Lords Sitting of 27 January 1994

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

The Natural Resources Institute
Lord Taylor of Blackburn Lord Taylor of Blackburn asked Her Majesty's Government:
What plans they have for the future of the Overseas Development Natural Resources Institute at Chatham.
The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley): My Lords, the Natural Resources Institute is being restructured in the light of a strategic review of its performance and prospects. In the same context, as announced by my noble friend the Minister for Overseas Development on 26th January, a study of options for transferring NRI to private sector ownership is being launched.
Lord Taylor of Blackburn: My Lords, I thank the Minister for that reply. Is he aware that there is great concern among the scientists at the NRI, who have contributed a great deal of work to our overseas aid programme? They do not know what their future will be. They do not know whether they will be cast on the slag-heap or whether they will be used or not. Is he further aware that the expertise of the scientists has been of great benefit to this country? Surely, more should be said and more should be done rather than allow rumours to float around as they are at present.
Lord Henley: My Lords, I hope that people are not fearing rumours floating around, as I shall go on to explain. The need for change is to ensure that the NRI's capacity adapts to changing patterns of demand for its services. A strategic measure of this kind is essential if the NRI is to preserve its position as a centre of excellence in natural resources and if best value is to be obtained for the aid programme. We have appointed the consultants Segal Quince Wickstead and Hambros Bank and they will report shortly. We shall then take the matter forward. It is possible that staff reductions may be necessary but I can give the noble Lord an assurance that there will be full and frank consultation with all involved.
Lord Judd: My Lords, does the Minister agree that, whatever the other explanations, this is the first evidence of cut in real terms in the aid programme? Does he not also agree that there is room for grave anxiety that such an important and rich resource of talent and expertise, which is so desperately needed in the groundwork of development in the third world, is being lost in this way?
Lord Henley: My Lords, I reject totally the allegations that this is evidence of a cut in the aid
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budget. We believe that we have a very good record on aid. We have maintained and increased our programme in very difficult times—it has increased by 10 per cent. in real terms in the past six years. I accept that the NRI performs a valuable role. We want to ensure that it continues to perform a valuable role. That is why we are ensuring that the consultants look at the future of the NRI to see that it can perform its role in the best possible manner.
Lord Judd: My Lords, does the Minister accept that the aid programme is being cut in real terms now?
Lord Henley: No, my Lords, I do not.
Baroness Young: My Lords, is my noble friend aware that negotiations are proceeding between the University of Greenwich and the NRI with a view to developing research links between the two? Is he further aware that there is also under discussion a proposal that the university might become a tenant of part of the land of the NRI? Would he like to say something further on that matter?
Lord Henley: My Lords, there is not much further that I can say. I can confirm, as my noble friend has informed the House, that the university is planning to develop a new Medway Towns campus. That is very good news for the Medway Towns and a welcome boost for the east Thames corridor. We also believe that the university's decision to rent accommodation at the NRI's Chatham site is an excellent opportunity for collaboration in teaching, research and consultancy. We certainly hope that the consultants will look at various options which involve the University of Greenwich, but I cannot prejudge any suggestions they may come to.
Lord Cledwyn of Penrhos: My Lords, the reputation of the NRI is high not only in this country but internationally. In those circumstances, why is an inquiry necessary in the first place? Will the noble Lord be precise and explain that to the House?
Lord Henley: My Lords, I would be the first to agree with the noble Lord that the NRI is an internationally recognised centre of excellence in natural resources. It will remain a significant contractor of specialised services to the British aid programme. We believe that it should provide the best possible service. There is no reason whatever why that could not be provided just as well in the private sector and no reason whatever why the service could not be just as objective in those circumstances.

Broadcasting of Parliament: Effect
3.5 p.m.
Lord Clifford of Chudleigh Lord Clifford of Chudleigh asked Her Majesty's Government:
Whether they consider that the televising of parliamentary proceedings contributes to their campaign on law and order.
The Minister of State, Home Office(Earl Ferrers): My Lords, the purpose of televising the proceedings of

