non-dependant deductions from housing benefit, the state pension age, VAT on fuel, housing benefit, the social fund and the invalid care allowance. All those things have been discussed by Parliament in the past but the SSAC has seen a need to report on them—and it has reported extremely well, but with hindsight.
All that we are asking for in the amendment is that the committee should have a chance to comment on such changes before they are put into effect. We feel that it would improve the operation of the benefit system if the committee were able to make its critical but constructive comments before provisions have the force of law. I am disappointed by the Minister's answer which we shall need to reflect on. We may wish to return to the matter on Report because this is an important suggestion. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 5:
After Clause 1, insert the following new clause:
("Report by Government Actuary
.—The Secretary of State shall publish a report by the Government Actuary setting out the consequences to the National
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Insurance Fund and the Treasury subvention to that fund of the increase in primary Class 1 contributions under section 1 of this Act.").
The noble Baroness said: The amendment would require the Secretary of State to publish a report by the Government Actuary setting out the consequences to the National Insurance Fund and the Treasury subvention to that fund of the increase referred to in the Bill. I know that we shall be told that the fund is simply a notional one, but when the present welfare system was devised Beveridge intended that there should be contributions on a tripartite basis from employees, employers and the state. He originally intended that all three should make equal contributions but, as we know, that notion has fallen by the wayside. Employees' contributions have increased, employers' contributions have decreased, and the Treasury subvention at one time disappeared altogether. We have been over this ground to some extent already today.
Back in 1979, the subvention was regarded as being of the order of 18 per cent. It was gradually eroded until it disappeared. It is now back again. It will be recalled that individuals who opted out of SERPS into private pensions were allowed a national insurance rebate for doing so. I have no doubt that that bribe—for that is what it was, although the Government do not like it being called that—was responsible for many people, who were badly advised, opting into the private market. That was as a result of some hard selling by the insurance industry. I well remember the posters on the Underground:
"When did the Government ever give you any money?".
The advertisement continued, "Well, they are now". People were told that they could obtain £1,200 from the Government merely by taking out personal pensions by the approved date. It has now been found that large numbers of people have taken out personal pensions when they would have been better advised to stay in their firms' pension schemes or with SERPS. The SIB is to conduct an inquiry, and has talked in terms of compensation for people who were inappropriately advised. But, as I said, I do not blame the insurance industry for that. Still less do I blame the salesmen, who have a living to earn in a highly competitive market and are just as scared of unemployment as the rest of the labour force. The blame must rest with the Government, whose brilliant idea it was.
As it is, the revenue which might have come to public funds has been forgone and people are receiving less for their money in terms of security for old age than if they had stayed with SERPS or their firms' occupational scheme. As I understand it, £12.6 billion has been lost to the NIF which might otherwise have come to it. It is follies of that kind to which we on this side of the Committee take exception. Of course, the amendment will not stop the Government from embarking upon further follies induced by their obsession with private provision, but it will enable Parliament to look at what is happening at regular intervals. Again, this is an argument for open government which, as I said earlier, I believe the Government claim to support. I hope to hear from the Minister that he has decided to accept the amendment. I beg to move.
Viscount Astor: The proposal to increase by 1 per cent. the national insurance contributions for employees has been in the public domain since the Budget last March, and its effect on the income to the National Insurance Fund is set out in the Financial Memorandum and notes on Clauses to the Bill. The Committee is well aware that the amount to be raised for the National Insurance Fund by the proposed increase is some £1.9 billion. That sum can be placed in context by my right honourable friend's Statement at the time of the Budget that he proposed to seek a Treasury grant of some £6.4 billion in 1994–95 in order to ensure the stability of the National Insurance Fund in that year. Thus it is quite clear that, even with the proposed increase in national insurance contributions, expenditure on benefits is still significantly outstripping income from contributions. There can be no question of the Government withholding details of the financial effect of the proposed increase.
There is of course no pre-existing requirement for a report by the Government Actuary to go hand in hand with primary legislation, as applies with secondary legislation. We shall of course be laying a report as usual setting out the effects of all the changes to contributions and benefits in time for the debate on the benefit uprating and contribution re-rating orders which I expect will take place next month. That report will, I am sure, set out the consequences to the National Insurance Fund of the 1 per cent. increase in contributions. In effect therefore it will meet the noble Baroness's wishes.
The Committee will remember that we published a report with the Bill which provided for the Treasury grant last year. We felt it was necessary for the Committee to have available full details of the National Insurance Fund's finances when debating a structural change to the fund's finances which would affect it for years to come by providing a further and separate source of income. The position this year is quite different. We are dealing with a simple change in contribution rates. Therefore, I believe that the amendment is unnecessary.
There will still be a Government Actuary's report this year which will be laid as usual with the uprating and re-rating orders. I am satisfied that, generally speaking, that is the right and proper method of advising this place about the effect of various changes on the fund's finances. It would be superfluous, I think, to provide in this Bill for a further report, and in view of my explanation I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Turner of Camden: I am obliged to the Minister for his explanation and for pointing out that we shall have a further opportunity to look at the way in which contributions and benefits are being dealt with by the Government when we have the actuarial report. I am not certain that that satisfies entirely what we had in mind with Amendment No. 5, but it is not my intention to press it this afternoon. In a sense, it was a probing amendment to see what the Government's intentions were in this connection. Having listened to the Minister, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Remaining clauses agreed to.
5.45 p.m.
In the Title:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 6:
Line 2, after ("1992") insert ("and to require information on such increase;").
The noble Baroness said: This is an attempt to amend the Bill's title by the insertion after "1992" of the words,
"and to require information on such increase".
The intention of the amendment is to expand the Bill's title to make it clear that it is not just a question of putting up the contribution rates, but that there is also the question of proper accountability as to how the contributions are utilised and to see what are the Government's intention in that connection.
We believe, as we have said repeatedly in discussions on the Bill, that, although it is a short, small Bill, it is an important and significant one and will mean a good deal to large numbers of people who will find suddenly that they will have to pay more in their national insurance contributions and may later, when they come to look at what they receive for those contributions, feel that they are not receiving as much as they had originally thought that they would. It is so important that we believe that there should be written into the Bill's title the requirement that information should also be made available, and we have used the wording,
"and to require information on such increase".
Again, it is a question of accountability. It is a question of saying to the Government, "We want to know what you are doing and we want arrangements for monitoring made". If we put that wording into the title, it will give us the opportunity to come back on Report with other amendments based upon the discussion that we have had this afternoon. I beg to move.