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Parliament is so that the public may be better informed of parliamentary opinion. There is no evidence that it has had —nor, indeed, that it was intended to have—any particular effect on law and order.
Lord Clifford of Chudleigh: My Lords, I thank the noble Earl for his good answer. However, does he not feel that the behaviour of parliamentarians was sufficiently considered before this House and the other place invited television into their Chambers? Does he not feel that the criticism and condemnation of certain of the electorate's behaviour deserves respect when it is considered that obvious public disrespect is shown to authority by certain Members in Parliament?
Earl Ferrers: My Lords, all of the advantages and disadvantages of televising the proceedings of Parliament were gone into in great depth both in this House and in another place. It was decided, first in this House and then in another place, that the proceedings should be televised. That is what is happening. Of course, it is up to everyone, whether in this House or another place, to conduct themselves with the correct decorum.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the broadcasting of the proceedings of this House has done a great deal to build up the standing and admiration felt for this House among all the more intelligent parts of society?
Earl Ferrers: My Lords, I entirely agree with my noble friend; but I am not so sure that I would restrict it to that part of society to which he referred in the latter part of his question. The televising of the proceedings of the House has done the House an enormous amount of good and has shown its proper standing as a whole.
Lord Strabolgi: My Lords, may I ask the noble Earl for his advice as the Deputy Leader of the House as to whether Questions of this kind, particularly supplementary questions, reflecting on the conduct of another place are in order, remembering the second report of the House's Procedure Committee of 1991–92, which stated:
"Criticism of proceedings in the House of Commons and of Speaker's rulings are undesirable"?
Earl Ferrers: My Lords, the noble Lord is quite right to draw attention to this matter. We have to be very careful how we proceed on such Questions. I would only refer your Lordships to the Companion to the Standing Orders, which states:
"Criticism of proceedings in the House of Commons and of Speaker's rulings are undesirable, but criticisms of the institutional structure of Parliament or the role and function of the House of Commons may be made".
It is as well that we bear in mind those strictures.
Lord Thomson of Monifieth: My Lords, is the noble Earl aware that both Houses of Parliament are currently conducting the mid-term review of the contract that provides the broadcasting of Parliament? Your Lordships' Select Committee on Broadcasting considered the matter last week. It reported that it was satisfied that those doing it were conforming well to the
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rules. It noted that the broadcasting of Parliament is better here than in other countries of which we were given evidence. Our only criticism was that there should be better coverage of your Lordships' House, including its committees.
Earl Ferrers: My Lords, the noble Lord, Lord Thomson of Monifieth, makes an important point. I am glad that he has drawn our attention to the fact that these matters are being considered. I remind your Lordships that, according to the House of Commons Select Committee on the televising of proceedings, a broadcaster must have regard to the dignity of the House and its functions as a working body rather than a place of entertainment. I am sure that the broadcasters take note of that.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that, while it can be conceded that televising the proceedings of this Chamber has allowed people to know that the House of Lords exists in a way which was not done before, one cannot be quite so certain that Parliament as a whole, encompassing both Houses, has benefited in terms of its reputation by what we see on television?
Earl Ferrers: My Lords, that was a carefully phrased question. It is for the advantage of the people of the country who wish to see parliamentary proceedings being televised to be able to do so. It is up to Members of both Houses of Parliament, in their own ways, to conduct themselves with decorum.
Lord Marsh: My Lords, does the Minister agree that far from being a criticism, anything which demonstrates that parliamentarians are ordinary human beings, warts and all, must be good for democracy?
Earl Ferrers: My Lords, it depends on the size and the nature of the warts.
Lord Ashley of Stoke: My Lords, is the noble Earl aware that the sturdy exchanges in another place are vital to democracy and that as such they ought to be televised? Does he further agree that the sturdy exchanges in this place—and the sturdier they are the better—should equally be covered? Can the Minister give an assurance that neither this Question nor any other will impede the Government or affect in any way the televising of our proceedings?
Earl Ferrers: My Lords, the televising of the proceedings of your Lordships' House is not a matter for the Government, but for your Lordships. I have no reason to suspect that this question will have any impact on that any more than it does on law and order, to which the original Question mysteriously refers.
Lord Acton: My Lords, is the Minister aware that Prime Minister's Question Time in the House of Commons is regularly shown on American television and that, overall, Britain gains thereby because Americans are so impressed by a system where Members of the legislature can ask questions of the head of the Executive?
Earl Ferrers: My Lords, that is one of the many advantages of broadcasting the proceedings of Parliament.
Baroness Robson of Kiddington: My Lords, does the Minister agree that there are moments during debates in this House which are not televised to the extent that we would like? For example, last week we had a very important debate on quangos introduced by my noble friend Lord Bonham-Carter. Is the noble Earl aware that, although parliamentary proceedings were shown on BBC television from 8.15 a.m. to 9 a.m., the only part of the whole of that debate which was broadcast by the BBC was the moment when my noble friend Lord Lester was speaking when the lights went out?
Earl Ferrers: My Lords, that was obviously considered a very important part of the debate.
Viscount Montgomery of Alamein: My Lords, can my noble friend confirm to the House what percentage of the total of the broadcast proceedings relates to the Lords and what percentage to the House of Commons?
Earl Ferrers: My Lords, no. If I could I would say only that that has nothing to do with the Question.
Lord Cledwyn of Penrhos: My Lords, the noble Earl will recall that the proceedings of this House were televised for five years before the proceedings of another place. Does he also recall that an undertaking was given at that time that, if the proceedings of the other place were televised, this House would have a fair share of the allocation of time? Does he believe we have a fair share?
Earl Ferrers: My Lords, I believe that we are getting into difficulties. The original Question asked whether the televising of the proceedings of Parliament had any impact on law and order. The noble Lord, Lord Cledwyn, is now asking whether there was a fair relationship between the proceedings televised from the House of Commons and those televised from your Lordships' House. That is a different matter.
Lord Cledwyn of Penrhos: My Lords, the reason I asked the noble Earl that question was because I am absolutely certain that we have a better effect on law and order than the other place.
Earl Ferrers: My Lords, I am very glad that I gave the noble Lord, Lord Cledwyn, the opportunity to ask a second supplementary question. It was not clear that that was the object of his first supplementary question.
Lord McIntosh of Haringey: My Lords, is the Minister aware that many of us on this side of the House are grateful to him for distancing himself from the Chief Secretary to the Treasury, who recently said in a notorious speech that the televising of the proceedings of Parliament was ill-advised? Does he agree that Parliament is an institution which has to deserve respect rather than receiving it as of right, which Mr. Portillo seems to believe to be the case?
Earl Ferrers: My Lords, it is not up to me to rise to that particular question from the noble Lord, Lord McIntosh, which, again, has nothing to do with the Question on the Order Paper. But I do agree 'with him that the way in which people conduct themselves is very important.
Lord Stoddart of Swindon: My Lords, as one who opposed televising Parliament, is it not a fact that the reason why the House of Commons gets a bad name is because of the editing of the programmes about the proceedings of the House? Would it not be as well if more of the proceedings of the House of Commons was broadcast rather than less—
Lord Hailsham of St Marylebone: My Lords, next Question!
Lord Stoddart of Swindon: Oh, shut up, you!
Earl Ferrers: My Lords, I failed to hear the last part of the noble Lord's supplementary question. Would he be kind enough to repeat it?
Lord Stoddart of Swindon: My Lords, I said "Shut up, you!" I was referring to the noble and learned Lord, Lord Hailsham.
Earl Ferrers: My Lords, it might just as well have applied to me and I shall take the noble Lord's advice.
Lord Clifford of Chudleigh: My Lords, I thank noble Lords for the response to the Question that I asked and I also thank the noble Earl. I hope that he has the same opinion—
Noble Lords: Question!
Lord Clifford of Chudleigh: My Lords, does the Minister have the feeling that it is Parliament's aim to communicate to the public instructive information as opposed to destructive information when it comes to debate on the nation's future and to give an example to the people who watch television?
Earl Ferrers: My Lords, when Parliament debates issues it debates them for Members of Parliament and for the assembly of which they are part. Television repeats what the Members of Parliament in either House say to each other. That is not a question on which it is right for the Government to interfere.

Cyprus
3.18 p.m.
Lord Stallard Lord Stallard asked Her Majesty's Government:
Whether they remain committed to a federal settlement of the Cyprus problem.
Lord Henley: My Lords, we are committed to the search for a settlement to the Cyprus problem acceptable to both Cypriot communities. The "Set of Ideas" of the United Nations Secretary-General, endorsed in Security Council Resolutions 774 and 789, set out the basis for a single, bi-communal, bi-zonal federal republic. This remains the best hope for a solution.

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The package of confidence-building measures proposed by the United Nations Secretary-General is aimed at improving the atmosphere for negotiating a lasting settlement.
Lord Stallard: My Lords, I thank the noble Lord for his reply. It will clear up some of the misunderstanding. My Question was prompted by remarks reported to have been made by the Minister's noble friend Lady Chalker in Cyprus implying that a confederal solution could not be ruled out. That caused a great deal of consternation in Cyprus. Can the Minister tell the House when the next round of United Nations sponsored talks will take place? Can he confirm whether the Government have received any recent reports from the United Nations Secretary-General's representative for Cyprus, Mr. Joe Clark, and, if so, what responses have they made?
Lord Henley: My Lords, I ought to make it clear in response to what the noble Lord said about remarks which my noble friend might have made that we are certainly not in the business of prescribing any final details of a settlement. Any settlement has to meet the interests of both communities and have their agreement. The history of this dispute—and certainly of others—shows that a settlement imposed without that agreement will not last. It therefore must be for the individual parties to play their part in coming to any agreement. Having said that, we obviously accept that we have a significant role to play as one of the guarantor powers and because of our presence in Cyprus, and we shall continue to play that important role in making representations to the Turks, to the Turkish Cypriots and to the legitimate government in Cyprus. But in the end it has to be a matter for the Cypriots themselves to get together and to work for peace.
Lord Avebury: My Lords, did not the last report of the Secretary-General state that in the absence of agreement on the confidence building measures, the Security Council would have to consider what further steps to take to enforce them? Can the noble Lord give us any indication of what steps the Secretary-General or the Security Council might be able to take, such as further sanctions against the Turkish Cypriots in the North, which would compel them to accept this very modest package of measures towards reaching a final solution?
Lord Henley: My Lords, I think that the noble Lord's use of the word "compel" in terms of asking people to accept a package is possibly unacceptable. The point that I am trying to make is that if any package is going to work—and is going to work in the long term—it has to be acceptable to both sides. We shall continue to work with the United Nations and with all parties towards securing a lasting and secure settlement. It must be one with the agreement of both sides in this dispute.
Lord Beloff: My Lords, in my capacity as one who lectured for many years on the subject of federalism, may I ask my noble friend whether he is aware of the fact that there has never been a successful federation
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with only two components? It is a recipe for breakdown and deadlock. Therefore, does he agree that some other way ought to be sought of reconciling the interests of the two communities?
Lord Henley: My Lords, I am aware of my noble friend's strongly felt views on federalism which he has given to the House on many occasions. What we are saying here is that we believe that this probably is the best way forward but in the end it has to be a matter for both sides in the dispute. If we cannot find agreement between the two parties, we cannot have a secure and lasting settlement between them. There must be agreement.
Lord Molloy: My Lords, bearing in mind the extraordinarily good and remarkable work of the United Nations Good Offices Commission in trying to get both the Greek and Turkish factions to agree, first, to a two-zone federation and, from there, to take the next step of a united federation, do the Government give the UN Good Offices Commission all the support that it obviously deserves?
Lord Henley: My Lords, we have given a great deal of support to all the United Nations measures. That is why I stressed that we have supported those two United Nations resolutions and other United Nations resolutions relating to Cyprus. I have also stressed that we have played a very extensive role in Cyprus and we shall continue to play an extensive role in providing a major contribution to the United Nations force in Cyprus. I can assure the noble Lord that we are due to spend something of the order of £24.5 million this year on maintaining that force. I understand that in today's terms we have spent something of the order of £500 million since 1963 on maintaining forces in Cyprus for this very purpose.
Baroness Elles: My Lords, do the Government consider that there can possibly be a peaceful and stable solution as long as there are Turkish troops in the island of Cyprus?
Lord Henley: My Lords, certainly, as the United Nations resolutions have stressed, we would like to see a reduction in all foreign troops in Cyprus. If those troops could be withdrawn, that would be one measure which could greatly assist confidence building, one hopes, among both communities.
Lord Monkswell: My Lords, I wonder whether the Minister can give us some clarification. In answer to an earlier supplementary question, he talked about both sides having to come to agreement, implicitly on an unequal basis, but in another answer he talked about the "legitimate government" of Cyprus. There seems to be a contradiction there. I wonder whether the Government can explain it.
Lord Henley: My Lords, there are two sides and those two sides must come to an agreement. There is a legitimate government in Cyprus; there is then a republic in Northern Cyprus which neither we nor any other country, with the exception of the Turks, recognise.
Baroness Blackstone: My Lords, I was glad to hear the Minister accept that we have a special role in Cyprus that goes back to the 1960 agreement. In the light of that, surely we have some responsibility to play a pro-active part in securing a negotiated settlement in Cyprus. Can the Minister tell the House what steps the Government intend to take in the near future in the light of the discussions that are taking place in the United Nations and with the Government of the United States to secure that settlement?
Lord Henley: My Lords, I accept that we have a major role to play. I do not accept that we should be in the position of imposing a settlement on the two parties for the very reasons that I gave: the settlement must be one to which both parties agree. We shall continue to make representations to all relevant people, just as my right honourable friend the Foreign Secretary made representations to the Turks when he was in Ankara the other day, and for the reasons that he will make the same representations on 2nd February to the Cypriot Government when he meets them.
The Lord Privy Seal (Lord Wakeham): My Lords, I think that we should move on.

Overseas Aid and Arms Sales
3.25 p.m.
Lord Redesdale Lord Redesdale asked Her Majesty's Government:
Whether they can give an assurance that no overseas aid grants have been tied to any kind of bilateral agreement that involves the purchase of arms from British companies.
Lord Henley: My Lords, yes, I can give such an assurance. Our aid is not linked to arms sales.
Lord Redesdale: My Lords, I thank the Minister for that Answer. I should like to ask him about Oman and Indonesia. Aid to those countries has significantly increased over the past 10 years although they have relatively high incomes per capita. Is it a coincidence that those countries rank third and fourth in the amount of arms that they buy from the United Kingdom?
Lord Henley: My Lords, I do not accept what the noble Lord is suggesting. The main criteria that we use in allocating aid are sustainable development, good government and need. That is why the United Kingdom's aid programme has been commended for its poverty focus. As regards the analysis produced by the World Development Movement, on which I imagine that the noble Lord is relying, we believe that it is deficient: for example, the statistics on aid to Jordan include aid to refugees during the Gulf War.
Lord Bruce of Donington: My Lords, is the noble Lord aware that many of us in this House will find it difficult to believe that the Government can give the assurance that they have just given, particularly in the light of the £238 million grant to the Malaysian Government in respect of the dam that was built which
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has already been condemned widely and upon the legality of which the Foreign Secretary received adverse advice from his own permanent staff?
Lord Henley: My Lords, as the noble Lord will know well, we do not comment on advice between officials and Ministers. That is a long-standing convention. We believe that it is right so to do. As my right honourable friend the Foreign Secretary indicated on 25th January in a Written Answer in another place:
"During discussions in 1988 about the proposed memorandum of understanding on defence sales, the Malaysians expressed their wish to make a reference to aid. A protocol was signed during the visit to Kuala Lumpur in March 1988 by the then Defence Secretary, my noble Friend, Lord Younger of Prestwick. This set out the Malaysian Government's intention to buy defence equipment from the United Kingdom, with the details to be elaborated in the later memorandum. The protocol included a reference to 'aid in support of non-military aspects under this programme'.
After consultation with ministerial colleagues in London, the Secretary of State for Defence wrote to the Malaysian Minister of Finance in June 1988 to say that aid could not be linked to defence sales. As a result the issue was not taken up in the, memorandum of understanding on defence procurement which the British and Malaysian Prime Ministers signed in September 1988, and which did not cover aid".—[Official Report, Commons, 25/1/94; col. 145–6.]
I repeat that our aid programme is not linked to arms sales.
Lord Hailsham of Saint Marylebone: My Lords, without questioning in any way the assurance given by my noble friend in his Answer, I should like to ask this question. Will he confirm that Article 51 still stands part of the United Nations Organisation chatter, and as long as it does stand part of the United Nations Organisation charter, it does not necessarily follow that sales of arms are intrinsically immoral?
Lord Henley: My Lords, my noble and learned friend is quite correct. We do not oppose in principle exports to other countries. Exports to both developed and developing countries make a very large contribution to the success of our own defence industry, which directly and indirectly employs some 560,000 people. I believe that that is a point that we ought to bear in mind.
Lord Bonham-Carter: My Lords, is it not the case that the Minister's answer to the noble Lord, Lord Bruce of Donington, was a classic fudge? Did not the Foreign Secretary admit that there was a link between arms and aid? Is it not the case that that link is in breach of the spirit and the letter of the Overseas Aid Act 1966?
Lord Henley: My Lords, it is certainly not in breach of the letter of the current Act which provides no proscription against arms sales. I shall not repeat at length my right honourable friend's answer which. I gave earlier; but I refer the noble Lord to the Written Answer that my right honourable friend gave on 25th January in another place.
Lord Judd: My Lords, notwithstanding the detailed answer the Minister gave, does he agree that it is extraordinary that the considered professional advice of the Permanent Secretary of the ODA was overridden, and that the only conclusion can be that there were some wider understandings which were being honoured? Will

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the Minister give us a categoric assurance that as provided for under the 1966 Act, the Government will never use aid, directly or indirectly, for the promotion of arms sales to any country within the third world?
Lord Henley: My Lords, I have given the assurance that we do not use aid for the promotion of arms sales. As regards the first point made by the noble Lord, I can only repeat that it is a long-standing convention that we do not disclose discussions between Ministers and their officials, or between Ministers. We believe that that confidentiality is necessary to ensure that all policy options can be considered fully and frankly.
Lord Avebury: My Lords, is the Minister aware that in the new guidelines for conventional arms sales which were agreed by the CSCE in November 1993, among the criteria were that the arms were not likely to be used for internal repression, and that they were required for the legitimate defence of the state concerned against external aggression? Will he consider how those factors apply to Indonesia where there is a substantial military operation against the people of East Timor and where there is no threat from any of its neighbours such as Malaysia, the Philippines and Australia?
Lord Henley: My Lords, arms sales are another matter. I do not believe that now is the time or this is the place to repeat our policy on arms sales. I am trying to make it clear to the House that we at no point linked aid to arms sales.