Viscount Astor: If the Committee had accepted any of the amendments tabled by Members of the Committee opposite which sought reports to be provided either by my right honourable friend the Secretary of State or by the Government Actuary, it might well have been appropriate to amend the Bill's title in the way provided for by the amendment. However, that has not been the case and the amendment to the title is therefore unnecessary. In fact the title can, as I understand it, be amended only if the Bill has been altered so as to necessitate such an amendment. That is not the case here as the title as it stands is entirely adequate in relation to the scope and content of the Bill.
Baroness Turner of Camden: As I understand it, the Committee has not rejected the amendments about having reports; we have withdrawn the amendments on the basis that we would want to consider between now and Report what the Minister has said. If he does not want us to consider what he has said, that is a different matter. Presumably he gave us full explanations so that we could consider the matters between now and Report.
Viscount Astor: Perhaps I may help the noble Baroness. The point is that none of the amendments has been accepted and therefore there is no reason to change

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the long title of the Bill. If any of the amendments had been accepted, there would be good reason to change it, but they have not. So I am afraid that the noble Baroness will have to contain the amendment until she manages to persuade this place to accept one of her other amendments.
Baroness Turner of Camden: I still claim that this place has not had the opportunity to decide for or against the amendments because we decided not to take the Committee's opinion. In any event, my understanding is that if we want to amend a Bill's title that always comes last. It is one of those unfortunate things. One cannot amend the title before one starts on the Bill; one has to amend it at the end. So we have no alternative but to do it in that way.
Lord Campbell of Croy: I thank the noble Baroness for giving way. It is the practice of this Chamber to deal with the title at the end of the proceedings because it has to be dealt with only if the Bill has been altered. For that reason it is dealt with at the end, not at the beginning.
Baroness Turner of Camden: I am certain that we should not persuade the Committee to accept the amendment, but if we had, it would be impossible for us to amend the Bill on Report. I shall not press the amendment at this stage—I think that it would be most unwise to do so—and I beg leave to withdraw it.
Amendment, by leave, withdrawn.
House resumed: Bill reported without amendment.

Insider Dealing (Securities and Regulated Markets) Order 1993
5.50 p.m.
Lord Henley Lord Henley rose to move, That the draft order laid before the House on 8th December be approved [3rd Report from the Joint Committee 1993–94].
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. The order is required to enable the insider dealing legislation contained within the Criminal Justice Act 1993—which repeals and restates the law on insider dealing—to be brought into force. The Government plan to commence the Act's insider dealing provisions on 1st March. Noble Lords will know that during the passage of the Criminal Justice Act the House considered at length the broad question of how to prevent insider dealing. It is not the function of the order to address this question. Instead, the issues with which it deals are much more specific, and I intend to confine my remarks to them during the course of this debate.
The order has three functions. First, it specifies the securities to which the Criminal Justice Act is to apply. The effect of the order is to apply the law to securities which are "market" related, reflecting the fact that the legislation is designed to protect the integrity of the market in its broadest sense.
The second function of the order is to specify what is meant by the term "regulated market", which is important for determining whether a transaction in a
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particular security is covered by the legislation. Transactions in "securities" will be covered if they occur on regulated markets or if they are done off-market in reliance on a professional intermediary. Regulated markets are stock exchanges within the European Economic Area, relevant domestic derivatives exchanges (LIFFE and OMLX) and the Recognised Overseas Investment Exchange (NASDAQ).
Finally, the order specifies what is meant by the term "market regulated in the UK". This is important because it is the Government's intention that all dealing which occurs on securities markets operating within the UK should fall within the ambit of the legislation, regardless of the whereabouts of the dealer. A UK regulated market is any market which is established under the rules of the London Stock Exchange, and LIFFE and OMLX.
The effect of the order, in combination with the Act passed by the House last year, is to provide a sensible reform of our legislation against insider dealing. The new legislation will tighten the law against insider dealing and thus play its part in protecting the integrity of the United Kingdom's financial services industry, to the benefit of the industry, those who use the markets to raise capital, and the investing public.
I commend the order to the House.
Moved, That the draft order laid before the House on 8th December be approved [3rd Report from the Joint Committee 1993–94].—(Lord Henley.)
Lord Peston: My Lords, I thank the Minister for introducing the order. It was debated at some length in the other place and I do not propose to repeat the argument. We all agree that insider dealing is a serious issue and that an order of this kind is an inevitable consequence of the Criminal Justice Act. One hopes that as a consequence what will happen will be precisely what was described by the Minister; that it will make control of insider trading more effective. The questions that one has are not for debate this evening; one is interested in how many more dealers will be caught and prosecuted and how tough the sentencing will be for those who are found guilty. I agree that we cannot talk about the matter in detail tonight but I should like to know how powerful the legislation will be. We on these Benches believe that it must become abundantly obvious that the game of insider dealing is not worth the candle and that it is an activity that should not be risked.
I hope that the legislation will work not only in order to catch the fraudulent traders but also for the sake of the good name of the City of London and for the good name of the overwhelming majority of financial operators who are honest. I echo the Minister in saying that what is involved is the integrity of the financial services industry. If we were debating the matter I should express my fears. However, I hope that the measure will be effective and that we shall read more of people being caught and severely sentenced.
I wish to ask one question about the order. The schedule lists the regulated markets but there appears to be no power to add a new stock exchange. If a new stock market or stock exchange were created would we have to agree a new order adding that to the list? That is a purely hypothetical question because it is unlikely that

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a new stock exchange will come into existence. However, as the measure does not contain words such as, "and such other stock exchanges as come into existence", will the noble Lord confirm that if that were the case we should have to have a new order?
Lord Taylor of Gryfe: My Lords, I do not propose to pursue a debate about the detail of the order, which was discussed in another place. However, the order enables us to express our anxieties about the effectiveness to date of the insider dealing provisions. I too sincerely hope that it will enhance confidence in the City, which has been shaken a little by some of the recent fraud cases and the relative ineffectiveness of the insider dealing provisions.
The financial services industry is important not only to the City of London but also to the economy of Edinburgh, which is a major financial centre. The City is prosperous only if people have confidence in its integrity. Anything which damages that integrity can affect this important industry. About 2 million people are employed in the financial services industry, whose earnings represent 18 per cent. of our gross domestic product. Let there be no mistake about it; if confidence in the City is in any way undermined, many countries in Europe which are jealous of the efficiency and innovativeness of the City will be pleased to assume some of the responsibilities which are important to our economy.