Non-Domestic Rating Bill
3.31 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (The Earl of Arran): My Lords, I beg to move that this Bill be now read a second time.
The Bill does two things. It honours the pledge given by the Chancellor of the Exchequer in the Budget on 30th November last year to give more help to business ratepayers in the next financial year. It also gives the Government greater flexibility to introduce transitional arrangements following the 1995 revaluation, if such arrangements prove necessary.
Without the changes announced by the Budget, businesses in transition would have faced increases in their rates bills for 1994–95 of up to 20 per cent. above the rate of inflation. Although there are clear signs of economic recovery, we do not think that businesses should have to sustain such large increases. But neither could we afford again to limit increases across the board to the rate of inflation, particularly when some ratepayers are a considerable way away from their true liability. The Bill will therefore reduce the increases to no more than 10 per cent. above inflation for large businesses and 7.5 per cent. for smaller ones. For small properties which contain both domestic and non-domestic parts, which includes corner shops and sub-post offices in rural areas, the Bill will hold rate increases for the third year running to the rate of inflation. In all, some 360,000 businesses will benefit.
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That relief—some £90 million for businesses in England and £5 million in Wales—comes on top of the £1.8 billion provided by the 1992 and 1993 Acts. While the Bill does not affect Scotland, the rates bills of all 220,000 businesses north of the Border will be reduced by £10 million overall under separate powers. Their reductions will, on average, be broadly in proportion to the reduction in England. I am sure that your Lordships will agree that that represents a very substantial package of support.
In 1995 there will be a further revaluation of business property based on market rents at 1st April last year. By the early summer we hope to be ready to consult ratepayers on any proposals for further transitional arrangements which might then be necessary. Parliament will have an opportunity to consider any new arrangements later this year. The regulations which will give effect to the scheme require the approval of both Houses by affirmative resolution and must come into force by 1st January next year.
The Bill will give us greater flexibility to make such regulations. Existing powers require any scheme to be self-financing. The Bill removes that restriction. It will enable the Government to devise rules to reduce the overall burden on businesses. It will, therefore, be possible to devise a scheme for 1995 which would reduce the burden for those facing large increases but without placing the full cost of that relief on other ratepayers. The difference could be made up by an Exchequer contribution to the non-domestic rating pool.
I am happy to repeat the commitment given in another place by my honourable friend the Minister for Local Government and Planning that if we use our powers to reduce the burden on businesses in that way we will make up any shortfall using the pool rather than any other mechanism. That is why we have included in the Bill a power to top up the pool. We are seeking a power rather than a statutory duty because the need to top up any shortfall will occur only if the transitional arrangements are not self-financing. So that it is clear beyond doubt, let me assure the House that if a shortfall to the pool should occur after 1995 because transition was not self-financing, the pool will see that shortfall made up.
Under existing powers it is necessary to make regulations governing the transitional arrangements before the start of each five-year period between revaluations. With the removal of the self-financing requirement, the Government would be required to forecast up to five years in advance the extent to which the arrangements might need to be supported centrally each year. By allowing the regulations to be made one year at a time, the Bill provides the flexibility to take a view each year, in the light of prevailing economic circumstances.
The Bill will also give us the flexibility to ensure that protection against rate increases is not lost under any transitional arrangements after 1995 if a property is altered to form a new property for rating purposes. Rateable values will need to be certified for that purpose. The Bill will allow that and will also give ratepayers the right to appeal if they are dissatisfied with the certified value.

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We believe that overall these measures will provide a further valuable fillip for many businesses and pave the way for a smoother transition to new rates liabilities in 1995. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(The Earl of Arran.)
3.37 p.m.
Baroness Hollis of Heigham: My Lords, on this side we want to make clear that the Labour Party is not opposed to the principle of business receiving subsidy while the recession continues. But we remain fundamentally opposed to the uniform business rate—that is, the national non-domestic rate—because, at the core, the Government have persistently and perversely claimed "a problem" with business rates. It is a problem which led them in 1988 to abandon the old locally levied business rate and to introduce in 1990 the national uniform business rate.
Since then there has been a problem with the UBR because it was introduced at a time of revaluation. As a result, it has had to be abated annually in the form of transitional arrangements which are again the subject of the Bill. To coin a cliché, as with the poll tax, the solution has become the problem.
Poll tax and UBR were introduced at the same time. The poll tax had to be abandoned rapidly. Each and every year, UBR has had to be muted, abated and amended. That might just suggest that the Government's touch is not entirely secure when it comes to local government finance.
Why was the old system of locally levied business rates abandoned? As a result of a number of fallacies. It was assumed, and indeed asserted, that business rates had, and have, a significant detrimental effect on business. That is not true. The first argument advanced was that because business did not have a local vote, it should not pay a local tax. But let us remember that business rates are a levy for services enjoyed as well as a property tax. In my authority, for example, the business rate contributed towards the cost of housing for key workers, training schemes, refuse collection, street lighting, police and fire protection, roads and public transport, economic development strategies, industrial estates, small rent-free development units and, above all, an airport jointly run by the city and county council which was a loss leader to promote local businesses. They were all services which business enjoyed, and they were funded effectively by the business rate.
As the operations director of Courtaulds said, local business, whether part of multinational companies or local enterprises, is an essential part of the life of the community. It consumes local services; it requires local supplies; it employs the young people who were educated and trained through the local system; and it is affected by local decisions. We believe that as a result there should be funding by local rates. The question for business is not whether the rates are levied locally but whether they obtain value for money and whether they are predictable in their incidence.
The second point argued against the old business system is that the rates were too high and too unpredictable. Again, that is false. In most firms
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business rates averaged about 2 per cent. of their costs, the same as for the domestic ratepayer, as Layfield showed, and in many cases rather less than their telephone bills. And whereas they could not get to the phone company they could get to local authorities, It is true that businesses could not reduce their levy any more than they could their rental, but that was because it was a fixed charge. As regards predictability, even if in any one year business rates rose by, say, 10 per cent. when inflation was, say, 5 per cent. that would have added only about 5 per cent. on a 2 per cent. annual charge. In other words, the fluctuations posited on business by local domestic and non-domestic rates were infinitesimal compared to the fluctuations and unpredictability of interest rates produced by government monetary policy, which have totally determined businesses' capacity to invest and to survive.
The third and final argument used against the old business rate and in support of the introduction of UBR is that differing levels of the local business rate had a detrimental effect on business and employment. There is no evidence for that fallacy either. Surveys carried out in the 1980s on a county-by-county basis show no connection between business rates and their incidence and unemployment and its incidence. Indeed, the Government's own Green Paper on rates published in 1986 confessed that,
"between 1974 and 1981 rates could not be shown to have a significant overall influence on manufacturing employment".
It added:
"It is not possible to detect an influence of rates on the location of employment".
As we know, what affects employment is the location, the transport links, the quality of labour and the quality of the environment. The rates have always been largely irrelevant.
It is of course the case that business rates rose through the 1980s, as did domestic rates, and above the level of inflation. But the explanation lay not in the profligacy of local authorities, not in their hostility to local business and not in the extravagance of their agendas. It was because central government grant fell from some 61 per cent. in 1978–79 to barely 45 per cent. in 1985–86. Even for services to stand still both domestic rates and business rates had to rise in compensation. In my authority of Norwich, but for the withdrawal of government grant business rates and. domestic rates would have risen each year by less than the rate of inflation.
In other words, local government was fingered by central government for the consequence of central government's withdrawal of grant. It was central government which forced up the business rates, using that as an argument to nationalise them into the uniform business rate and then having the effrontery to blame local government for it. Added to that we have faced the issue of revaluation due every five years but abandoned in England and Wales since 1973.
With UBR in place in 1990, business rates have been levied by government on local industry but have been returned to local authorities on the basis not of their industry but of their population. Each year any rises have been limited to inflation plus a phased change towards the new revaluation basis.

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We quickly learnt that the poll tax was disastrous, and the Government reversed it. In my view, UBR is similarly disastrous, and for three main reasons. The first is that the uniform business rate breaks the link between what business pays locally and what it gets back locally in services. My authority ran a municipal airport as a loss leader. It did so to attract and to keep local firms whose business revenues and employment enriched the local economy. Why now should it bother? Why should my authority produce small starter units at a loss? Why should it produce key worker housing? Whatever we do to aid business benefits our local economy, in terms of revenues, by not a single farthing.
So why spend council tax, which is capped, to enhance business prospects when all the financial returns from it are filtered off and filched by central government to re-allocate on a population basis? Whether my local authority is energetic or supine in adding business makes not a ha'penny of difference, so why should it bother? If I or my colleagues had been the government we should have done all that we could to strengthen and reforge the links between local authorities and the local economy. Instead, government snapped those links, unhooked the connection and divorced the fate of the local business economy from the finance of the local authority. That was folly, absolute folly.
Under the old system statutory consultation was required when rates were set. That was not a formality. My authority of Norwich wanted the chairman of the local chamber of commerce to share its reading of the future of Norwich's economy and work together to enhance it. There was give and take on both sides—but no more. Local authorities find business irrelevant to the task of balancing their finance. Local business finds local authorities indifferent to a plight they cannot afford to aid. Why bother to consult about an outcome which neither party—business or local authorities—can affect? Both sides are the losers. As the British Chambers of Commerce stated in a position paper of December 1990, the incentive for local authorities to welcome and co-operate with business should be restored. It should be restored urgently.
If the first argument against UBR is that it breaks the link between local authorities and local economies, the second is that it is unfair in its incidence. Perhaps I may again cite my own patch, Norwich. Aided by its local authority, more than £30 million-worth of business rates were paid in the 1980s. Under UBR barely £20 million was received in return. Neighbouring rural authorities, which had done little or nothing and had largely coasted off the backs of neighbouring cities, contributed approximately £8 million. However, on a population basis they got back about £20 million. My authority was penalised but its neighbours were rewarded for their lack of endeavour.
I accept that the consolidation of the business rate with central government grant into an aggregate Exchequer finance muted some of the problem. Nonetheless, the combined effect is to inflate the errors
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associated with population factors in the standard spending assessment. That is a point to which I hope we shall return in Committee.
My third and final criticism of UBR is that it is extremely damaging to the health of local authority finance. In the 1980s domestic and business rates contributed about half of local expenditure. With business rates now hijacked by central government and re-distributed on a population basis, the only independent source of finance that local authorities have is the council tax which raises between 12 and 20 per cent. of local revenues. And even that is capped across the country. The only element that can vary is that tiny fraction of our spending. That means that every £1 of additional spending must be found from only one-eighth of total income; that is the council tax element. The consequent gearing means that for every £1 increase in overall spending £7 has to come from the council tax. Council tax has now too narrow a base to carry increased spending without violent and unnecessary fluctuations from year to year. It is not sufficiently robust because it is not sufficiently broadly based. That must change.
As the Association of County Councils said, there is now no meaningful link between the movement in local tax bills and the changes in local service levels. That diminishes accountability. From the very beginning, all the local authority associations and all the business organisations—the chambers of commerce, the Institute of Directors, the Federation of Small Businesses—were unhappy about UBR, with the exception perhaps of the CBI although even that body criticised UBR on grounds of fairness. That view was endorsed by the Audit Commission, which called for the return of business rates to local decision-making in order to widen the local tax bases and to reforge links between local authorities and the local community.
UBR is designed to end the perceived but fallacious inequalities of the old rating system. It is designed to reduce the load on local business caused by "excessively high poundages". However, because it was accompanied by revaluation, two-fifths of all businesses under UBR faced increases or reductions of 50 per cent. or more in their bills. That is far more than under the old business rates. Therefore, those changes had to be phased in to cushion the losers, who did not like losing at all, while the winners wanted to benefit immediately from their gains. Therefore, transitional arrangements, as the noble Earl rightly said, were adopted to phase in the changes, thus perpetuating the very inequalities that UBR was designed to overcome.
We had a national business rate to reform the inequalities of the old business rate. We then had transitional arrangements to phase that in. Now, with this Bill, we have transitional alterations to the transitional arrangements provided by the original Act. Equity is ever receding and we shall not even have reached the old valuation ratios before the new valuations come into effect in 1995. While those distortions continue, we perpetuate the problems that UBR was designed to overcome. UBR is a bad tax and, as with the poll tax, the Government should scrap it and

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return to a locally determined property tax on local businesses, brigaded in a responsible way to domestic council tax and underpinned by statutory consultation.
Having said that, we shall obviously not oppose the Second Reading. After all, in the 1970s there were 10,000 business failures per year; in the 1980s, 20,000; and in the 1990s, something like 50,000. Business clearly needs help. However, we shall move amendments so that we can discuss the issues further.
First, we shall try to ensure that the help is better targeted on small businesses, which are proving the most vulnerable during the recession, rather than throwing money at healthy multiples which do not need it.
Secondly, we shall wish to ensure that if the winners receive their gains quickly while the losers are cushioned from increased levies, the shortfall is made good by central government rather than local taxpayers. The noble Earl, Lord Arran, repeated the assurances given in the other place that central government, rather than local taxpayers, will make up the pool. We had assurances before about targets not being for capping and three years later, they became so. Assurances are not enough. We shall seek to have that written on the face of the Bill in primary legislation.
Thirdly, as the noble Earl said, the Bill gives greater flexibility to make regulations. Again, we are uneasy about reliance on statutory instruments in the Bill and we wish to seek to amend that provision. We are concerned also about where the levy falls. We want to look at the position of the utilities—water and so on—and the special situation of the City of London. We have wider worries too about the pattern of change which will result in the North and the Midlands being disadvantaged to aid the South and South East. In the transitional arrangements, manufacturing industry will be disadvantaged to help shops and offices.
We shall return to those and similar anxieties in Committee. At this point, we wish to give an unambiguous message to the Government that we believe that UBR is a bad system of taxing local business. The transitional arrangements proposed by the Bill do not address that central issue. We shall seek to amend the Bill to make it better but at the end of the day the Government must change their system of financing local government through their national business rate.
3.55 p.m.
Baroness Hamwee: My Lords, it is desirable that any tax should not only be fair but it should be also transparent, certain and accountable. This small Bill provides a great deal of material on which to base discussions on those subjects. I shall not detain your Lordships for as long as one might with philosophical and economic discussions to which that could give rise. I shall merely make one or two remarks on those three topics.
The tax itself is clear to an extent, although it is not linked to the services provided to the taxpayers. But I do not believe that the Government could begin to claim that the Bill is clear. I take this opportunity to thank the drafters of the Explanatory and Financial Memorandum, without which I should have been extremely puzzled. I
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ask that when existing legislation is to be amended, we should see the full amended provision in the Bill, rather than merely the replacement words. It would be extremely helpful to have the full paragraphs.
Is the tax certain? It is not certain for local authorities, given that there may be changes on an annual rather than a five-yearly basis. We know the difficulties of planning far ahead, but we know also of the difficulties that arise when one cannot do so.
Is it certain for the ratepayers? The failure to revalue between 1973 and 1990, with the hike based on 1988 values, which came into effect in 1990, has been a clear problem. Many people are looking forward to the reduction which there is likely to be in 1995 because of the revaluation based on 1993 values. But that could lead into a long discussion about the problems caused by wild fluctuations in property values. Perhaps this afternoon is not the time for that, but there is a clear lack of certainty arising from the structure.
We know all about business bankruptcies and the fragility of small businesses, many of which have made it quite clear that they believe that they have been tipped over the edge by the non-domestic rate. I believe that that applies in particular to small shopkeepers. The average revaluation factor in 1990 for shops was 9.6; it is an enormous increase if that multiplier is applied.
Not only does that cause problems for the individual businesses which are the subject of that revaluation because of the increased burden upon them; it has also caused a major effect on the communities of which they were a part. There has been a change in the character of many communities because of the failure of small businesses, including small shopkeepers. That has been particularly apparent in London and the South East, which have suffered more than other parts of the country from the wild fluctuations in property values which I mentioned. I hope that the Government will at least admit that they recognise the dangers of any increase whatever to businesses which have clung on until this point.
The question of transitional relief is always difficult. It begs the question as to the reasons underlying it. Understandably, questions were asked about whether the imminence of the last general election had an effect on the arrangements for transitional relief a couple of years ago. Questions are asked in the local government world now about the transitional relief "damping", as it has been called; in other words, the extra grant put back into some local authorities because the transitional arrangements had proved to be so difficult and had involved such large and unexpected figures. Some authorities have benefited extremely well from the Government's damping arrangements devised to avoid huge fluctuations. Of course, the authorities which have benefited are the ones which the Government wanted to benefit. They are the Government's friends.
The Minister has alluded to the question of the pool and whether it would be reduced. Of course, I welcome his commitment that the pool will be made up if there is a shortfall. However, I fail to understand his approach. He says that it is not necessary for the Bill to make the provision mandatory because there may not be a shortfall. But if there is no shortfall, the question does