My noble friend Lord Peston expressed anxiety about the effectiveness of the existing legislation, which we have had since 1980. There has been surveillance by the SIB since that time. The Stock Exchange has referred 104 cases to the criminal courts for prosecution since that time. Twenty-two people have been prosecuted since the beginning. Since 1987, which was a very lively period in mergers and acquisitions, only 17 people were prosecuted in cases referred for prosecution by the Stock Exchange. That must give rise to some anxiety. The recent case of Roger Levitt indicates that the offences that those perpetrators of fraudulent acts are committing are not taken seriously. Account is not taken of the fact that they undermine the integrity of the City of London.
Roger Levitt received a sentence of community service following his prosecution. In the case of Terry Randall, £90 million of fraud was proved. He was not sent to prison as a result of that fraud. Incidentally, it was pointed out in the other place that a poacher in Scotland who had been poaching salmon received a sentence of three months' imprisonment, whereas Terry Randall suffered no serious punishment following a £90 million fraud.
Therefore, I suggest to your Lordships that if we are to pass this order, as I suspect we shall do, the Minister and his department should look seriously at the effectiveness and operation of legislation in connection with insider dealing. It is a crime against the City and is a crime against this country if insider dealing is not dealt with and punished as it should be.
6.2 p.m.
Lord Henley: My Lords, I welcome the support of the noble Lord, Lord Peston, and what I took to be a degree of support from the noble Lord, Lord Taylor. We all support the remarks of the noble Lord, Lord Taylor, in which he said that anything which damages the integrity of the industry could damage its prosperity. We accept that that would be to the detriment of us all.
As my honourable friend the Economic Secretary made clear in the debate in another place, no system will ever be absolutely perfect but it is important to achieve the right balance between the various forms of regulation.
I do not wish to comment on specific criminal charges that have arisen as a result of existing legislation, but I can confirm some of the figures which the noble Lord, Lord Taylor, gave. Since insider dealing was made illegal in 1980, there have been 33 cases, of which 18 have resulted in convictions. The cases involve some 52 individuals, of whom 24 were found guilty. Those figures include a case that was concluded on 17th January—that is, last week.
However, I believe that it is wrong to judge the success of any legislation merely by the number of successful prosecutions. The deterrent effect of both the existing legislation and this order is important. We believe that legislation has played an essential part in convincing people that insider dealing is wrong.
I can give the noble Lord, Lord Taylor, an assurance as regards looking at the effectiveness of the legislation. My right honourable and honourable friends will always bear that in mind and keep it under review for the very reasons which the noble Lord gave. This is a major industry in this country and it brings to it a great deal of prosperity. We believe that it is extremely important that that prosperity should remain within the industry to the benefit of the whole country. Therefore, it is important that we should ensure its continued integrity.
The noble Lord, Lord Peston, asked a specific question about whether we should need a new order if a new stock exchange were to be quoted. Regretfully I must inform him that we should need another order in the unlikely event of another stock exchange being set up. I am sure that the noble Lord would welcome the opportunity to have yet another discussion on an amendment order. Perhaps we should wait until such a situation arises.
I hope that I have reassured both noble Lords. I commend the order to the House.
On Question, Motion agreed to.

Farm and Conservation Grant (Variation) Scheme 1993
6.5 p.m.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe) rose to move, That the scheme laid before the House on 30th November be approved [2nd Report from the Joint Committee 1993–94].
The noble Earl said: This instrument which came into effect on 1st December 1993, reduces the rates of grant for various investments provided for in the principal scheme as a consequence of the decisions on public expenditure announced in the Chancellor's Budget Statement. But we have also taken the opportunity to make some other minor changes to the grant arrangements which we think are desirable.
The changes to the rates of grant offered under the scheme are as follows. The rate of grant for facilities for handling, storing and treating farm waste is reduced from 50 per cent. to 25 per cent. Grants for the provision, replacement or improvement of hedges, traditional walls and banks, shelter belts, the enclosure of heather moorland and grazed woodland, the burning of heather and the control of bracken are reduced from 50 per cent. in the less-favoured areas and 40 per cent. outside to 30 per cent. and 25 per cent respectively. Grants for the repair or reinstatement of traditional farm buildings are reduced from 35 per cent. in all areas to 25 per cent. in the less favoured areas and 20 per cent. outside them.
But we have not made these reductions in isolation or purely in response to pressures on public expenditure. They have been made against the background of strengthened markets and much improved returns to producers. And we have also taken into account the progress which has been made in reducing the incidence of pollution from farm waste and the development of other, more specifically targeted, vehicles for delivering environmental aids.
Since the F&CGS opened in 1989, more than £149 million has been paid to farmers in the UK, £119 million of which has been for the installation or improvement of waste handling facilities. In Great Britain, around 11,000 farmers (9,000 in England) have benefited from grant on farm waste facilities.
The exceptionally high rate of grant on these facilities, which exceeded normal EC maxima but which we were able to persuade the EC Commission to accept when the F&CGS was introduced, has fulfilled its purpose of stimulating farmers' investment in pollution control. And we have seen the result in a significant decrease in the number of major agricultural pollution incidents.
For those reasons, we think that the time is now right to reduce the 50 per cent. grant rate. However, we are not complacent about the job that remains to be done in tackling water pollution, which is why we are continuing to pay grant on farm waste facilities. In addition to continuing to provide grant aid, we are also providing, through ADAS, free advice to farmers on pollution control and help with drawing up farm waste management plans. Also in selected catchments with particular problems we have asked ADAS to undertake a campaign to promote the use of farm waste management plans.
Since the F&CGS was introduced in 1989, we have significantly developed the theme of assistance to farmers for investing in looking after the countryside. We have done so by putting in place schemes targeted at the specific needs of areas of particular significance.
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For example, under our environmentally sensitive areas programme we have now designated nearly 30 areas in Great Britain. Moreover, subject to the approval of the European Commission, during 1994 we plan to launch a number of additional measures, including further ESAs, as part of the agri-environment package accompanying reform of the CAP. All ESA schemes offer the opportunity of grant aid to assist in conservation plans at rates which range between 30 per cent. and 80 per cent. Other agencies such as the Countryside Commission, English Nature and the National Park authorities also have in place considerable, and increasing, budgets for grants from which farmers are able to benefit. Against that background, assistance generally at high rates of grant is no longer appropriate. But we have maintained the range of conservation grants originally offered under the F&CGS, albeit at lower rates of grant.