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not then arise. Therefore, I am unconvinced by the Minister's logic. There needs to be a commitment, and I do not believe that the noble Earl has sufficiently explained the change in the terminology from "shall" in the existing legislation to "may" in the Bill.
The latter raises another very broad question; namely, the centralisation of all our government services. Yet again we have the ability in the Secretary of State to decide whether to take a certain action which will have huge effects on government as provided at local level. It is yet another one of a great series of centralising measures.
Finally, I turn to the question of accountability. The problems as regards the non-domestic rate being unaccountable have been well aired both this afternoon and on many previous occasions. In that regard, I must say that I fear it simply does not matter to the Government.
4 p.m.
The Earl of Arran: My Lords, I think that the comments both of the noble Baroness, Lady Hollis, and of the noble Baroness, Lady Hamwee, are not altogether unexpected. I believe, having read Hansard very carefully, that they have been more or less par for the course in what has happened in the past couple of years in your Lordships' House. They are certainly consistent with their somewhat begrudging acceptance of various measures. The only difference this time is that your Lordships will have more opportunity to discuss the Bill as it goes through the House in all its stages. In particular, the noble Baroness, Lady Hollis of Heigham, cantered over the course of the uniform business rate, as did the noble Baroness, Lady Hamwee.
However, there are just a few brief points that I should like to make about uniform business rates. A return to local business rating would mean that businesses could, therefore, be asked to pay more but still without any guarantees that they would receive more by way of local services. Authorities in areas with high concentrations of businesses have never kept the entire proceeds of the business rate. If they did, many authorities would not need to raise any money from their domestic taxpayers. That would completely destroy local accountability. The fact is that many areas have high concentrations of business for commercial reasons; other areas have industries which are declining.
Resource equalisation has always been necessary to ensure that authorities' reasonable spending needs are met. However, that is not to say that local authorities have no incentives to help business. As the noble Baroness, Lady Hamwee, pointed out, businesses are the lifeblood of the local community. If local authorities ignore their needs, they do so at their peril. That is true, irrespective of whether local authorities can keep part of the business rate.
The noble Baroness, Lady Hollis, also mentioned the fact that the Government grant dropped from 61 per cent. to 45 per cent. during the 1980s. But I should say that, although government grant may have dropped by some 16 per cent. in the 1980s, the average rate
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poundage increased by 37.4 per cent. over the same period. That is more than double the drop in government grant.
Perhaps I may for the time being end this discussion on Second Reading by making two further points. Over the past two years we have introduced measures worth some £1.8 billion to help businesses with their rate bills during the recession. The Bill provides a further £90 million boost to hold down rate increases. Secondly, the regulations will be introduced after Royal Assent to enable authorities to recalculate their contributions to the non-domestic rating pool. The Bill requires the Government to make good the shortfall to the pool by adding to the amount which authorities receive from the national pool next year. As I said in my opening speech, and I shall say it again, we will make similar additions to the pool in future years if we decide to support any future transitional arrangements centrally rather than through a self-financing mechanism. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
4.5 p.m.

British Nationality (Hong Kong) Bill [H.L.]
Lord Bonham-Carter: 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.—(Lord Bonham-Carter.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Brougham and Vaux) in the Chair.]
Clause 1 agreed to.
Clause 2 [British Citizens "otherwise than by descent"]:
Lord Bonham-Carter Lord Bonham-Carter moved the amendment:
Page 1, line 25, leave out subsection (2) and insert—
"(2) A person who but for his registration prior to commencement as a British citizen under section 1(4) of the British Nationality (Hong Kong) Act 1990 would be a British citizen "otherwise than by descent" under this Act, shall be treated as having become such a citizen at the time of his registration, notwithstanding the provisions of section 2(1) of the 1990 Act.".
The noble Lord said: On Second Reading, the noble Earl, Lord Ferrers, said:
"However, if the proposals of the noble Lord, Lord Bonham-Carter, in Clause 2 were put into effect, they would in fact give citizenship benefits both to the ethnic minorities and to the spouse and child beneficiaries of the selection scheme which are not enjoyed by other British citizens who are born abroad". —[Official Report, 13/12/93; col. 1219.]
That is not an interpretation which I or my legal adviser accept. However, in order to make assurance doubly sure, I am moving an amendment to delete Clause 2(2) and replace it with the proposed subsection (2).
Perhaps I may explain the amendment. The 1990 Act set up the Hong Kong selection scheme providing for the registration of 50,000 key people in the colony. Section 1(4) of the Act also provides for the spouses and

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minor children of successful applicants under the scheme to he registered. Section 2(1) goes on to say that those spouses and minor children who are registered under the selection scheme in that manner shall be British "by descent". That means, generally, that they will be unable to transmit that citizenship.
However, among those persons—that is, among the non-Chinese ethnic minorities to whom the Bill is directed —there may be spouses and minor children who have registered under the selection scheme of the 1990 Act and who would therefore become citizens by descent. If such person or persons would under the Bill have become British citizens "otherwise than by descent" and are able to transmit that citizenship for one generation, they should be so treated. In other words, they should be treated as citizens "otherwise than by descent" from the time when they registered.
No provision needs to be made in the Bill for people registered under the 1990 Act after the Bill comes into force because such registration would be redundant and unnecessary. That is because those persons becoming British citizens as a result of the Bill (when it comes into force) or being born after the legislation comes into force would therefore be British citizens and no longer eligible for registration. I hope that that explains the rather legal phraseology of the amendment. I beg to move.
Lord McIntosh of Haringey: Members of the Committee will be grateful to the noble Lord, Lord Bonham-Carter, for his explanation of the proposed new subsection. I must confess that I found the original wording totally incomprehensible. The explanation that the noble Lord has just given makes it almost totally incomprehensible, but there are little glimmers coming through to me from time to time. I hate legislation which deems things to be what they do not appear to be. The noble Lord seems to have got rid of the word "deem". However, he is still making things what they do not appear to be on the face of it. I suppose that there is no way of avoiding that. This is a worthwhile Bill. Its effects are minimal in terms of numbers. That the Government should seek to oppose it is as incomprehensible to me now as it was at the beginning. Any improvement in wording to overcome what might be legalistic objections to the Bill is worthwhile.
Earl Ferrers: I agree with the noble Lord, Lord McIntosh, that this is a complicated matter. If he finds it so complicated, I cannot imagine why hp should think the Government would be wrong to oppose something which he himself does not understand. However, we understand these difficulties.
Clause 2(2) as it appears in the Bill provides for all the spouses or minor children of the 50,000 principal beneficiaries registered under the selection scheme to be British citizens "otherwise than by descent", as the noble Lord, Lord Bonham-Carter, said. That means they can pass down that citizenship to their children.
The 1990 British Nationality (Hong Kong) Act makes no provision for the spouses or the children of the 50,000 principal beneficiaries registered under the scheme to be able to pass on citizenship automatically to
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the next generation. It provided for them to be British citizens "by descent," a form of citizenship which is of lesser value.
Lord Bonham-Carter's amendment seeks to change this—but only in respect of the ethnic minorities with whom his Bill is concerned. It seeks to allow the members of the ethnic minorities only, who have applied and who have been successful in their application under the scheme, to have an enhanced status. It proposes that the spouses and dependants should have citizenship "otherwise than by descent" rather than "citizenship by descent" as the 1990 Act provides. Citizenship by descent is what the other successful applicants under the scheme will get.
I am bound to tell the noble Lord, Lord Bonham-Carter, that his amendment conflicts with the clearly stated principle behind the 1990 legislation that its benefits should not in general be enjoyed by future descendants of those who are selected under the scheme. It would, therefore, mark a departure from a fundamental principle of British nationality legislation which is that British citizenship should not be transmissible to people who have no close connection with the United Kingdom. I accept, though, that the amendment which the noble Lord proposes is art improvement in the context of the Bill as seen through the eyes of the noble Lord. It restricts Cause 2(2) to members of the ethnic minorities, rather than seeks to cover all spouses and children registered under the selection scheme.
As both the noble Lord, Lord Bonham-Carter, and the noble Lord, Lord McIntosh of Haringey, said, these are complicated matters. I would not seek to oppose the amendment because it is an improvement to the noble Lord's Bill. But, as the noble Lord knows only too well, the Government regrettably do not view the noble Lord's Bill with approbation. I would say in short that the noble Lord's efforts with the amendment can be described as trying. His efforts with the Bill can only be described as very trying.
Lord McIntosh of Haringey: The Minister misunderstands me. My incomprehension is limited almost entirely to Clause 2(2). The Bill itself, which I wish the Government would support, I understand very well. That is why I support it. The Minister said that, regrettably, the Government do not support this Bill. It is indeed regrettable that that is the case.
Lord Bonham-Carter: The noble Earl has said that my amendment is trying. I wish the noble Earl and the Government would try to meet the demands which this Bill makes. I would be ready to consider a minor alteration so long as the principle to which this Bill is directed is put into effect and that the future of the ethnic minorities at which it is directed is ensured and made safe. I am perfectly ready to hear suggestions from the Government's own draftsmen as regards meeting arty fundamental objections as long as that does not affect the principle of the Bill. I hope therefore that the noble Earl will try to meet my remarks.
On Question, amendment agreed to.
Clause 2, as amended, agreed to.
Remaining clauses agreed to.
The schedule agreed to.
House Resumed: Bill reported with amendment.

Industrial Training Levy (Construction Board) Order 1994
4.15 p.m.
Lord Henley Lord Henley rose to move, That the draft order laid before the House on 18th November be approved [2nd Report from the Joint Committee 1993–94].
The noble Lord said: My Lords, it may be for the convenience of the House if I speak to this order and the following order together.
The proposals before the House this evening seek authority for the Construction and Engineering Construction Industry Training Boards to impose a levy on the employers in their industries, to finance the operating costs of the boards and to fund their range of training initiatives, including grants schemes. Provision for this is contained in the Industrial Training Act 1982 and the orders before the House would give effect to proposals submitted by the two boards.
Both proposals include provision to raise a levy in excess of 1 per cent. of an employer's payroll. The Industrial Training Act 1982 requires that in such cases the proposals must be approved by affirmative resolution of both Houses. In each case the proposals are almost exactly the same as those approved by the House last year. As in previous orders they are based on employers' payrolls and their use of sub-contract labour. Both have special provision for excluding small firms from paying levy.
For the CITB the rates are 0.25 per cent. of payroll and 2 per cent. of payments made by employers to labour-only sub-contractors. Employers with a payroll of £61,000 or less will be exempt. This is an increase from the previous threshold of £45,000. The ECITB treats its head offices and construction sites as separate establishments and applies different levy rates which reflect the actual costs and the different arrangements for training particular workers. For head offices the rates are 0.4 per cent. of payroll and 0.5 per cent. of payments to labour-only sub-contractors. Firms employing 40 or a smaller number of employees are exempt. The rates for sites are 1.5 per cent. of payroll and 2 per cent. of labour-only payments with exemption for employers with a payroll of £75,000 or less. In each case the proposals have the support of the employers in the industry as required by the Industrial Training Act and have the full support of the respective boards, which consist of senior employers, trade unionists and educationists.
The House will know that the CITB and the ECITB are the only two statutory industry training boards. Most other sectors of industry are covered by independent, non-statutory arrangements. In these two industries though, employers are firm in their support for a statutory board and the House will recall that last year we reconstituted the CITB for a further five years. In doing so, we recognised the strong feelings of the employers and the performance and achievements of the board.
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The House will also be aware that the ECITB is currently being similarly reviewed. Such reviews are necessary if we are to ensure that the training arrangements we have in place are right for the employers in a particular sector. As with the CITB we have consulted fully with the industry about the effectiveness of the board and the levy system more generally. The ECITB's current term of office is due to expire in July and the Government expect to make an announcement about the board's future around the beginning of April.
The draft orders before the House will enable the two boards to carry out their training responsibilities in 1994 and I believe it is right that the House should agree to approve them. I commend them to the House. I beg to move.
Moved, That the draft Order laid before the House on 18th November be approved [2nd Report from the Joint Committee 1993–94].—(Lord Henley.)
Baroness Turner of Camden: My Lords, I thank the noble Minister for his usual lucid explanation of these orders. It is not my intention to oppose them this evening but I wish to make some comments. First, the Minister will be aware that we on this side of the House have always supported industrial training boards. It is a matter of regret to me that most were disbanded some time ago, leaving only the CITB and the construction side of the EITB. I am quite prepared to agree that some of them may have become redundant and that the system should have been examined since nothing remains good and viable for ever. However, the ITBs had a role which was industry specific. In other words, they were focused directly on particular industries and able to plan and organise with the peculiarities of those industries in mind.
I am glad to say that the Government accepted that argument in regard to the CITB and have decided, as the Minister said this evening, that it should remain in being for another five years. I am very glad about that and so, I am sure, are the CITB staff since I know that they were concerned for their future. However, there is still a time limit rather than a situation in which the CITB is seen as having a continuous existence well into the future. But at least it is an improvement.
The support of everyone in the construction industry—the large employers organised through the Federation of Master Builders and the unions with membership in the industry—has been crucial in persuading the Government that there is something very special about the construction industry and therefore that the arrangements for the board should stand. Long may it continue that way, for construction is very special. It is a key economic component in the UK. If we are really to work our way out of the recession and into an era of rather better employment prospects, then construction will have to lead the way.
However, the industry has been hit very hard by the recession. The downturn in housing and the inability of local authorities to engage in large housing initiatives have had a bad effect. The result is that the number of new trainees on CITB schemes has fallen to around 10,000. There is considerable unemployment in the