Finally, we have decided to provide additional assistance under the farm and conservation grant scheme in three ways. First, we have extended for a further year the life of the special package of grants available under the F&CGS to growers on the Scilly Isles to deal with the particular problems of bulb and flower production there. Essentially this is a short-term solution while we consider longer-term arrangements for dealing with those problems. Secondly, we have put in place grants to help farmers with the cost of capital works needed to open up new access to farm land by the public. The grants will underpin further assistance for that purpose, for which we will shortly be seeking the approval of the House. Thirdly, we have put grant aid for dealing with poultry waste on the same footing as that for dealing with other livestock wastes.
In summary, the instrument before the House results from a considered review of the F&CGS. We have concluded that the range of grants the scheme offers should be maintained. We are making some extensions to the scheme. But, in recognition of trends in pollution incidents and progress in introducing targeted assistance for conservation, we believe that it is now right to reduce the rates of grant offered under the scheme for such types of investment. I commend the instrument to the House. I beg to move.
Moved, That the scheme laid before the House on 30th November be approved [2nd Report from the Joint Committee 1993–94].—(Earl Howe.)
Lord Carter: My Lords, the House will be grateful to the Minister for explaining the scheme so clearly. As regards the aspects to which he referred at the end of his speech, I can say that they are certainly most welcomed by these Benches. I have in mind the increased access provisions, the proposals for dealing with poultry waste and the one-year extension for the Scilly Isles. However, having said that, we are disappointed at the level of reduction in the grants because such grants deal with conservation, the environment, and pollution.
Whenever I speak to farming audiences on the subject of environmentally friendly farming or related matters, I am always anxious to congratulate the Government on the imaginative proposals for the environmentally sensitive areas that they were the first

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in Europe to introduce. However, they are limited in area. I believe I am correct in saying that 85 per cent. of the country's farmland is outside ESAs.
As a matter of principle, we feel that the capital grant system should be available to encourage farmers to undertake environmental work wherever they farm, and not just in the limited designated areas. Indeed, we had proposals, contained in our manifesto for the last election and still Labour Party policy, for green premia to be available to all farmers wherever they farm so as to encourage them to farm in an environmentally friendly way. Naturally, we are disappointed to see the Government reducing the grant available for conservation and for dealing with the environment and pollution.
I believe that the total cost of the grant scheme is in the order of £74 million. That is less than 10 per cent. of the cost of the set-aside and the arable area payments scheme. Can the Minister confirm that the savings for the first year will be £12 million and that, thereafter, the savings will build up to over £25 million which will represent about one-third of the cost of the scheme? The Minister implied in his opening remarks that this is a Treasury response and one that is not driven by concern for the environment.
On the matter of hedges, the loss of grant for reinstatement is most disappointing. Perhaps the Minister can confirm that there was a pledge in the Conservative manifesto at the last election to protect hedgerows. I should like to know how the proposed change can be reconciled with such a pledge.
It is a shame that we are debating the matter tonight. I understand that later this week—perhaps the Minister can confirm this—the Government's proposed biodiversity plans will be published. I believe that such plans will be in the hands of the Department of the Environment. It will be most interesting to see how the approach from the Ministry of Agriculture—that is, cutting grants for conservation to deal with the environment and pollution—marches with the biodiversity plan.
There was a quotation in yesterday's Observer as regards the targets for the biodiversity system and the various plans to be produced to fulfil the pledges made at the Rio Earth Summit. The article stated:
"'How these targets will work within the planning system remains to be worked out by Ministers,' one senior Whitehall source said. 'They could either turn out to be the most significant development in nature conservation for over a decade or a largely unfulfilled wish list'".
If the approach to the present grant scheme is anything to go by, it is much more likely that the biodiversity proposal will be that largely "unfulfilled wish list" rather than real improvements in nature conservation.
It would be most helpful if the Minister could say how the farm conservation grant relates to the agri-environmental package. Is it a reduction overall in the total? We all know about the agri-environmental package, but is there any way in which that can make up for the reductions in the farm conservation grant? It would be odd if the Government, on the one hand, under the agri-environmental package, were introducing certain measures but, on the other hand, were reducing
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the grant on similar measures through the present scheme. How do the changes in this grant scheme relate to the agri-environmental package?
I believe that the variation sends the wrong signal to livestock producers and to conservation generally. It is a pity to reduce at such a severe level the environmental grants which, as we know, have been of great value to farmers who have carried out such work. For individual farmers who wish to install effluent disposal facilities, the extra financial burden could have a very serious effect on the viability of their businesses.
I have long said that pollution is one of the major problems facing British agriculture, especially as regards intensive livestock keeping. It is a pity that such grants should be reduced when this is such an important and expensive matter for farmers to put right. As I said, I believe that the reductions will eventually represent a one-third cut in the grant scheme. That is a great disappointment. Although we will not be dividing the House, I nevertheless express the disappointment that we all feel on these Benches. It is a disappointment that I know farmers also share.
Lord Beaumont of Whitley: My Lords, I welcome the way in which the Minister explained the proposed variation to the scheme, although I cannot welcome its effect. He explained it very fully and frankly, but there was one statement he made that I slightly beg leave to doubt. Along with the noble Lord, Lord Carter, I see the hand of the Treasury behind the variation to the scheme more than any other department. In my view, the victim is not so much the farmer. To a certain extent I accept the explanations given by the Minister and in another place that perhaps overall and taking everything into consideration the farmer may be better off. However, the countryside and the environment will suffer. That is what the Minister should be defending, not the issue that his honourable friend in another place defended, namely, whether or not the farmer will be worse off. He should be concentrating on whether or not the countryside will be better or worse off. I believe that it will be considerably worse off. The wrong targets have been chosen. It is possible that the variation to the scheme was prepared in a hurry. A botched up solution has been found.
The problems posed by the CAP are, as we all know, absolutely enormous, and set-aside is a botched up solution just this side of a disaster. The cuts in the agricultural support which are embodied in this provision, and carried out in other measures by the Government, should be made against the arable area compensation for rotational set-aside, which is an extremely expensive way of achieving not very much. Instead of that, the target which has been chosen tonight will embarrass the Department of the Environment when it publishes its biodiversity plan. I entirely agree with the noble Lord, Lord Carter, in that I too look. forward very much to seeing what will emerge in public about what will undoubtedly be a major. interdepartmental wrangle. But the moral of the departmental wrangle is that we would be better off with a straight one between agriculture and the environment and not one which was governed by the Treasury.

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The Government have declared their support for enhancing conservation and fighting pollution. Where, I ask them, is that support tonight? Of course we welcome the measure which applies to the Scilly Isles. We find nothing to be excited about in the measures dealing with poultry waste and we would be more excited about access if it had not already been pledged as part of the commitment to the European agricultural environment programme in August. It is difficult to see whether this is just a repetition of that or whether it involves something separate. We certainly join with the noble Lord, Lord Carter, and his Benches in thinking that this is a fairly disastrous provision and that it is a great pity that it is not seemly that we should divide against it. However, there are certain questions which both the noble Lord and I have asked and which I hope the Minister will feel he can answer.
Lord Hylton: My Lords, I hope that I shall be in order in saying a few words about the subject of the conversion of existing farmland, particularly corn-growing land, to organic methods. I say that because this has a strong bearing on both the conservation of soil and the conservation of wildlife. I have in the past declared in your Lordships' House my interest as a farmer and I do so again today. Perhaps I should add that I happen to be a symbol holder for cereals of the Soil Association.
I wish to draw the Government's attention to what happens when a given acreage now producing corn grain by conventional methods is converted to organic methods. When looking at this question it is important to take into consideration a four or six-year period, or indeed a longer period if anyone wishes to do so. I say that for rotational reasons. Let us assume that a given acreage at the present time is producing continuous cereals. If that is the case and if organic methods are then adopted, there will, over a four or six-year period, be an immediate reduction in production of 50 per cent. That arises because half the land will be taken out of cereal production and will be turned over to grass crops or other break crops. That is what happens in phase one, as it were.
Over the same period of time there will also be a very marked reduction in cereal yields. There will probably be a change from an annual production of three or four tonnes on the old conventional methods to a new production of one-and-a-half or two tonnes per year on that part of the organic system devoted to the cereals. If one takes these two kinds of reduction together, one finds that, over time, they amount to a reduction of the order of 75 per cent. of the grain that was being produced on the land affected. I believe anyone would recognise that as being significant. If we compare that position with a slightly different situation where, at the present time, cereals are being produced in conjunction with other break crops such as potatoes, sugar beet, oilseed rape or legumes—all of which occupy quite considerable acreages—we shall discover that these break crops are often used only at rare intervals during the long course of production of cereals—perhaps one year in five, two years in 12 or sometimes even for a smaller fraction of the total time.
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Let us assume that 10 acres were producing 40 tonnes a year under the conventional methods involving considerable inputs of chemical fertilisers and pesticides, and sometimes growth regulators. When the conversion to the organic system has taken its full effect, those same 10 acres will be found to be producing something of the order of 10 tonnes per year. In addition to the reduction in output there is a quality gain in the cereals produced that is perhaps particularly noticeable in the nutritional value of the organically produced cereals. Therefore there is a great deal to commend this kind of conversion to the Government and to the European Union generally as regards their desire to reduce surpluses of cereals, grain mountains and other such phenomena.
I ask the Government to think rather more seriously about this process than they have in the past. I hope that by what I have said I may have been able to dispel a little ignorance which may exist in the minds of certain Ministers, and which I am fairly sure exists in the minds of a good many of their official advisers. I hope the Minister will be able to comment on what I have said tonight. I am well aware that he and I have been in correspondence on this subject in the past and he has been helpful. However, I believe there is still a way further to go.
Earl Howe: My Lords, I am grateful to the noble Lord, Lord Carter, for his welcome for the enhancements that I outlined in the farm and conservation grant scheme. It is something of a disappointment, however, bearing in mind some of our recent exchanges across this Table, not to find the noble Lord arguing the Government's case throughout. Somehow, though, the alliance seemed too good to last. Notwithstanding that, I think it is appropriate that I should expand a little on my earlier remarks.
Five or six years ago the instruments available to the Government for delivering our environmental policy in the sphere of agriculture were limited in number. We were really only just beginning. However, we have now reached the point where our policy—although in many important respects still delivered to the generality of farmers—can also be delivered in a much more refined and targeted way where the need is greatest, across several government departments and within a much larger overall budget. In a very real sense, therefore, the order we are debating this evening reflects not a diminution of government support for the environment but the exact opposite. It is part of a much broader picture.
I think, too, that it would be wrong if schemes like the farm and conservation grant scheme were not reviewed in this way from time to time in response to actual events. Even a 25 per cent. grant represents a considerable measure of assistance. As I outlined, we are building enhancements into the scheme.
Grant aid is, of course, only one means of delivering the Government's environmental policy. Advice and regulation are the other two prongs of the policy. The Government's commitment to the countryside should. not be doubted.

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The noble Lord, Lord Carter, mentioned a figure of £74 million as the cost of the farm and conservation grant scheme. I do not recognise that figure. The true figures are as I mentioned in my earlier speech. The budget for 1994–95 throughout Great Britain is £40.6 million, compared with £39.7 million in the current year, reducing in the subsequent two years to £31.7 million and £31.4 million respectively. To answer another question posed by the noble Lord, that represents a reduction from the previously planned totals across Great Britain of £9.02 million in 1994–95 and £20.67 million and £21.17 million in the following two years.
The noble Lord, Lord Carter, and the noble Lord, Lord Beaumont of Whitley, mentioned the Government's biodiversity plan. Naturally I would not wish to anticipate tomorrow's announcement of that plan. I believe that both noble Lords will find much in it to welcome, but I should like to emphasise that it is but the start of a process. It represents an important new initiative.
The noble Lord, Lord Carter, asked about hedgerows. The problem of hedgerow neglect has already been tackled in part through the hedgerow incentive scheme which we launched in July 1992. That scheme is administered by the Countryside Commission. The Government have allocated £5.3 million in the three years ending 1995–96 to provide grants for the management of important hedgerows. In 1992–93, the first year of the scheme, 411 agreements were made, resulting in grant aid over the next five years for the management of 602 kilometres of hedgerow. The scheme is closely co-ordinated with the MAFF farm and conservation grant scheme. The Government are committed to legislating to protect hedgerows when parliamentary time permits. There is no question of dropping our commitment to legislate unless new data of which I am not aware show that the need to legislate has now receded.
The noble Lord, Lord Carter, asked about the funds available for the agri-environment package as a whole. In Great Britain, the figure—which is the more helpful figure to give rather than that for England alone—for the current financial year is £33 million. The figures for the following two financial years are £58 million and £93 million respectively. I can tell the noble Lord, Lord Hylton, who advanced some detailed arguments in favour of organic farming, that nothing in this evening's order should be taken as a diminution of the Government's commitment to the agri-environment package. As he will know, we had a useful debate on the subject of organic farming just before Christmas. I take note of the points he made this evening.