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industry. Indeed, the federation reports that there have been substantial and damaging reductions in training and recruitment programmes for both apprentices and graduates.
All that must obviously have had some effect upon the revenue of the CITB, since that is forthcoming via a levy raised as a percentage of the payroll. This is an industry in which the operations are often inherently hazardous. There is a high rate of industrial injury and sometimes, regrettably, fatal injury. The CITB's training programmes play a vital role in ensuring that sites are as safe as possible, but the operation of training programmes in which the protection of health and safety feature very largely is extremely important.
Against that background, quite obviously more money must be raised via the levy, and we do not object to that. However, I believe that the industry generally is unhappy that the threshold exempting small builders from paying the levy is to be increased from £45,000 to £61,000 of yearly emoluments. The effect will be to decrease income to the board. The view of the Federation of Master Builders, with which I agree, is that no one should be exempt from paying the levy since all construction industry employers use skilled craftsmen and therefore all should contribute to the training costs. Moreover, the intended uplift in the threshold will exacerbate competitive problems between smaller employers represented by the federation.
The federation says that the margins are tight and the combined effect of raising the CITB threshold and the new VAT registration threshold announced in the last Budget will add to the problems of numerous firms of roughly the same size being able to compete on an equal basis. It also says that from the financial standpoint, by moving to a £60,000 exemption threshold, the CITB's income will decline by about £1 million over the next year. A nil threshold would yield an estimated £8.5 million per annum at the current rates of levy, with an extra 35,000 firms being involved.
I have always thought it unfair that firms which do not invest in training should be able to poach staff from those which do. That is one of the drawbacks of a voluntary system and one which the ITB grant and levy system was meant to obviate. I can understand the Government's concern about not putting too much upon small firms, but in the construction industry, where there are many small firms, it is often in those firms that safety standards are less good than in the larger ones and therefore training is that much more important. If good standards are to be obtained and maintained, everyone should make a contribution. I accept that we are unlikely to persuade the Minister tonight to accept a nil threshold because a threshold already existed, but I suggest that serious consideration is given in the future to the representations made by the industry about the inadvisability of raising the threshold exemption figure.
Much the same considerations apply concerning the Engineering Construction Board. Again I say how much I regret the demise of the former EITB. I believe that that board and the CITB performed their functions extremely well. That argument has been accepted by the
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Government in the case of the CITB but not for the EITB except for that section concerned with construction, and that also is under review.
The EITB had some very important initiatives, including a programme directed specifically at women and designed to attract more women into engineering as a career. That coincided with the campaign initiated by the Equal Opportunities Commission when I was a member and the noble Baroness, Lady Platt of Writtle, was Chairman—the WISE Campaign (Women Into Science and Engineering). I have not seen very much since then to indicate that similar initiatives are being continued under present arrangements.
We do not oppose the orders since that is not the custom of the House, and in any event of course we would not want to deprive these bodies of the funds they need. However, I ask the Government to pay more attention to those who work in the industries concerned. I know that the Government prefer the so-called voluntary system to the one inherited via ITBs, but at the same time I believe that the grant and levy system was a good one and ensured that everyone bore part of the burden of training in the industries concerned. I regret that that concept has been abandoned except in the CITB case, and in that case, as I indicated, there are anxieties about the exemption of small businesses However, I do not oppose the orders.
Lord Rochester: My Lords, I should like to join in thanking the noble Lord, Lord Henley, for having explained the orders so clearly. As he said, the proposals are almost exactly the same as those approved by the House a year ago. It is good to know that they have the support of the employers, trade unionists and educationists who comprise the respective boards.
Like the noble Baroness, Lady Turner, I am glad that after these matters were last discussed in the House the Government decided to reconstitute the Construction Board for a further five years in recognition of its achievements. Having had the opportunity to read the 1992–93 report of the Engineering Construction Board and also the document detailing its strategy for the next three years, I hope that, following the current review, the Government will decide to reconstitute that board as well. I say that because the workforce moves from job to job just as frequently in the one case as in the other and individual employers are therefore equally unable to provide training for the broadly based skills that are needed.
I welcome both orders and have only one reservation to express. It is one to which the noble Baroness referred. As the Minister said, the Construction Board order provides for the payroll threshold for payment of the levy to be increased from £45,000 to £61,000, the intention apparently being to exclude firms with four employees whereas the number was previously three. The Federation of Master Builders took the view that all employers should contribute to the cost of training, as the noble Baroness said. I do not go so far as that because I recognise the burden that that would impose on very small firms. However, at a time when the need for more training is so widely acknowledged, I wonder whether it is right that as many as an estimated 35,000

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businesses should now be exempted from the levy and therefore in effect be subsidised by the rest of the industry. I shall be grateful if when the noble Lord, Lord Henley, replies he can relieve me and the noble Baroness, Lady Turner, of our doubts on this matter so far as he can.
4.30 p.m.
Lord Henley: My Lords, I am grateful for the support that the noble Baroness, Lady Turner, and the noble Lord, Lord Rochester, gave to these orders. Perhaps I may deal with one or two points that they made.
The noble Baroness regrets that most industries used to have these statutory arrangements and that they have now disappeared. We believe that there are major differences between the construction and engineering construction industries—they have very different workforces. We also feel that statutory levies were not welcomed by all sectors. Many sectors felt that they should be given responsibility for their own training arrangements; and the Government certainly support those voluntary arrangements wherever possible. However, we believe that a different arrangement is necessary in this sector.
The noble Baroness also regretted that the CITB was to be reconstituted for only five years. It is normal for all non-departmental public bodies and not just ITBs to be subject to periodic review. As I said in my opening remarks, the review of the ECITB is currently under way and we believe that five years for the CITB is perfectly fair.
More importantly, moving to the question of relief for small employers, I understood the noble Baroness to say that she would prefer a nil threshold to bring in all employers. I am not quite sure how far the noble Lord, Lord Rochester, would go but he believed that the increase from £45,000 to £61,000 might be excessive. We believe that there is a strong need to protect small firms and to give them some advantage. We believe in the importance of small firms and in their importance to the economy. It will always be difficult to get the balance right. As the noble Lord said, the increase to £61,000 excludes those firms with four workers or fewer. Obviously these have to be rough approximations depending on levels of pay. That amount maintains very approximately the same level as existed in real terms in 1971 when the exclusion level was £6,000.
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I accept that within the industry there are many deeply held views on the issue of the balance between training needs and the pressure on small firms. I can give the assurance that we shall certainly keep the level of exclusion under careful review. However, as noble Lords will know from other legislation that has been or is before the House—one thinks of the Statutory Sick Pay Bill—it is always important to offer some protection to the smaller firms which are less able to cushion those costs.
Perhaps I may say a few words about help for women within the construction industry. The CITB has set targets for the training of women and has a range of initiatives to promote training of both women and ethnic minorities. Certainly we should very much like to see that go forward. We are as committed as the noble Baroness to equal opportunities in that field.
I stress, as the noble Baroness did quite rightly, the importance that we attach to training. I made that clear yesterday when I answered a Question from the noble Lord, Lord Rochester, on TECs. But we believe that training is absolutely vital. That is why the Government are committed to training and provide a great deal of money for it. We also believe that it is important for employers to make a contribution for training. That is why I quoted the figure yesterday of employers paying,
"something of the order of £20 billion",
to train their workforce. It will always be the employers who are the major contributors to training.
I conclude by stressing yet again that the proposals have the support of the respective employers and have been approved by both the boards. It is not therefore in dispute—I believe that the noble Baroness accepted this —that they should be approved by this House. I commend the orders to the House.
On Question, Motion agreed to.

Industrial Training Levy (Engineering Construction Board) Order 1994
Lord Henley: My Lords, I beg to move that the Industrial Training Levy (Engineering Construction Board) Order 1994 be approved.
Moved, That the draft order laid before the House on 2nd December be approved [2nd Report from the Joint Committee 1993–94].—(Lord Henley.)
On Question, Motion agreed to.
House adjourned at twenty-five minutes before five o'clock.