I believe that that covers most of the questions posed this evening. I hope that the House will be able to approve the order, which should be looked at in the context of a commitment to the environment throughout the Government which is rising, in financial as well as other terms.
On Question, Motion agreed to.

Scottish Administrative Systems
6.34 p.m.
Lord Campbell of Croy Lord Campbell of Croy rose to ask Her Majesty's Government whether they will take further action to assist the media and the public to distinguish within the United Kingdom the separate administrative bodies and the different systems which operate in Scotland.
The noble Lord said: My Lords, my object is to inquire what is being done by the Government to help the media and the public to recognise that separate systems and institutions operate in Scotland in many fields of life and activity. At present misunderstandings often occur and the public are unintentionally misled.
I shall give an illustration. Three weeks ago the leading news item on British television and radio was about proposals by the Secretary of State for Education concerning discipline in schools. During the following two or three days when meeting acquaintances in the street and elsewhere, including former constituents who are inclined to engage me in conversation about current events, this subject was raised. They were surprised to learn that these proposals did not apply to Scotland. Some did not realise that my right honourable friend Mr. John Patten, whom they had seen speaking on television, had no responsibilities for our schools in Scotland. I had happened to see the television evening news and heard the radio that day and nothing had been said to indicate that the proposals concerned England and Wales.
I raise this question because I hope that more can be done to avoid situations where families in Scotland watching the main news on television think that an item like that involves their children and their schools. To complete that episode, I ought to make clear that the Secretary of State for Scotland and the Scottish Office Education Department were not inactive on discipline in Scottish schools and that their initiative, dealing with discipline in schools had taken place earlier, in November, in different circumstances, including consultation with the main Scottish teachers' union, the EIS, which does not operate south of the Border.
I am glad to see that a Scottish Office Minister is to reply this evening—my noble and learned friend Lord Fraser, the Minister of State. The matters which I am raising are mainly for the attention of other government departments, particularly those dealing with England and Wales. I hope, therefore, that my noble and learned friend will do his best to influence his colleagues in other parts of the Government. This is needed to give practical support to the admirable White Paper Scotland and the Union, which was issued by the Government in March. Among other things that White Paper sets out clearly in Annexe C the departments of the Scottish Office and their functions. That annexe contains a store of information with which the public in the United Kingdom as a whole, including Scotland, is unfamiliar.
Moreover, because the Scottish Office administers so much in the domestic field there are some government departments in Whitehall which have no functions in Scotland. Other Whitehall departments exercise only some of their functions in Scotland. For example, the

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Department of Health and the Department of the Environment have no functions in Scotland. They are the lead departments in the United Kingdom, formulating general policy and handling international aspects, but the administration of the National Health Service, dealing with health authorities and other health functions, are in Scotland the business of the Secretary of State for Scotland. Similarly, the subjects dealt with by the Department of the Environment in London for England and Wales are all handled separately in Scotland by the Scottish Office: for example, housing, planning and local government.
In home affairs the Scottish Office has to deal with crime. That is not unexpected because Scots law is different and Scottish courts are separate. For example, the Secretary of State signs warrants to authorise telephone tapping, like the Home Secretary, and has other similar functions, including prisons and the fire service. A Scottish Office department administers agriculture and fisheries within Scotland working closely with MAFF. Education has already been cited. Schools, teachers and their unions are the concern of the Scottish Office not the Department for Education.
I hope that those examples are enough for noble Lords to appreciate that it is not easy for most people, unless they are involved, to carry in their heads these divisions of functions. They are also unlikely to have Annexe C, to which I have referred—valuable document though it is—on their persons. Nor are the representatives of the media. Those closely reporting Parliament will be well informed but will not have the details at their fingertips. They should not be expected to do so. They deserve one helpful, simple addition of a few words in prepared announcements. I suggest that procedures should be in place in the departments based in London to identify, in government announcements, those parts of the United Kingdom to which they apply. Otherwise news items and broadcasts received in Scotland will from time to time continue to mislead, unintentionally, and to confuse.
I give two examples of what can happen. On the evening of 2nd March, families in Scotland watching the lengthy first item on television news learnt that new secure training centres were to be established for juvenile offenders. Only later, and by chance, were they to discover that that was not proposed for their communities in Scotland. Few members of the public know that the functions of the Home Secretary and the Education Secretary in these matters are limited to England and Wales. The announcement in Parliament made no reference to that, presumably because MPs and Peers are expected to know. A better way would have been to state clearly at the beginning that the proposals applied only to England and Wales, and to add that Scotland's different system was also being considered for possible changes or innovations. Unless care is exercised in that way, some of those Scottish families will regard such an announcement as another example of Scotland being forgotten or, worse, thought not to matter.
The other incident also illustrates how misunderstandings and confusions arise. On 4th February, a
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Statement was made by the Secretary of State for Transport. It was described as applying to the national road network of motorways and trunk roads. National, my Lords? The proposal applied only to England, but nowhere was that stated. The Scottish office is responsible for roads in Scotland. When the Statement was repeated in this House, halfway through the subsequent questions an inquiry about a road in Wales prompted the Minister to declare, to gasps of surprise, that the whole Statement applied only to England. The lack of identification, together with the use of the word "national", led newspapers on the following day to present the proposal as for Great Britain. Readers in Scotland searched the accompanying maps and list of projects in vain to find anything proposed for north of the Border. Their conclusion was likely to have been that Scotland had missed out again.
The irony is that motorways and trunk road improvements are popular in Scotland whereas such schemes have been opposed and delayed by objectors in England—and the announcement to which I referred was immediately criticised by the Council for the Protection of Rural England. Furthermore, expenditure on roads in Scotland has been continuously more per head than in England. Therefore, unwittingly, a completely false impression was given in Scotland.
Those situations could be greatly reduced before announcements are made or documents issued by determined efforts to identify in the headings or at the beginning of texts what application, if any, they have north or south of the Border. It would then be clear that a particular proposal applied to England only and that another applied to the whole of the United Kingdom. That would help the media which, I believe, would welcome the guidance especially as they normally have to work at speed to meet deadlines. They do not have time to check Annexe C or its equivalent.
I mentioned that Wales was being dealt with separately with regard to the road programme. I believe that everything that I point out this evening can be helpful to the Welsh Office—and increasingly so as I am sure that the Welsh office will continue to take over more functions from Whitehall. I remember when it was established nearly 30 years ago. It was five years old when I started my term as Secretary of State for Scotland. I have followed its progress with special interest. The Scottish Office is 109 years old.
It must be borne in mind also that Scots law is different from that in the rest of the country. I was glad to see a letter in The Times on 30th November from the noble and learned Lord, Lord Jauncey, a Law Lord in this House, commenting on a leading article and pointing out that a pronouncement about the status of confessions in the British legal system did not apply in Scotland. I hasten to assure noble Lords that I also write and telephone to the media when the way in which news is presented is likely to lead to misunderstandings; and I have received grateful acknowledgements. But there is a limit to how much an individual can do without the risk of being regarded as an eccentric.
Historically, Scotland has also had its own education system resulting in different examinations at different stages and a separate curriculum for schools. When the

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name "national curriculum" was adopted for England and Wales a few years ago, it led to much confusion in Scotland—and still does for the public there. I protested in this House about the name, but it was too late. "Curriculum for England and Wales" may be clumsy, but in future cases in other fields the importance of accurate descriptions and of avoiding the impression that Scotland has been overlooked should be considered. Confusion on the subject continues today in Scotland. It is not realised by many people that Sir Ron Dearing's recent recommendations have no application north of the Border.
There can be significant differences in practice in Scotland arising from past customs and traditions. A topical example is Sunday trading. The Shops Act has not applied in Scotland and shops are free to open on Sunday. There have been no restrictions. Only about 23 per cent. of the shops in Scotland open on Sundays at present. The factors which apply are local opinion in different areas, and demand, but not legislation. I have been disappointed to observe that most of the media, most of the time during the controversy in recent months on the subject, have overlooked that fact. Knowledge of the Scottish experience in recent years might be helpful to England and Wales in finding a solution.
The names of bodies and institutions can cause ambiguity. Annexe C will not help in that regard. I mention a few which have Scottish counterparts: the National Trust; the Parole Board; the Law Society; and the Sports and Arts Councils. For example, the Parole Board has an equivalent —the Scottish Parole Board—but that is not widely known. So far as concerns the Scottish bodies, the words "Scottish" or "of Scotland" are always included in the titles.
When it comes to new bodies and names for them, I ask the Government to take special care. Only a few years ago a new body was brought into existence—the National Rivers Authority—although it was to have no functions in Scotland. The press thought that it covered the whole of Britain; and who can blame them? The misconception continues today. It is especially unfortunate because Scotland is over one-third the area of Britain, land and water, although containing only one-tenth of the population. It has about half the coastline of Britain. So a large proportion of Britain's rivers and coasts are not within the NRA's ambit, despite its name.
Confusing also for the media and public are references to "the Roads Minister", "the Housing Minister" or "the Local Government Minister" when his functions are only in England or England and Wales and he has an equivalent in Scotland. They are all Ministers of State or junior Ministers. I am sure that such considerations apply to the Welsh Office. They will have their equivalent Ministers for Wales, if not there already.
The Scottish Office also has several groups of inspectors reporting to the Secretary of State on pollution, education and other subjects. The titles of the equivalent officers south of the Border can be confusing. For example, the Government Chief Medical Officer and Her Majesty's Chief Inspectors of Schools and
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Prisons have no functions in Scotland. The picture is even more confusing—I am sure that noble Lords will understand the difficulties for the media—when the "chief" concerned is a Scot, although he does not deal with Scotland.
A major benefit of the Union is that its flexibility provides opportunities for the English to excel in Scotland and Scots to excel in England. That is happening at the moment. Particular abilities are used in appropriate positions to everyone's advantage. The Government's Chief Medical Officer and Her Majesty's Chief Inspector of Schools are at present both Scots: Dr. Calman and Professor Sutherland. In neither case does their work involve Scotland. We should have pity on the media having to meet deadlines at short notice in those areas.
There is another example which is very close to us here; namely, that of my noble and learned friend the Lord Chancellor, whose functions do not extend to Scotland. The appointment of judges, the administration of the courts and associated subjects in Scotland are the responsibilities of the Secretary of State and the Lord Advocate. My noble and learned friend has been Lord Advocate, and I have been Secretary of State, so we are well aware of that situation. But we must be in a very small minority in the country. In many fields there are fruitful exchanges between England and Scotland. They make it less easy, however, for the media and the public to sort out who does what in which parts of the United Kingdom.
I add to my message this evening a brighter note. I believe that in the past two years or so there has been an improvement. More often than in the past, media news items have included at the beginning the words "in England and Wales", so that viewers, readers and listeners in Scotland know immediately that it does not apply to them. However, there is still a very long way to go, though I do not ask for very much. I ask only for a small addition to procedures followed by vigilance and alertness. In the spirit of the Citizen's Charter, I ask the Government to do more to help the media, and through the media, the public. The extra trouble needed in Whitehall departments is small and the good effects attainable are very worthwhile.
6.52 p.m.
Lord Carmichael of Kelvingrove: My Lords, the House should be grateful to the noble Lord, Lord Campbell, for raising this debate. To people who do not go home to Scotland every week, the matter may seem rather petty. But those of us who live in Scotland and who are involved in Scottish affairs are very aware of the way in which Scotland is frequently lumped together with the rest of the UK when, as the noble Lord, Lord Campbell, said, a Scottish Minister may have no function in England or an English Minister in Scotland, and the same is true of an establishment or an organisation. That becomes an annoyance to most of us in Scotland.
The saddest part of the matter, and another side of the argument that the noble Lord put, is that it becomes a very serious irritation to many Scots. Sometimes a cheap and aggressive chauvinism shows itself. It is a

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quality that most of us do not like. I find it extremely unpleasant. Perhaps down here we are so familiar with what is Scottish and what is UK business, or what is solely English or Welsh business, that we may ourselves become a bit careless, and when we speak it is to people who understand the distinction. There is no doubt that south of the Border the importance of the Scottish dimension is sometimes ignored.
The Government should make many of the changes that the noble Lord, Lord Campbell, suggested. Change will not be brought about overnight. It will take some time. It may perhaps merely be a matter of sending a letter every now and again. When a statement comes out or a Bill or report is produced, it would not do any harm if someone in the Scottish Office were given the job of dropping a little note to the relevant UK department to say that the department had it wrong. It is a small matter, but it would save a great deal of trouble.
Those south of the Border should realise that there is that Scottish dimension and they should clearly distinguish between Scotland, England and Wales. When the United Kingdom is discussed, it would be a very small matter, again, as the noble Lord, Lord Campbell said, to add to the procedures simply to put that point in. I am sure that the Minister is well aware of the problem. He has been in the same position as all of us have in company in Scotland, and he will know what a silly effect it has when referring to matters such as football and Murrayfield etc. It perhaps gives us all a wee tingle. But it is unnecessary. It annoys me when sometimes it becomes a maudlin, if not aggressive, chauvinism. I hope that the Minister will pay a great deal of attention to the debate tonight and carry it with him back to Whitehall.
6.55 p.m.
The Minister of State, Scottish Office (Lord Fraser of Carmyllie): My Lords, I very much welcome the debate initiated by my noble friend. I was of course aware of his concerns, but I should like to say immediately that I share his views that the distinctive nature and features of those bodies and systems which operate exclusively in Scotland should so far as possible be recognised throughout the United Kingdom. I am most grateful to my noble friend for his very clear exposition of the issues. He provided some particularly telling examples. I hope that there will be Whitehall departments that will follow his words very carefully.
Scotland must always be seen in the context of the Union, and we are committed to maintaining and strengthening Scotland's role in that Union. One of the Union's great strengths is its ability to accommodate different approaches in different parts of the United Kingdom. What is appropriate for Scotland may not suit Northern Ireland, for instance; and English institutions may not fit Scottish circumstances. The Union is, however, sufficiently flexible to allow distinctive solutions to emerge in all four parts of the United Kingdom. It is not a straitjacket of rigid constitutional prescription, but rather a subtle instrument able to move with the times and meet the needs of its citizens in different ways in different places.
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The existence of these different arrangements can however be confusing, and my noble friend has put his finger on a substantial difficulty: how to ensure that the media and the public can better distinguish the different systems in the different parts of the United Kingdom. Like him, I have felt that sense of frustration when, for example, newspapers and the broadcasting media refer to developments south of the Border in terms which imply they are equally applicable in Scotland. As my noble friend said, that is usually unintentional. Sometimes, frankly, it is just a matter of sloppy reporting. However, it is not unknown for it to be deliberately, mischievously confusing.
In answer to my noble friend I acknowledge that the Government have an important part to play here. We must ensure that government statements properly reflect their territorial scope. My noble friend may regard some Whitehall departments with responsibilities exclusively relating to England and Wales as the worst offenders. But it is correct that we too should recognise that, while my right honourable friend the Secretary of State for Scotland naturally announces policy for Scotland only, in respect of forestry his statements cover the whole of Great Britain. For our part, that ought always to be made clear.
I think that our White Paper, Scotland in the Union: A Partnership for Good, published last March, to which my noble friend referred, will help meet some of the concerns of my noble friend. The paper stresses not only the benefits which Scotland and the United Kingdom as a whole have derived from the Union, but also the importance of bringing the Union alive. In that context the paper points out that,
"The Union is not something which affects just one Department of Government, the Scottish Office. If new life is to be breathed into the Union its existence must permeate every area of Government. Account must be taken of the Union by all Government Departments, at all itmes".
I do not think that even my noble friend would look for a more ringing declaration.
Naturally I acknowledge that there may be occasions when we fall short of our own laudable targets, and I will indeed consider further with my right honourable friend the Secretary of State for Scotland the points which my noble friend has so persuasively made. However, I hope that he accepts that the Government's heart is in the right place. The commitment in our White Paper is both comprehensive and clear.
Acknowledgement of Scotland's position within the United Kingdom—and, conversely, that of the Kingdom's other constituent parts—may be made not only in the narrow context of government statements and media reporting. The Union operates at many levels and consequently there are many aspects of Scottish life where Scotland's status as a nation may be recognised.
For instance, there might be more acknowledgement from all parts of the United Kingdom of the significance of the major institutions of Scottish life: the legal system, the professions, the Church, the universities, the learned societies and the financial institutions. Likewise, more might be done to acknowledge Scottish cultural excellence and the revival in Scottish arts, of which no doubt much more will be said on Wednesday.

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We do not want to come across as prickly and lacking in self-confidence about the intrinsic worth of these aspects of Scottish life. But we wish to avoid unhappy or uncomfortable strains that too easily arise and are as easily exploited by that minority in Scotland which has no concern for the continued existence of the Union and which, as the noble Lord, Lord Carmichael, indicated, was indeed an undesirable feature. In the parliamentary field, Parliament should be seen as a fully United Kingdom Parliament, reflecting in its composition, institutions and ceremonial the diversity of the Kingdom's constituent parts.
Perhaps your Lordships will permit me to take the opportunity of this debate to bring the House up to date on the implementation of the proposals which we made in the White Paper. All the major proposals are now implemented or are well in hand. The list is too long to give noble Lords a comprehensive account, and in any event this is not the occasion. But perhaps I may briefly single out a few of the most significant changes.
The White Paper placed particular importance on Scotland's relationship with Europe and we have achieved substantial representation for Scotland on the Committee of the Regions. We want to bring to Scotland more decisions affecting Scotland, and much has been done to take forward the White Paper's proposals to transfer certain functions and powers to the Scottish Office: for instance, responsibility for training policy and for the Scottish Arts Council, to which the noble Lord made reference.
To make the Scottish Office more accessible to the public we have established a Central Enquiry Unit which can be reached from all parts of Scotland through a special telephone link. We have also opened 22 information points throughout the country, with another four in the pipeline. Perhaps we ought to have one in England too. Indeed, one significant feature of the
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experience in Scotland is the number of inquiries received about the responsibilities of Whitehall departments.
Constitutionally, the most significant proposals in the White Paper relate to improvements in the parliamentary arrangements for handling Scottish business. We intend that there will be several changes to procedures in another place and greater use of existing procedures. Most will focus on an extended role for the Scottish Grand Committee.
For example, the committee will be able to debate the Second Reading of a Bill, including major government programme Bills. The committee will have the opportunity of up to 12 sessions each year for general debates; an additional opportunity to question Scottish Office Ministers, with an oral question time similar to that already held in another place; short adjournment debates initiated by MPs; and rather more formal evidence-taking sessions.
We intend that those sessions will hear not only from Scottish Ministers who are members of the committee, but also, as is the case with Select Committees, that Scottish Office Ministers or Law Officers who, like me, are Members of your Lordships' House may give evidence if they agree to do so. The parliamentary proposals have been the subject of consultation with Opposition parties and we anticipate that they will be implemented before long.
This has been a short but useful debate. The noble Lord indicated where the problem lies. I am grateful to have had the opportunity as a Scottish Office Minister to respond. Undoubtedly, I share his view that if we are to continue to make progress, this is a debate which should concern not only Members of your Lordships' House from Scotland or Scottish MPs but every department in Whitehall. I am most grateful to the noble Lord for introducing the matter.
House adjourned at five minutes past seven o'clock.